JLL Report Industrial Real Estate
At USD 195 Bn, Industrial real estate is now the second largest investment asset class globally: JLL Report
MUMBAI: Investors and occupiers are reimagining India logistics real estate strategies to take advantage of ongoing structural shifts and evolving market maturity across the country, according to JLL’s ‘The Road Ahead – The Logistics Sector in Asia Pacific’ report.
“India logistics sector remains firmly on the radar of investors globally. Recent signs show the market becoming increasingly sophisticated. The inflow of capital into logistics has resulted in more complex transactions and greater participation by both established and new investors into the sector, which we expect to continue in the future as well,” said Ramesh Nair, CEO & Country Head (India), JLL.
As investors continue to reimagine their logistics strategies throughout the COVID-19 environment, JLL forecasts several key themes to gather momentum in India and reinforce the structural shift occurring in the sector.
The pandemic and lockdown, as expected, has affected the India logistics sector with overall leasing or absorption in the top eight cities in India standing at 11 mn sq. ft. in H1, 2020 (Jan-Jun) as against a 12-quarter average or 7.3 mn sq. ft. However, there has been an additional spike in short-term demand / temporary warehouses, (lease tenure of 6 – 11 months) demonstrating the underlying strength of the sector looking for substitute locations or business continuity planning locations for occupiers to mitigate for delays in delivery of under-construction projects.
E-commerce continues to drive a reimagination of the Indian logistics sector. According to e-Marketer, online retail sales as a proportion of total retail sales stand at 14% globally in 2019. India has a huge growth opportunity with the e-commerce penetration rate standing at close to 5%. To fulfill potential, e-commerce and other sectors will increasingly push the sector in a three-dimensional growth path:
“The pandemic will accelerate trends already in play across the sector, such as increased internet penetration rates, expansion of online grocery, omnichannel retailing, the rise of temperature-controlled storage, and the integration of technology into logistics and warehousing. Led by occupier and investor commitments, the sector is well placed to respond to the post-COVID-19 recovery,” said Yogesh Shevade, Head – Industrial Services, JLL India.
Key shifts influencing occupier decision-making, expected by JLL to accelerate, include:
On the manufacturing front, India is also experiencing the dual thrust of two major reform initiatives – Atmanirbhar Bharat (Self Reliant India) and Make in India. While, Atmanirbhar Bharat boosts domestic manufacturing and reduces imports, Make in India is expected to capitalize on the regionalization of international supply chains and reimagine India as a global manufacturing hub.
“Manufacturing firms, especially in the ancillary and assembly space, will find solace inbuilt manufacturing spaces on lease. Additionally, manufacturers will be positioned to realize the benefits of conversion of CAPEX (land & building) to OPEX (rent), ready-to-occupy and built-to-suit industrial spaces, higher specifications, faster entry, and pre-approved usage associated with built spaces,” said Chandranath Dey, Head – Industrial Operations & Business Development, JLL India.
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