Leasing of warehousing spaces jumps 31% in 8 major cities in H1FY19

Mumbai, Chennai, and Bengaluru accounted for more than 60% of leasing activity

Leasing of warehousing spaces went up by 31 per cent to over 13 million sq ft across eight major cities in the first half of this year, while investment of more than $200 million was witnessed in the industrial and logistic real estate segment, according to property consultant CBRE.

The demand for warehousing/logistics space was driven by third party logistic firms, which absorbed 56 per cent of the total space, CBRE said in its report 'India Industrial and Logistics Market View H1 2019'.

Mumbai, Chennai and Bengaluru accounted for more than 60 per cent of leasing activity.

Logistics leasing in the country recorded a growth of 31 per cent on a yearly basis, crossing 13 million sq ft, CBRE said in the report. The cities tracked in the report are -- Delhi-NCR, Mumbai, Chennai, Kolkata, Bengaluru, Hyderabad, Pune and Ahmedabad.

"We expect logistics leasing activity to strengthen owing to consolidation/expansion by occupiers," said Anshuman Magazine, Chairman and CEO - India, South East Asia, Middle East and Africa at CBRE.

According to the report, third-party logistic players contributed close to 56 per cent of total absorption during H1 2019.

On supply side, about 11 million sq ft space was added in H1 2019, led by Mumbai, Chennai and Ahmedabad.

"Domestic corporates drove demand with a share of about 85 per cent of leasing as compared to about 67 per cent in H1 2018," said Jasmine Singh, Executive Director, Advisory and Transaction Services, CBRE India.

Sustained occupier interest in locating in quality developments resulted in rental growth of about 5-40 per cent in NH-1 and NH-8 in NCR; about 3-24 per cent in Eastern and Western Corridors in Bangalore; about 12-18 per cent in Western and Southern Corridors in Hyderabad; about 5-7 per cent in Western Corridor II and Northern Corridor in Chennai and about 3-6 per cent in Narol in Ahmedabad on a half-yearly basis.

On outlook, CBRE said that the "logistics sector is experiencing unprecedented structural shifts in the form of automation, leading to blurring of lines with the retail sector, transformation of supply chains and growing investments."

As technology permeates the sector, demand for quality space is increasing and corporates across segments are opting for large, modern warehouses, it added.

CBRE expects that the trend of e-commerce platforms owning and operating their own facilities will result in more built-to-suit facilities, thereby taking off some pure leasing from the market.