Telangana

Warehousing poised to grow in Hyderabad

Stock out experience during COVID-19 lockdown likely to increase demand for warehouse space in Hyderabad, says Knight Frank report. Amazon’s warehousing facility at Shamshabad airport.

Stock out experience during COVID-19 lockdown likely to increase demand for warehouse space in Hyderabad, says Knight Frank report. Amazon’s warehousing facility at Shamshabad airport.   | Photo Credit: K.V.S. GIRI

Hyderabad shows the highest potential for warehousing development among top eight cities in the country, real estate consultancy Knight Frank’s India Warehousing Market Report-2020 has said.

Ranking the city high on the Knight Frank’s Development Potential Multiple, the report said the potential is to more than double its existing stock from 13 million sq ft to 29 million sq ft. This exists on the back of a land pool of approximately 1,291 acres committed to warehousing. Besides Hyderabad, the report looked at Mumbai, National Capital Region, Chennai, Kolkata, Bengaluru, Ahmedabad and Pune.

In 2019-20, Hyderabad’s warehousing market witnessed 3.4 million sq ft leasing activity, which was 14% lower compared to the previous fiscal. However, over the past three years, the warehousing asset class in the city has seen a robust compounded annual growth rate (CAGR) of 41%, the report said.

Knight Frank branch director-Hyderabad Samson Arthur said while warehousing market demand was affected in FY 2020 due to economic slowdown and disruption caused by COVID-19, the market’s underlying strength is evident in the 41% CAGR growth. Investment interest continues to remain strong in this property type and should fuel its momentum over the longer term, he said.

E-commerce, retail and fast moving consumer goods (FMCG)/ fast moving consumer durables (FMCD) industries are the major drivers of the warehousing sector in Hyderabad, together contributing to 50% of the total transacted space in FY 2020. The warehousing activity in Hyderabad is largely concentrated in three major clusters of Medchal, Patancheru and Shamshabad. Of the three, a significant 87% of the FY-2020 transaction activity was concentrated in the Medchal cluster. Rent appreciations have been reported across locations in the three warehousing clusters, a release on the report said.

Elaborating on the pandemic impact and changes likely to be triggered in the warehousing space, the report said lean supply chain with a focus on inventory carrying cost had been a key consideration for enterprises. In the COVID-19 circumstances, many such businesses, mainly in essential segment like food and beverages, groceries and pharmaceuticals faced stock out as raw material sourcing as well as production was disrupted. Learning from the experience, many businesses may look at increasing the level of inventory in the short to medium term.

This shift towards increased stocking need was likely to lead to a greater demand for warehousing. However, the demand will be served by greater cubic capacity utilisation of vertical space rather than mere increase in floor area, the report said. The learnings from the pandemic could also see more demand for cold storage facilities.

Automobile, consumer durables and engineering are segments that will experience a slowdown thus impacting their warehouse demand. “In the short-term, we expect warehousing demand to be adversely impacted by the COVID-19 crisis and rents to be under pressure. We reckon the warehousing sector is a long-term play whether in terms of lease tenures or investment horizon,” the report said.

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Printable version | Aug 11, 2020 5:37:06 PM | https://www.thehindu.com/news/national/telangana/warehousing-poised-to-grow-in-hyderabad/article31983091.ece

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