Warehousing Space Sees $500 Million Investment Since 2017 On GST Boost: CBRE
Demand for warehousing will strengthen and leasing will be about 10-15 percent higher this year, says the CBRE report.
The industrial and logistic segment has attracted $500 million (about Rs 3,500 crore) investment since 2017, as demand for quality warehousing space is growing rapidly post the implementation of Goods and Services Tax, property consultant CBRE said.
In its report, the consultant highlighted that several policies (both proposed and implemented), along with the grant of infrastructure status to the logistics sector, led to more than $500 million being invested in acquiring industrial and logistics assets in India during 2017 to first half of 2019.
In its survey of warehousing clients post-GST, CBRE found that almost 70 percent of respondents indicated an improvement in ease of doing business mainly on account of e-way billing, which has removed a lot of bottlenecks in cargo storage and transport processes.
About 80 percent of respondents felt that the taxation system improved after the implementation of GST, while 40 percent respondents indicated that they will increase the number of warehouses in the post-GST era.
On outlook of this sector, CBRE said demand for warehousing will strengthen and estimated that leasing will be about 10-15 percent higher this year at 25-30 million square feet compared to last year.
CBRE had earlier reported that leasing of warehousing spaces went up by 31 percent to over 13 million square feet across eight major cities in the first half of this year, driven mainly by demand from third party-logistic and e-commerce firms.
"The permeation of technology in operations, innovative business models & strategies, improving supply chain efficiencies, augmented warehousing demands, varied funding avenues, favourable government policies, geographical expansions into tier II and III cities are together playing an instrumental role in preparing the sector for the next phase of development,” said Anshuman Magazine, chairman and chief executive officer (India, Southeast Asia, Middle East & Africa) at CBRE.
With fundamental shifts across the industrial and logistic sector in last two years and increased demand for quality space, he said developers are more likely to build compliant, large-sized spaces.
Magazine said, the rising interest of prominent players would result in the country's warehousing stock touching 500 million square feet by 2030.
"This survey seeks to assist investors, asset managers, and developers in gaining a deeper understanding of the occupiers' current and future requirements in the post-GST era," said Jasmine Singh, nation head (industrial and logistics services) and senior executive director (advisory and transaction services) at CBRE India.
Among other future trends, CBRE said that various infrastructure initiatives would further boost supply chain efficiencies across the country. Within this segment, it said demand for cold storage would rise from food and beverages occupiers such as Zomato, which is already in the business of supplying fresh raw material to restaurants.
The share of Tier II cities in logistics shipments in India could grow from almost 40 percent in 2017 to about 50 percent in 2022. Shared warehousing concept might gain strength in the coming years.
As large distribution centres proliferate, the demand for 'last-mile' warehouses could increase, with same-day delivery expected to become the new standard for the industrial and logistics sector.