Spurt in e-comm, retail activity expected to drive growth in logistics sector

The warehousing and logistics sector has been thriving as the spine of industrial activities in India and has drawn significant investor interest in the past few years.

Growth in the e-commerce, retail, FMCG, auto and auto ancillary, chemical and pharmaceutical industries are driving demand further and, hence, pushing the enormous warehousing volume growth to the next level.

“The organised warehousing sector is poised for an interesting time in the short to medium term as the envisaged spurt in demand for organised top quality warehousing is expected to exceed available quality supply in major cities across India. Dearth in quality supply and escalating land prices have always remained the woe of large manufacturing companies and e-commerce companies that are constantly expanding their footprint. It is a good time for developers/ investors to evaluate this sector to add to quality organised warehousing infrastructure keeping in perspective the latent demand and consolidation/ expansion expected post-GST rollout,” said Shyam Arumugam, Associate Director, Office Services, Colliers International India.

Colliers Research said besides rapid expansions, the biggest challenge that India’s warehousing market would face is the acquisition of a feasible land parcel.

“Land cost shares the largest component of a warehousing project. While the land price is dependent upon multiple factors such as development control regulations, infrastructure development and the best alternate land use, rental values will depend primarily on the connectivity, demand and supply factors in the respective cities. It is recommended that warehousing developers acquire land at a feasible cost, as it will be the key when it comes to warehouse investment,” Colliers said.

According to Colliers Research, several international companies are hopeful about the Indian logistics market with announcements of various global players to increase their capacity for transporting goods back and forth from Indian cities.

A few companies such as FedEx, Kintesu World Express, DHL and TNT have already entered India through mergers, acquisitions and joint ventures with Indian logistics companies.

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