NCR’s logistics areas see rental drop due to lack of new quality supply, says CBRE

With the dearth of new quality supply, it has been observed that there is a significant rental drop in prime logistics areas at national capital region (NCR), according to a report — “India Logistics Market View H1 2013 by CBRE, an international property consultant.

According to the report, the first six months of the year continued to see automobile players, FMCG companies and retail majors as the prime occupiers of warehousing space; while the preferred expansion mode for most corporates remained built-to-suit (BTS) facilities in the range of 100,000–150,000 sq ft.

Anshuman Magazine, chairman and managing director of CBRE, South Asia Pvt. Ltd said, “In the coming months, India’s logistics industry is likely to attract demand from companies keen on expanding their warehousing footprint. We can also expect a supply addition in various cities, which may result in a marginal rental rise in select locations. The recent relaxation of FDI regulations in the retail sector is also expected to create substantial demand for logistics and warehousing services across the country.”

Over all, the growth in India’s logistics and warehousing industry has been fuelled by encouraging developments in the retail, e-commerce and manufacturing sectors.

In the NCR areas, NH-8/Gurgaon (Haryana) continued to enjoy its position as one of the most preferred locations for large warehouse developments or regional distribution centres (RDCs). Other emerging locations in H1 2013 for new warehouse developments in the region were Luhari, Kulana (NH-71), Sohna Taoru Road (NH-71B), Taoru, Khajuri and Farukhnagar. Although no new Grade A warehouse space was added during the first six months of 2013, there was significant addition of Grade B supply from local developers. Lack of quality supply led to a rental drop of 23–24% in the micro-markets of Akbarpur and Saboli, and to that by 17–18% in the NH-8/Gurgaon area, over H2 2012.

Besides, the high cost of land at the established logistics hubs of Mumbai’s Bhiwandi and Panvel areas are beginning to drive demand to the city’s western suburbs of Virar and Vasai, as well as towards Nashik on NH-3. Demand for quality warehousing from cash-and-carry retailers, keen on expanding their footprint in the city, is likely to witness an increase in the next few months.

The report also said, rentals are expected to remain stable on the back of steady demand and abundant supply across the warehousing hubs of Chennai, Hyderabad, Pune and Kolkata. While FMCG companies and e-retailers are the major demand drivers for quality logistics spaces in Chennai, Pune attracts more attention for industrial space from engineering and automotive companies.