Demand for Logistics Space Remains Resilient

Warehousing demand from India was especially robust. Almost 78 percent of warehousing occupiers in the Asia Pacific intend to expand their real estate footprint in the next three years
Demand for Logistics Space Remains Resilient

The demand for logistics space in India remained resilient in the July-September quarter. Online retailers and related third-party logistics (3PL) firms led the leasing demand, in turn, preparing for year-end sales promotions. According to a report, net absorption of nine million sq ft occurred in the September quarter. 

Going by CBRE's Asia Pacific report, the net absorption reached 27.4 million sq ft in Asia, a record quarterly high, despite disruption to manufacturing and container shipping. 

"During the quarter, several occupiers were seen extending their distribution networks, particularly last-mile facilities, to shorten delivery times for consumers," the report said. 

Around 172 million sq ft of new logistics supply is scheduled to be completed in Asia Pacific's primary and secondary markets in 2022, the highest annual total on record.

Strong Demand in Warehousing Segment

Warehousing demand from India was especially robust. Almost 78 percent of warehousing occupiers in the Asia Pacific intend to expand their real estate footprint in the next three years as continued strong market sentiment ensures occupiers remain in expansion mode, as per CBRE's Asia Pacific Logistics Occupier Survey.  

"It is evident the demand for Grade A warehousing is only going to grow exponentially from here," Abhijit Verma, Chief Executive of Avigna Group, said. 

The strong supply pipeline reflects landlords' eagerness to capture surging demand from occupiers for space as they look to extend their logistics networks.  

A substantial portion of new supply due to come on stream next year will be in emerging logistics hubs near transportation nodes, providing more convenience to occupiers seeking stronger delivery network connectivity.

"Avigna has expanded its warehouses from four locations to seven locations in the last two years and now we are looking at expanding across North and East India," Verma added.

As per the survey, 84 percent of occupiers expect the operating environment to improve in the next three years, while 78 percent plan to add to their logistics footprint in the next three years, and 61 percent view cost as the top barrier to expansion. 

E-commerce to Shore Up the Indian Logistics Space

Coverage of e-commerce in India is expected to rise from its pre-pandemic figure of 6.5 percent to 11.7 percent by 2025. Recent major expansions include Indian platform Flipkart's announcement that it would add four new warehouses to its current 12-facility Indian network in Q3 2021, representing a 43 percent increase in square footage.

"There is absolutely no doubt that warehousing is poised to continue its good demand trajectory in the next couple of years. Ecommerce and industrial (segments) occupy the biggest space in this market and these, along with 3PL, are expected to continue to grow at a 25-30 percent per annum trajectory," Gagan Randev, Executive Director-India at Sotheby's International Realty, said.  

As per the report, occupiers are already displaying a strong appetite for new, high-quality logistics space. Net absorption in major Asia markets reached 35.6 million sq ft in the January-June 2021 period, the highest first-half figure on record.

CBRE expects occupiers to continue to adopt an aggressive approach to space take-up in the short-to-medium term. Asia's rapidly growing population and increasing urbanization rate are creating business opportunities in lower-tier cities and emerging areas. In recent years, developing markets such as Southeast Asia and India have seen strong expansionary demand from occupiers, along with a wave of demand for upgrading to newer and more efficient facilities.

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