More shoppers shifting online spurs demand for warehouses

Leasing of industrial and warehousing spaces totalled 10.1 million sq ft in the first six months of 2021 across the top five Indian markets of Delhi-National Capital Region (NCR), Pune, Bengaluru, Chennai and Mumbai, as per a report by Colliers.

The demand was primarily driven by third-party logistics companies (3PLs), followed by e-commerce firms, which accounted for almost 31% and 22% of the total demand respectively, said the report released by the Canadian commercial real estate brokerage.

“The behavioural shift of consumers from offline to online shopping is contributing to increased demand across the spectrum of industrial and logistics property,” said Shyam Arumugam, managing director, Industrial & Logistics Services (India).


Some of the firms that recently leased large spaces include Amazon, Flipkart, Mahindra Logistics and Nissan Logistics.

“Demand for industrial and warehousing space will not only come from e-commerce, 3PLs, but also medical suppliers, exporters and cold storage operators. With same-day delivery becoming the norm, there will be significant activity in smaller facilities closer to cities,” said Ramesh Nair, CEO-India at Colliers.

Delhi-NCR led the leasing activity with a share of about 30.2%, followed by Pune and Bengaluru with a share of 27.2% and 20.0% respectively. Almost 59% of the total leasing was in Grade A industrial and warehousing facilities, indicating increased inclination for high-grade structures, said the report.

“We are very bullish and have launched a $400 million logistics private fund in India. There is a significant amount of cash available to be invested in the warehousing and logistics space, and it is looking at tier-II cities with hubs in metros,” said Aloke Bhuniya, CEO, Ascendas-Firstspace.

On the supply front, the market witnessed 15.1 million sq feet of new building completions during the first half of 2021, a twofold increase from a year ago.

Developers are racing to ensure building completions to capture the burgeoning demand for industrial and warehousing space. Delhi-NCR accounted for almost 63% of the new supply delivered in the first half of 2021, followed by Mumbai and Chennai, which accounted for 15% and 11% of the pie respectively.

“We continue to invest as there is a huge demand for quality space. Indian warehousing space continues to be very attractive for foreign investors as there is not enough stock available,” said Rajesh Jaggi, vice-chairman – real estate, Everstone Group.

The overall vacancy rate was at just over 12%, with Bengaluru and Chennai having the lowest vacancy rate of 6.3% while Pune and Delhi-NCR had the highest at 17.9% and 17.4% respectively.

All the cities saw an uptick in rentals during the period. Bengaluru saw the steepest rise of about 19% as demand outpaced supply.