With the COVID-19-induced lockdown, warehousing real estate has emerged as an attractive investment area in 2022. The requirements resulting from the pandemic and the trends have stimulated rapid expansion in the warehousing industry.
With the rapid rise of the e-commerce market, warehousing & logistics have turned out to be significant game-changers in the industry. E-commerce, retail sectors, FMCD, and FMCG players require bespoke facilities as per their logistics and fulfilment strategies. The past few years have seen India's warehousing real estate sector outperform every other asset class in the real estate sphere, attracting investments from all over the world.
Let me take you through some of the developing trends in the warehousing sector in post-lockdown India.
1. E-commerce To Boost Demand
The pandemic has made a noticeable change to us humans such as; a behavioural shift, increasing the acceptability of purchasing groceries and daily necessities online. Some of the larger organized merchants have seen this trend and have begun to enhance their e-commerce and home delivery infrastructure, which was not previously a priority. This move has boosted the warehouse industry's solid fundamentals and raised demand from e-commerce groups. India's e-commerce sector is expected to have a 7 percent share of the country's retail market amounting to $60 billion by 2023. Due to increased demand amongst fellow Indians for e-commerce and 3PL businesses following the pandemic, the sector has attracted significant operator and investor interest.
2. Growing Demand In Tier-II And Tier-III Cities
Warehousing firms are spreading to Tier-II and Tier-III cities, boosted by the Union government's emphasis on policies like the Gati Shakti Masterplan for expressways where the government has announced 25,000 km of new highways, and 100 new cargo terminals with multi-modal logistic parks and initiatives to connect urban transport to railways. In 2022, the market is expected to absorb more than 40 million square feet across Tier I, II, and III cities.
3. Inviting Global Investors
The interest of international investors in expanding their presence in India through investments in the storage and logistics industries has increased due to India's considerable legislative changes. Non-resident Indians, high net worth persons, and ultra-high net worth individuals are growing their interests in India's logistics sector leading to India’s promising economic growth, rapid development in the country's e-commerce enterprises, systematic reforms such as the installation of goods and services tax (GST), and the possibility for higher returns.
4. Spike In Leasing Agreements
Warehousing expansion in Tier II and III locations in India is ably supported by different government programmes such as highway construction, Bharatmala, and Sagarmala. According to reports, 32-34 million sq ft of new warehouse spaces are expected to become operational this year. Gross leasing of industrial and warehousing space rose 11 per cent across five major cities to 6.2 million square feet during the January-March period.
5. Increase In Cold Storage
Certain e-commerce industries like grocery grew more quickly than others as a result of the impact of COVID. Future demand for cold warehousing is rising because of growing online grocery demand. To manage smaller, more effective temperature-controlled storage facilities, warehouses will attempt to automate.
6. Increased Use Of Warehouse Automation
Warehouse automation has been steadily gaining popularity for years, but COVID, like many other things, has hastened its adoption. Warehouses have turned to automated storage and retrieval technologies to reclaim floor space and increase labour efficiencies as they alter inventory counts, make space for work in process (WIP), speed up order fulfilment, and apply social distancing and decentralization.
7. Increased Warehouse Capacity
Post-Covid, warehouse capacity expansion has become the need of the hour for a variety of reasons like increased inventory on hand, increased demand, and additional space for social distancing. According to reports, the warehouse industry is estimated to grow at a 20 percent CAGR from 31.7 million sq ft in the year 2020-21 to 45.9 million sq ft in 2022-23.
8. In-City Warehouses
There has never been a more exciting time in India for e-commerce than now. The most critical enablers of quick E-commerce, Urban Logistics and other convenience-centric supply chain models—In-City Warehouses are experiencing unprecedented demand and will continue to do so in the coming years; owing to factors such as increased online purchasing frequency, rising customer expectations for quick deliveries, the rise of hyper-local delivery models, and the growing trend/competition for shorter delivery timelines among e-commerce players. Last mile logistics makes a big difference to customer experience and In-City warehousing facilities serve as a great platform for the same.
9. Increased Height Of Warehouses
Warehouses in India featured a clear ceiling height of 29-33 ft during 2017-19 and have now increased to a range of 37-42 ft to allow extra vertical storage space. Features such as high ceilings help to accommodate automated stacking systems, sufficient loading & unloading zones and power backup provisions, etc. These manufacturing units are also expected to exhibit a growing preference for ready-built plug-and-play infrastructure within industrial clusters.
10. 3s Of Warehouses
With the development of e-commerce, there is a greater need for more responsive supply chains, as well as the ability to manage a higher number of stock-keeping units with fewer errors. Warehouses must develop into intelligent, efficient, and automated facilities to meet such demands. As a result, the '3S' principle can be used to establish this:
- ● Smarter- Imaging, cloud integration, voice/face recognition and personal assistants offer real-time information, regardless of the environment and location.
- ● Speedier- Robotics and other automated solutions can decrease the amount of time that personnel spend on travel, leading to a boost in efficiency, simplification of manual tasks and lower costs.
- ● Sustainable- It is now pivotal to integrate sustainability into the SOP. Designs that reduce carbon footprint are adopted and sustainable technology is incorporated for businesses to operate more efficiently.
In Summary
The industrial and warehouse real estate industry in India has been steadily growing and expanding, and this trend is expected to continue. Distribution and warehouse facilities will strive to be flexible, adaptable and feasible in light of the uncertain future. Our main concern will be how to effectively manage their most significant expense, labour, and make the best use of available space.