COVID-19 May Kick-start Demand for Multi-store Warehousing

• Warehouses currently restricted to cities’ peripheral areas; COVID-19 may create demand for multi-storey urban warehousing options
• E-commerce growth & faster delivery expectations to drive warehousing & logistics growth
• Multi-storey warehousing concept already entrenched in South-Asian countries like Hong Kong, Singapore, South Korea & Tokyo
• Such warehousing facilitating maximum land utilization in land-starved cities like Mumbai, it will help minimize delivery time & reduce transportation costs

Santhosh Kumar, Vice Chairman – ANAROCK Property Consultants

Multi-level warehouses within city limits may well be Indian real estate’s next big thing in a market completely transformed by the coronavirus pandemic. The compulsions of faster eCommerce growth in a post-pandemic world can kick-start demand for tech-enabled multi-storey warehousing. Such solutions are already in place in South Asian countries such as Hong Kong, Singapore, South Korea and Tokyo.

Currently, warehouses in the leading Indian cities are largely restricted to the city peripheries and far from the larger customer base. COVID-19 has already underscored the importance of eCommerce in the ongoing lockdown. With an uncertain post-pandemic future looming over the retail sector, retail players may now need multi-level warehouses within city limits to service cities.

Besides facilitating maximum land utilization in cities like Mumbai, multi-storey warehousing can help companies to reduce transportation costs and improve delivery time – the keys to success for most retail businesses. With technology as a key enabler, such options can replace multiple single-storey warehouses on the city peripheries and thus save on overall operational and occupancy costs.

Today, fast delivery is a crucial requirement for the seamless omnichannel strategy of eCommerce players. The fallout of the coronavirus pandemic can exceed the current lockdown and social distancing may become the new normal, at least over the mid-term. In such a market environment, retailers will be under pressure to secure warehousing locations close to their customer base.

Solutions like multi-storey car parking are already firmly in place in India’s most crowded and land-starved cities. Multi-storey warehouses of five or more storeys with tech-enabled loading on every floor are the next logical move.

Top Trends in India’s Warehousing Sector

Even before COVID-19 and the unique imperatives the pandemic has called forth, structural reforms such as GST implementation and infrastructure status for the logistics sector, coupled with the rapid growth of eCommerce, ushered in a new growth chapter for the Indian warehousing and logistics industry. Besides eCommerce, other sectors driving demand for warehousing include FMCG, engineering and manufacturing, and third-party logistics.

Indian warehouses have gone from low-quality godowns to scientifically designed steel structures, pre-engineered in factories and assembled at the location. Water-proofed, well-ventilated, temperature-controlled and warehouses with CCTV cameras are rapidly becoming the new order. Several factors have conspired to boost this transformation:

• Government impetus to warehousing: Budget 2020 packed several major announcements for the warehousing sector, including a plan to build a seamless national cold storage chain. The government also plans to create warehousing in line with Warehouse Development and Regulatory Authority (WDRA) norms. The National Bank for Agriculture and Rural Development (NABARD) will map and geotag warehouses and cold storages.
• Digital technology improving efficiencies: Like other sectors, logistics and warehousing is also leveraging technology to achieve better efficiency and lower dependence on manpower. Many warehouses now use software that improves fleet management via live tracking of goods, RFID (Radio Frequency Identification) systems for inventory identification, automated pallet storage, etc.
• Warehousing demand in Tier 2 cities: The primary demand for warehousing is currently concentrated around top cities like Delhi NCR, Mumbai, Bengaluru, Chennai and Pune. Due to its locational and distribution advantage, Kolkata has also emerged as a warehousing and logistics hub in the east. However, the proliferation of eCommerce in smaller cities has kick-started a growing demand for warehousing in tier 2 cities such as Jaipur, Ludhiana, Coimbatore, Lucknow and Guwahati.

Going forward, with the government providing viability gap funding for PPP-based warehousing at block and district level, the warehousing sector has now come to the centre-stage for global investors and developers. With COVID-19 already a major catalyst for technology-enabled real estate innovations, multi-storey warehousing is a logical next step.