E-commerce absorbed 2 million sqft of warehouse realty in 2015: CBRE

With the e-tailing sector growing rapidly, e-commerce has emerged as one of the key drivers for warehouse realty after third party logistics operators in 2015, a recent study says.

According to a report by property consultant CBRE South Asia, third party logistics operators constituted 30% of the total demand for warehouse realty followed by e-commerce at 22%.

Nearly 2 million sqft of warehousing space was taken up by e-commerce firms in 2015, which is a significant jump as the share of the sector rose from a meagre 2% of the total warehousing demand in 2012, to around 22% during 2015.

On the same lines, office space demand from e-commerce firms witnessed a 170% year-on-year growth from 7 lakh sqft in 2014 to 2 million sqft in 2015. "Investors have begun to show more interest as the growth story of the sector continues. The sector saw significant activity during 2015, mainly driven by existing e-commerce companies looking to ramp up operations, while new players entered the market," its Chairman and Managing Director Anshuman Magazine said.

He further said along with e-tailing groups, substantial funding also flowed into the e-commerce logistics segment, which registered investments of close to $262 million during 2015.

According to the report, between 2010 and 2012, the average demand for warehousing space was just about 4.5 million sqft.

However, with the emergence of the e-commerce segment in the country, modern warehousing space leasing increased to approximately 7.7 million sqft during the 2013-15 period.

"Along with leading urban centres, smaller cities like Jaipur, Ahmedabad, Nagpur, and Mangalore, among others, saw e-tailing firms establishing their fulfilment centres (FCs) here. Tier II locations like Ludhiana, Surat, Ahmedabad, and Jaipur are currently attracting the next phase of leasing activity," Magazine said. 

On an annual comparison, warehousing space leasing surged by more than 200% in these smaller locations. This was largely driven by the need to improve operational efficiencies and increase the customer base.

"As competition becomes fiercer and buyer expectations increase, e-commerce majors will have to consider multiple factors such as the quantum of investments in asset improvement, expansion possibilities, rental and other associated commercial terms to determine their optimal real estate strategy," its Executive Director (Head Industrial & Logistics Services) Jasmine Singh said.

Developers on the other hand, will need to monitor the market carefully to ensure that the right kind of supply at the right price is available for the occupiers, he added.

The report also pointed out that with an increased awareness about the standards and associated cost of construction of Grade A Pre-Engineered Buildings (PEBs), and stricter adherence to environment, health and safety standards, the demand for modern warehousing space has increased.

This trend is likely to continue, and will create an increasing pressure on developers to build better quality assets, going forward, it said.