The leasing of warehousing and industrial space has slowed down because of the nationwide lockdown but demand may rise post-COVID-19 with expected growth in e-commerce and possible shift of manufacturing activities from China to India, according to industry experts.
“Industrial and warehousing is the most resilient segment in India, which is likely to emerge quickest and strongest post-COVID-19,” property consultant Savills India said in a report. The demand-supply of industrial and warehousing space is expected to soften as compared to previous estimates in the near to medium term due to coronavirus pandemic, the consultant said.
Higher supply contraction could lead to decrease in vacancies and optimum pricing, it added.
In its report ‘India Front & Center - Production & Supply Chain’, Savills India has revised its estimates downwards for both absorption and new supply of warehousing and logistics space for 2020. The projection for warehousing and logistics leasing has been revised to 30 million sq ft from 40 million sq ft earlier. Fresh supply is now estimated at 12 million sq ft this year from 42 million sq ft projected earlier across top eight cities - Ahmedabad, Bengaluru, Chennai, Delhi, Hyderabad, Kolkata, Mumbai and Pune.
When contacted, Embassy Industrial Parks CEO Aditya Virwani said, “Both logistics and industrial requirements will see an increase post-COVID. The digital shift to online retail has been a success during these times and that will result in e-commerce firms growing in India.”
Embassy Industrial Parks has facilities in Maharashtra, Tamil Nadu, Telangana and Delhi-NCR. On industrial space, Virwani, who is also COO of Embassy Group, said: “India has not been able to compete with China and other Asian countries with manufacturing investments. Now is the opportunity to capitalise on the fear of setting up in China.”
With the right support of the government, Virwani said the industrial space can see a boom. “Our existing clients are holding off on growth in China and looking for new markets.” Rajesh Jaggi, vice chairman - real estate, Everstone Group, said the warehousing segment is considered as an essential service and has therefore largely not been affected due to the lockdown. Everstone group-backed IndoSpace is into development of logistic and industrial parks.
“Leasing activity is expected to be slower in this period as companies will focus on maintaining efficiencies of their manufacturing and supply chain processes, instead of new procurement. “While we have not experienced significant change in demand due to COVID-19, the timelines to close a contract may differ under current circumstances,” he said. Once the lockdown period is over,manufacturing picks up, Jaggi expects that sectors like pharmaceuticals, e-commerce,food industries would ramp up their storage capacities in line with the demand.