Grade-A warehouses: A preferred choice in India’s logistics and warehousing sector

Grade-A warehouses: A preferred choice in India’s logistics and warehousing sector

Fulfilling all the necessary requisites, Grade-A warehouses emerged as the one-stop solution, and its demand witnessed a major uptick during the pandemic. Its necessity will only grow hereafter.

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According to a recent report by Knight Frank titled ‘India Warehousing Market Report 2021’, annual
warehousing transactions in the primary markets will grow at a compound annual growth rate of 19 per cent to 76.2 million sq. ft. by FY26 from 31.7 million sq. ft. in FY21. Elucidating this growth, a recent report by Savills India also reveals that the leasing of industrial and warehousing spaces across 8 major cities went up by 35 per cent during 2021, wherein the fresh supply rose 64per cent. With such a remarkable expansion, the sector has established itself as one of the most resilient asset classes that continues to bring significant capital.

The pandemic has certainly played a major catalytic role in boosting the logistics industry. With a drastic shift towards digitisation and contactless operations, customers that traditionally operated offline went online. This resulted in a huge explosion of D2C brands seeking to bring the very best of their products directly to the customers’ doorstep. This further highlighted the significance of smoothening of the entire supply chain of doorstep delivery. Additionally, the heightened need for oxygen cylinders, vaccines, essential supplies, food, etc. made fast and timely distribution a priority. Considering these aspects, there was a significant boom in the e-commerce sector. It revved the speed of the industry to meet the consumers’ needs for increased home shopping demands and shed light on the importance of last-mile delivery.

Fulfilling all the necessary requisites, Grade-A warehouses emerged as the one-stop solution, and its demand witnessed a major uptick. The Savills report also validates this by indicating that the warehousing demand in 2021 was driven by e-commerce companies and third-party logistics players which accounted for 62 per cent of the total absorption, followed by the manufacturing sector at 14 per cent. Grade-A warehouses are essentially gigantic spaces that allow storing, facilitate efficient operations of the supply chain of any business, and are built with modern amenities, state-of-the-art infrastructure & technology to provide competencies.

Moreover, with limited space within the existing parks, businesses are often forced to settle for alternate locations, far from the city. Thus, looking at the current scenario, there is a growing need for industrial and warehousing solutions, which are designed with easy expandability options, are in the same location, and are aligned with the businesses’ future growth plans. Grade-A parks close to transport hubs and well connected to state and national highways keep the throughput high and the transportation cost low. Such strategically located spaces in integrated social eco-systems also reduce employees’ travel time and costs, offering them the facility to live, work, and learn.

Grade-A warehouses in India are almost equivalent to international standards in terms of quality, which encourages more investors to invest and attract MNC clients who need such facilities. Global manufacturing companies have been stepping into the country to build manufacturing hubs that can establish an incremental supply base for them. The entry of these new global participants with limited/no presence in India will warrant an imperative need for Grade-A parks providing clean, marketable land titles, assistance for all statutory approvals, and permits for hassle-free onboarding.

With the up-gradation of the warehousing space from Grade-B and C to Grade-A facilities, the sector has been rapidly expanding its roots in tier-I and tier-II cities. In 2015, there was only 3 per cent of Grade-A warehouses. However, the recent reports indicate that there is a total of 10 per cent growth in the Grade-A warehouses. This illustrates that the sector is not only developing but getting more organized. In-city warehousing, smaller fulfillment centers are staying high in demand in top metro cities as delivery timelines are becoming shorter from same-day delivery to a few minutes’ deliveries. Occupiers are thus preferring Grade-A properties with good eaves height and compliances. Moreover, the economy is going to see larger companies adopting arising technologies like artificial intelligence, blockchain, etc. at scale to enhance efficiency to satisfy the changing consumer needs.

The forthcoming times will be optimistic for the logistics and warehousing sector. The knowledge from the pandemic-ridden years, the emphasis on building stability, the rise of e-commerce, the hastening of digital mediums, the adoption of newer technologies, and green logistics will boost the sector this year and beyond. With persistent focus by the government on ease of doing business, huge investments in the infrastructure sector, emphasis on public-private partnerships, the sector is set for rapid growth, further creating job opportunities for millions of people across segments.

Views are personal. The author is CEO, Townships and Rental Assets, Lodha


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