India’s Auto Slowdown Is Impacting Warehouse Leasing As Well, Says JLL
Maruti Suzuki employees walk past lines of cars ready to be shipped out to dealerships at the company’s Gurgaon factory near New Delhi. (Photographer: Sanjit Das/Bloomberg News)

India’s Auto Slowdown Is Impacting Warehouse Leasing As Well, Says JLL

Bookmark

Leasing of warehousing spaces by automobile companies have declined by more than half during the first nine months of 2019 due to the auto slowdown, property consultant JLL India has said.

As automobile manufacturers prefer to go for government land, part suppliers and dealers which lease warehouses have become cautious in renting logistics space.

"The slowdown in auto sector has some rippling effect in warehouse leasing of late. The share of auto and ancillary industries in overall leasing went down to 3 percent in first three quarters of 2019 from 10 percent during the same period of 2018, " said Ramesh Nair, chief executive officer and country manager, JLL India.

The absorption has halved in absolute value during the same period, he added. "Warehouse leasing from the sector is dominated by ancillary players, while original equipment manufacturers prefer to go for government land. Ancillary players having long term plans have become cautious and we expect the leasing to witness uptick only after a few quarters."

According to JLL data, total warehousing leasing stood at 24.1 million square feet during January-September out of which share of auto and ancillary was only 3 percent. In the corresponding 2018, the total warehouse leasing was 16.7 million square feet with auto and ancillary accounting for 10 percent.

The auto slowdown in India entered the eleventh consecutive month in September, when sales dropped 23.7 percent to over 2.23 lakh units, down from 2.93 lakh units in the year-ago period.

In the April-September period of 2019-20, passenger vehicle sales declined by 23.6 percent at 13.33 lakh units as against 17.44 lakh units in the year-ago period.

Overall vehicles sales in the first half of the fiscal were also down 17.1 percent at 1.17 crore units as compared to 1.41 crore units in the corresponding period last fiscal.

Major automobile manufacturers including Maruti Suzuki India Ltd., Tata Motors Ltd., Mahindra & Mahindra Ltd., have undertaken production cuts in the wake of the auto slowdown.

JLL, however, expects the overall warehousing leasing higher this year driven by e-commerce and third-party logistics players.

In the first nine months of 2019, e-commerce players increased their share to 21 percent from 20 percent in the year-ago period. The share of third-party logistics segment stood at 44 percent, a sharp jump from 28 percent in the year-ago period.

BQ Install

Bloomberg Quint

Add BloombergQuint App to Home screen.