GST drives leasing activity in India’s logistics and warehousing by 45 %
CBRE South Asia Pvt. Ltd, India’s leading real estateconsulting firm, today announced the findings of its latest report ‘<strong>India Industrial and Logistics Market View, H1 2018’. </strong>As per the findings, transaction activity continued to gain strength in H1 2018 as close to 10 million sq. f
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Aug 21, 2018 5:45 AM
CBRE South Asia Pvt. Ltd, India’s leading real estateconsulting firm, today announced the findings of its latest report ‘India Industrial and Logistics Market View, H1 2018’. As per the findings, transaction activity continued to gain strength in H1 2018 as close to 10 million sq. ft. of space was leased across seven cities, an increase of about 45% compared with H1 2017. Leasing activity was primarily driven by consolidation and expansion initiatives of firms belonging to sectors such as e-commerce, 3PL, retail, and engineering and manufacturing, which together accounted for more than 75% of the leasing reported during the review period.
This is due of policy reforms that the sector has undergone in the past two years (particularly the implementation of the GST), as more and more corporates in this sector consolidate their operations and locate closer to consumption hubs, thereby driving demand for larger warehouses.
The average size of space take-up increased from approximately 75,000 sq. ft. during H1 2017 to close to 90,000 sq. ft. during H1 2018. The overall demand for logistics and warehousing space was largely concentrated in Bangalore (25%), Delhi-NCR (21%) and Mumbai (20%). Chennai and Hyderabad also reported sizeable transaction activity and accounted for about 12% and 10% of the demand, respectively. Smaller cities such as Kolkata, Ahmedabad and Pune collectively held a 12% share.
Anshuman Magazine, Chairman, India and South East Asia, CBRE, said: “Going forward, we foresee the use of innovative technology solutions being the game-changer for the sector. As the sector witnesses the use of technology, coupled with the government’s reform push, corporates across all sectors would be driven to opt for large, modern warehouses. The entry of various private equity firms and foreign players in the Indian logistics market would boost quality supply, hence propelling demand. Cities such as Mumbai, Pune and Chennai would remain major investment destinations, with Delhi-NCR and Bangalore also being on the investors’ radar.”
Commenting on the sector, Jasmine Singh, Senior Executive Director – Advisory & Transaction Services, India, CBRE said, “We foresee leasing activity to remain upbeat over the next six months driven by 3PL and e-commerce sectors. Initiatives such as the creation of a separate Logistics Department is a reiteration of the government’s focus on the development of the sector. In addition, initiatives such as Make in India and relaxation of FDI norms have further had a positive impact on investment sentiment in the country, leading to heightened business activity across the logistics sector.”
The report further stated that rentals continued to appreciate along several micro markets across the cities. The micro-markets of NH-6 in Kolkata and Bhiwandi in Mumbai reported the highest appreciation, ranging between 15% and 24%. Meanwhile, other micro-markets such as NH-2 in Kolkata, the Northern Corridor in Hyderabad, the Southern Corridor in Bangalore, NH-1 in Delhi-NCR and Aslali in Ahmedabad reported a rental appreciation of 3-5% on a half-yearly basis. The increase could be attributed to sustained occupier interest. Further, rentals across all other micro-markets in most of cities remained stable during the review period, except in Chennai’s Western belt, which witnessed a marginal 1-3% decline.
On policy measures aiding economic growth, the logistics sector benefitted from the ablation of the short-term pain inflicted by the implementation of the Goods and Services Tax (GST). The implementation of GST has also helped remove inter-state checkpoints and reduce the movement time of cargo, thereby reducing sources of capital, the report, said. Adding to this, the grant of infrastructure status to the logistics and warehousing sector has also led to increased investor interest as it has helped developers gain access to infrastructure lending at easier terms and with enhanced limits.
City Highlights – H1, 2018
Delhi-NCR
Mumbai
Bangalore
Chennai
Hyderabad
Kolkata
Ahmedabad
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