Hyderabad: Hyderabad’s warehousing market witnessed 3.4 mn sq ft leasing activity in FY2020. The city showed the highest warehousing development potential (by 2.19 times) amongst the top eight cities in India. The warehousing asset class in the city has seen a robust compounded annual growth rate (CAGR) of 41 per cent for the period FY 2017-2020.
The city has the potential to more than double its existing stock from 13 mn sq ft to 29 mn sq ft. This comes on the back of a land pool of approximately 1,291 acres committed to warehousing, according to Knight Frank India.
Balbirsingh Khalsa, national director, Industrial & Logistics told Telangana Today, “Hyderabad has a market size of 3-4 mn sq ft on an annual basis. The major drivers of the warehousing sector in Hyderabad are e-commerce, retail and the fast moving consumer goods (FMCG) / fast moving consumer durables (FMCD) industries, which together contributed to 50 per cent of the total transacted space in FY 2020. The city will see growth over the next one year in the warehousing space.”
Khalsa added, “Pharmaceutical is also a key sector for Hyderabad warehousing. Hyderabad, Bengaluru, Baddi and Ahmedabad are the top hubs for pharmaceutical activity in the country.”
Driven by consmption
According to Samson Arthur, branch director-Hyderabad said, “The Hyderabad warehousing market is a consumption centre driven by ecommerce, retail and FMCG. With large e-commerce and FMCG players preferring to outsource their logistics and warehousing needs, the share of third-party logistics in the transactions pie has gone up to 31 per cent in FY 2020.”
“While warehousing market demand has been affected in FY 2020 due to the economic slowdown and disruption caused by the pandemic, the market’s underlying strength is evident in the 41 per cent annual growth it has commanded over the past three years. Investment interest continues to remain strong in this property type and should fuel its momentum over the longer term,” Arthur added.
Warehousing activity in Hyderabad is largely concentrated in three major clusters of Medchal, Patancheru and Shamshabad. Of the three, a significant 87 per cent of the FY2020 transaction activity was concentrated in the Medchal cluster. Rent appreciations have been reported across locations in the three warehousing clusters.
Knight Frank estimates that existing land committed to warehousing across the top eight cities of India has the potential to add 193 million square feet (mn sq ft) of new warehousing supply. The currently committed land for warehouse is estimated at 21,163 acres, which has the potential to add 63 per cent more supply to already existing 307 mn sq ft of warehousing stock. Three out of eight markets Hyderabad (2.19), Ahmedabad (2.09) and Chennai (2.02) are ranked high on Knight Frank’s Development Potential Multiple.
Warehousing demand has seen strong growth in the last few years and has recorded a significant rise of 44 per cent CAGR since 2017, mostly after the introduction of Goods and Services Tax (GST).
Third Party Logistics (3PL), e-commerce and manufacturing warehousing demand had been recording healthy growth in the last few years; each of their respective shares in warehousing demand has increased to 36 per cent, 23 per cent and 23 per cent in FY2020.
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