Warehousing demand outstrips supply

Chennai: Demand for warehousing real estate has outstripped supply in 2018, for the first time in four years and the demand is expected to grow 19 per cent this year. The sector also has been attracting investor interest.

The annual demand for warehousing was 32 million sq ft in 2018, higher than 31 million sq ft supply. Structural reforms including the awarding of infrastructure status and the implementation of Goods and Services Act have bolstered the demand for logistics and warehousing space in the country. As a result, demand has outstripped supply, finds JLL.

JLL expects the annual demand for 2019 to grow to 38 million sq ft as 8.4 million sq ft has already been absorbed the January-March period. The demand has been coming from third-party logistics firms, engineering, auto and ancillary, e-commerce, FMCG, retail and telecom and white goods. In value terms, the logistics sector is expected to grow to $215 billion by 2020.

Knight Frank finds that the warehousing industry has witnessed massive participation from institutional investors as well as developers, who have collectively invested over $6.8 billion since 2014. Private Equity funds had a 49 per cent share of the total investments into the warehousing industry. This was followed by sovereign and pension fund at 31 per cent and 20 per cent of the pie belonged to the developers.

The investments committed by institutional invest-ors alone, is estimated to create over 158 million sq ft of new warehousing space over the next few years.

"Favourable investment regulations have made the deployment of development funds a lot easier than it used to be in the past. Moreover, the infrastructure status as expected has added strength to the development pace,” said Ramesh Nair, CEO and Country Head, JLL India.