This has been lower than the previous first quarter of last three years (2017 – 2019) demonstrating a contraction of approx due to nationwide lockdown.
India’s Industrial and logistics real estate quarterly demand dropped by 30% in the first quarter of 2020, according to JLL’s latest report “COVID-19: Industrial & Logistics Sector in India. Impact and Opportunities,” released today.
This has been lower than the previous first quarter of last three years (2017 – 2019) demonstrating a contraction of approx due to nationwide lockdown.
India’s warehousing sector, driven by new supply in eight major metros including Ahmedabad, Bengaluru, Chennai, Hyderabad, Kolkata, Mumbai, Delhi NCR and Pune, saw an approximately 15% contraction (in mn sq. ft.) during January-March, the first quarter of 2020. Net absorptions stood at 5.9 mn sq. ft. in the midst of the lockdown across the country starting March 2020.
The quarterly new supply addition is higher than the average quarterly new supply addition of first quarter in the last three years (between 2017–2019) which demonstrates that the impact of lockdown has likely not set in yet,” says the report.
“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,” says Ramesh Nair, CEO and Country Head, India, JLL.
As the impact of the national lockdown becomes clearer, the leases and active RFPs that were in various stages of closure are likely to be completed in the third and fourth quarters of 2020.
Post- lockdown, demand is likely to be driven by e-commerce and 3PL players who will continue to explore urban spaces. Grade A properties will be more attractive to occupiers due to health and safety 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,” says Yogesh Shevade, Head – Industrial Services, India, JLL.
The lockdown has frozen supply chains across multiple sectors, both in production and stockpiling.
The report highlights that the medium-term will experience an uptake in demand of urban logistics and in-city warehousing. The logistics sector is expected to see long-term growth as e-commerce expands and with enhanced infrastructure support.
Impact on
However, after the lockdown, a change in consumer behavior is expected to benefit e-commerce and e-payments, which is already being observed through movements of essential commodity.
Sectors such as FMCG, e-commerce, pharmaceuticals, and cold storage will see an increased growth and demand for the additional warehousing spaces. On the other hand, a few sectors like auto, heavy machinery and chemicals, may look for short-term rent abetments for one-to-two months.
In the short-term, a tightening of the debt/equity influx from Sovereign Wealth Funds (SWFs) will limit inbound activity. New investments will also remain cautious in the rest of 2020.
“Investors might remain cautious, critically scrutinizing portfolios before deploying capital for investments. However, the industrial asset class might emerge as a safer investment option compared to other real estate asset classes,” the report adds
Source: Economic Times
