Warehousing demand grows by 44 pc CAGR in past three years: Knight Frank India

Mumbai (Maharashtra) [India], July 2 : Warehousing demand across the country has recorded 44 per cent compound annual growth rate since 2017, mostly after the introduction of Goods and Services Tax (GST), Knight Frank India said in its latest report released on Thursday.
Despite an economic slowdown, warehousing leasing activity saw healthy demand in Mumbai (8 per cent year-on-year), Pune (42 per cent) and Ahmedabad (5 per cent) in FY20. Rents in grade A properties for FY20 remained stable ranging from Rs 13 to 32 per square feet per month.
The report said GST led to a transformative shift to efficiency-based location and size strategy rather than the erstwhile tax-saving focused objective. The real estate asset class has seen a robust CAGR for the period FY17-20. Post GST, the asset class has received institutional investment commitments of 6.5 billion dollars.
With a COVID-19 induced shift in buying behaviour, e-commerce growth is likely to accelerate. This will further increase the share of e-commerce in warehousing demand in the medium to long-term, said the report.
Significantly, it added that existing land committed to warehousing across the top eight cities of India has the potential to add 193 million square feet of new warehousing supply.
The currently committed land for warehousing is estimated at 21,163 acres which has the potential of adding 63 per cent more supply to already existing 307 million square feet of warehousing stock.
Three out of eight markets Hyderabad (2.19), Ahmedabad (2.09) and Chennai (2.02) ranked high on Knight Frank's Development Potential Multiple.
The National Capital Region (NCR) emerges as the foremost market, recording the highest volume of leasing at 8.6 million square feet. It also recorded a 45 per cent CAGR growth in demand over a three year period.
NCR has a development potential multiple of 1.75 which implies that 75 per cent more warehousing space can be added to the region. The current stock is reported to be 57 million square feet with a potential of expansion to 100 million square feet on warehousing land of 4,178 acres in NCR.
"The demand has especially been strong from industries like third party logistics, e-commerce, FMCG and pharmaceutical which is expected to continue in FY21," said Shishir Baijal, Chairman and Managing Director of Knight Frank India.
"Warehousing segment has been gaining traction with investors in the last few years due to the potential of India's domestic consumption and overall GDP growth," he said.