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Logistics leasing in India registers 31% growth in H1 2019: CBRE report

August 12, 2019: Logistics leasing in India in the first half (H1) of 2019 recorded a growth of 31 percent on a yearly basis, crossing 13 million sq. ft, says a report by real estate consulting firm CBRE South Asia.

According to 'India Industrial and Logistics Market View, H1 2019', Mumbai, Chennai and Bangalore accounted for more than 60 percent of leasing activity.
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According to 'India Industrial and Logistics Market View, H1 2019', Mumbai, Chennai and Bangalore accounted for more than 60 percent of leasing activity.

August 12, 2019: Logistics leasing in India in the first half (H1) of 2019 recorded a growth of 31 percent on a yearly basis, crossing 13 million sq. ft, says a report by real estate consulting firm CBRE South Asia. According to ‘India Industrial and Logistics Market View, H1 2019’, Mumbai, Chennai and Bangalore accounted for more than 60 percent of leasing activity.

Small-sized transactions (less than 50,000 sq. ft.) dominated the logistics space take-up, accounting for about 38 percent of the leasing activity in H1 2019 - a trend noticed in second half (H2) of 2018.

The share of medium-sized transactions (ranging between 50,000 sq. ft. and 100,000 sq. ft.) rose from 26 percent in H2 2018 to 32 percent in H1 2019. Large-sized deals (greater than 100,000 sq. ft.) accounted for 30 percent of the leasing activity during H1 2019.

“While the overall pipeline for the sector is expected to be around 60 million sq. ft. till 2020, at least 22 million sq. ft. of this supply is anticipated to be released by leading players. We also expect logistics leasing activity to strengthen owing to consolidation / expansion by occupiers. In addition, as per our APAC Investor Intention Survey, 2019, India was among the top five investment destinations in APAC. Industrial & logistics was also one of the top segments expected to be targeted by investors in 2019,” Anshuman Magazine, chairman & CEO - India, South East Asia, Middle East & Africa.

Supply addition rose by about 54 percent in H1 2019 as compared to H2 2018, with about 11 million sq. ft. of projects completed. About 65 percent of the completions were reported in Mumbai, Chennai and Ahmedabad. Moreover, the increasing interest of leading players in expanding their portfolios was visible during H1 2019.

Jasmine Singh, executive director, advisory & transaction services, CBRE India, said, “It is quite interesting to note that the key demand drivers of leasing activity in H1 2019 were 3PL (56 percent) and engineering & manufacturing (6 percent) firms. Domestic corporates drove demand with a share of about 85 percent of leasing as compared to about 67 percent in H1 2018. We also witnessed new launches to the tune of about 15 million sq. ft. by major developers."

In its outlook, the CBRE report said that cities such as NCR, Mumbai, Bangalore are expected to dominate the supply pipeline, with the average size of warehouses in NCR and Mumbai likely to exceed 1 million sq. ft. Other cities such as Chennai, Hyderabad and Pune are also expected to witness supply addition, but the average size of developments are expected to be in the 0.3 - 0.5 million sq. ft. category.

Partnerships in terms of JVs and mergers with foreign players would be dominant to meet the demand for quality spaces and seize the growth opportunity.

For the remainder of 2019, CBRE expects supply-constrained locations to continue to deliver rental growth, with new logistics hubs also emerging across cities in response to labour availability and land shortage. Prime locations likely to witness rental growth in coming months include NH-8 in NCR; Bhiwandi in Mumbai; Western and Northern Corridors in Chennai; Northern Corridor in Hyderabad; and NH-2 and NH-6 in Kolkata.

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