Warehousing demand in Bengaluru exceeds new supply by 55% during 2018-22

Leasing of warehousing space in Bangaluru exceeded new supply by 55 per cent during 2018-22 period, resulting in lower vacancy level and increase in rental, according to India Sotheby's International Realty report.

Property consultant India Sotheby's International Realty on Wednesday released a white paper 'Ahead of The Curve - Bengaluru Warehousing'.

The IT city is likely to witness a surge in investment for development of premium warehousing park to meet growing demand for storage space from e-commerce and third-party logistics players, the paper said.

The consultant has taken inputs from real estate data research company CRE Matrix in the white paper.

"The demand-supply trend of the last five calendar years (2018-22) shows that demand has outstripped new supply by far, resulting in very low vacancy levels in existing warehousing parks and a decent growth in rentals," the consultant said.

The cumulative absorption of warehousing space in Bengaluru during the 2018-22 period stood at 16.34 million square feet, while new supply was 10.5 million square feet.

"Bengaluru will be in the spotlight for investments in warehouses with greater capacity for e-commerce fulfilment. Based on the anticipated rise in demand, we project that more than 250 acre of land would be required in the periphery of Bengaluru city to develop new warehousing facilities," said Gagan Randev, Executive Director - Capital Markets, India Sotheby's International Realty.

In 2022, market rentals experienced a remarkable increase of 10 per cent, surpassing the average rental hikes of 5-6 per cent witnessed in previous years.

"This upward trajectory indicates a further tightening of the market. As a result, owners have gained the advantage of negotiating more favourable rental terms with new occupiers. The considerable rise of 10 per cent in market rentals, compared to the in-place rental increase of 2 per cent in 2022, clearly reflects this positive trend," said Harikesh Ananthamurthy, Senior Vice President - Capital Markets, India Sotheby's International Realty.

He said manufacturing, logistics players, e-commerce, and retail sectors will continue to drive the warehousing demand, with logistics players and e-commerce emerging as major occupiers.

Randev said the involvement of larger organised players in the sector has driven a shift towards automation, IoT integration, enhanced warehouse management systems, security measures, and a focus on creating greener and sustainable environments.

Prominent players such as All Cargo, Welspun, IndoSpace, Prologis, Panattoni, RMZ, The House of Hiranandani, Lodha (Macrotech), ESR, CapitaLand, Morgan Stanley, Horizon Industrial Parks, and Greenbase are aggressively expanding their presence in the warehousing segment, the consultant said.

The Sotheby's International Realty network is present in 81 countries and territories with 1,075 offices and 26,000 sales associates and has achieved a record real estate global sale of USD 167 billion.

India Sotheby's International Realty established its presence by setting up its first office in New Delhi in July 2014. It now has offices in Mumbai, Kolkata, Bengaluru, Goa, Colombo and the mandate for the Maldives. Its India residential portfolio includes listings of luxury properties like farmhouses, bungalows, villas, holiday homes to penthouses and apartments across the country.

The company also provides consultancy services to commercial real estate and advisory services for offices, institutional, retail, hotels and land transactions.