Covid-19 impact: E-commerce drives demand for warehousing in H1

Even as leasing of office and retail properties was hit in the first half of the calendar year, leasing of warehousing spaces is on an upswing.

Embassy Industrial Parks (EIP), Stellar Supply Chain Solutions, and TVS Industrial & Logistics Parks, among others, have seen a growth of anything between 30 per cent and 100 per cent in H1CY21.

The reason for this is growing demand from e-commerce, pharmaceuticals and third-party logistics firms during the pandemic.

Leasing of Grade A warehousing spaces since January to date stands at 13 million sq ft, compared to 9.4 million sq ft during the same period last year. This indicates growth of 38 per cent, according to data culled by Anarock Capital. 

However, FY21 saw a total leasing of 27 million sq ft against total leasing of 30 million sq ft in FY20 — of Grade A warehousing spaces, it said.

“Among other factors, the retail industry has seen a major realignment during the pandemic, with ecommerce becoming the preferred means of shopping. The vastly increased activity by both major and minor ecommerce players has necessitated a major ramp-up of warehousing access,” said Shobhit Agarwal, managing director of Anarock Capital.

In April this year, Walmart-owned Flipkart and Adani group said they will build one of the country’s largest warehouses for e-commerce in Mumbai. Amazon, too, is not behind. It planned to open 10 fulfillment centres as of last year.

According to Mathew Kurian Eranat, vice-president, ICRA, unlike the office and retail segments, the warehousing segment saw a decline of only around 10 per cent in new area leased in calendar year 2020. “Given the growth trends that some of these sectors are expected to see in the near to medium term, new space take-up in the warehousing segment could be expected to grow over 2020 levels,” he said.

Some players have outperformed the industry growth in leasing of warehousing spaces in the first half.

For instance, EIP was bought by Blackstone earlier this year. It signed about 850,000 square feet of leases across the National Capital Region (NCR) and Pune in the first half of this calendar year. This is more than double of what was signed in the same period last year, according to sources.

Blackstone or EIP did not comment.

Stellar Value Chain Solutions has leased a total warehousing area of over three million sq ft, which is 50 per cent higher than last year, said its chairman Anshuman Singh.  

Singh said in H2, the company will lease 100 per cent more than last year. Also, it will more than double its top line in warehousing this year compared to last year.

“Leasing went up because of our higher focus on e-commerce —new service offerings like mother hubs, cross docks and deep reserves this year, in addition to fulfilment centres," he said.

Its fresh focus on e-grocery, pharmaceuticals and tier 2 and 3 cities such as Coimbatore, Jammu, Raipur, Indore and Hosur helped, in addition to tier 1 cities, he said.

TVS ILP, meanwhile, has seen a 32 per cent compound annual growth rate (CAGR) this year over last year.  

“Due to the pandemic, the buying habits of the society have significantly altered in favour of e-commerce. This has led to increased demand for quality warehouses,” said Ravi Swaminathan, vice-chairman, TVS Industrial & Logistics Park, which has 15 million sq ft of warehouses at various stages of development.

However, ESR India has seen a decline this year. It is at 50 per cent of the total area leased during the same period last year, said Abhijit Malkani, CEO & country head at ESR India.  

Welspun One Logistics Parks plans to invest $ 265 million in the next three to four years to develop a leasable area of 7 to 8 million sq ft in Mumbai, Pune, Bengaluru, NCR, Chennai, Kolkata, and Lucknow. 

Indospace, the largest logistics firm in the country, plans to invest $300 million to acquire land across major warehousing hubs.