New supply of 9 mn sq ft of warehousing space in Q1

New Delhi: There has been new supply of 9 million square feet of warehousing space in the first quarter if the current calendar year, significantly higher than the average of quarterly new warehousing supply of just 7 million square feet in first quarter of last three years. 

The demand for pharmaceutical services and e-commerce has led to a surge in demand for warehousing spaces in the country. As the consumers in the country are now preferring online transactions in the wake of Covid19 pandemic, there has been significant resilience on the part of the industrial and logistics real estate industry.   

However, the absorption in the first quarter of the current calendar year has been lower by about 15 percent as compared to the same period of last year. The total absorption in the latest quarter =has been about 5.9 million square feet, according to a report by JLL. 

“Modest absorption amidst the COVID-19 uncertainties hints that the fundamentals of the industrial and logistics sector is strong and set to take a faster revival route among major real estate asset classes,” said Ramesh Nair, CEO and Country Head, India, JLL.

Speculative spaces supply (projected) of speculative spaces may get delayed by 1-2. This will be based on factors like protracted labour shortages. As the effect of the national lockdown gets clearer, the leases and proposals that were in different stages of closure are expected to be concluded in the 3rd and 4th quarters of 2020. 

After the lifting of the lockdown, the demand for warehousing spaces is expected to be led by e-commerce and third party logistics players. The Grade A warehousing properties will get more attractive because of health considerations.

“The extended lockdown in the country will also impact the under-construction projects resulting in an attenuated supply in the short-term. However, absorptions and demand in warehousing sector is likely to take a positive turn in the medium-to-long term phase,” said Yogesh Shevade, Head – Industrial Services, India, JLL.

The pent-up demand for warehousing spaces and the project closures are expected to get pushed by 2 quarters. There is an expected surge in demand in the 4th quarter. The fundamentals of the warehousing business are very strong though. The biggest advantage for the country remains in the potential to capture manufacturing demand as companies redraw their global supply chain strategy from a business continuity planning point of view.