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Warehousing demand expected to grow ~160% to reach 35 mn sq. ft in 2021: JLL

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Despite unfavourable socio-economic environment, stock in top 8 cities has added 27 million sq. ft to reach a total of 238 million sq. ft. in 2020 and demand is expected to grow around 160% to reach 35 million sq. ft in 2021 provided external conditions stay stable, a new report by JLL has said.

This is supported by growing demand in sectors such as 3PL (Third Party Logistics) and e-commerce. 3PL has become one of the fastest growing segments in the warehousing space, contributing nearly 35% of total net absorption in 2020, highest among all the other sectors. Likewise, many e-commerce categories are expected to do very well, as consumers are making a behavioral shift from buying offline to online, said the report titled India Real Estate Outlook – A new growth cycle by JLL.

Tier II and III cities are gaining strength in warehousing is eminent from the changing pattern of a typical warehouse sizes with some large transaction sizes of 0.3 – 0.4 million sq. ft, even in cities such as Coimbatore and Lucknow as outliers and ranging between 0.1 – 0.2 million sq. ft in general, as compared to 0.025 – 0.05 million sq. ft (25,000 – 50,000 sq. ft) a few years back, it noted.

“In Q4, the market started gaining momentum with highest supply and absorption in 2020 post the lockdown. Industrial spaces witnessed a 13% Y-o-Y growth in total stock in Grade A & B warehousing space in top 8 cities. The overall warehousing space stands at 238 million sq. ft at the end of 2020 compared to 211 million sq ft in the previous year thereby resulting in a net supply of 27 million sq. ft,” said , Head Industrial Services, JLL, India.

According to him, end -users and tenants have looked for new and innovative ways to taking up spaces in 2020 on short term and temporary leases of tenure 9 -12 months for leasing of unused spaces in existing leased warehouse on sub-lease. However, these are not captured in net absorptions considering these are already leased spaces.

“An important point to note here is that in 2020 the end-users / tenants have looked for new and innovative ways to taking up spaces on short term / temporary leased of tenure 9 -12 months for leasing of ‘white spaces/unused spaces’ in existing leased warehouse on sub-lease. Unfortunately, these does not get captured in net absorptions (considering these are already leased),” he added.

According to JLL, tier II and III cities are gaining strength in warehousing is eminent from the changing pattern of a typical warehouse sizes with some large transaction sizes of 0.3 – 0.4 million sq ft, even in cities such as Coimbatore and Lucknow as outliers and ranging between 0.1 – 0.2 million sq. ft in general, as compared to 25,000 – 50,000 sq ft a few years back.