78% of warehousing occupiers intend to expand real estate footprint in the next three years : Survey

78% of warehousing occupiers intend to expand real estate footprint in the next three years : Survey

Almost 78% of warehousing occupiers in Asia Pacific intend to expand their real estate footprint in the next three years as continued strong market sentiment ensures occupiers remain in expansion mode, according to CBRE’s Asia Pacific Logistics Occupier Survey.

As per the survey, 84% of occupiers expect the operating environment to improve in the next three years while 78% plan to add to their logistics footprint in the next three years and 61% view cost as the top barrier to expansion.

“It is evident the demand for Grade A warehousing is only going to grow exponentially from here. Avigna has expanded its warehouses from 4 locations to 7 locations in the last 2 years and now we are looking at expanding across North and East India,” said Abhijit Verma-Executive Director and CEO of Avigna Group.

E-commerce penetration in India is expected to rise from its pre-pandemic figure of 6.5% to 11.7% by 2025, and recent major expansions include Indian e-commerce platform Flipkart’s announcement that it would add four new warehouses to its current 12-facility Indian network in Q3 2021, representing a 43% increase in square footage.

“The warehousing industry as a whole has undergone a drastic change from godown era to a more structured Grade A construction during the pandemic itself. Avigna is betting big in East India because of its strategic location with newly developed National Highways, Freight corridors and ports with the potential to serve the entire eastern belt and neighbouring countries” said Verma.

The report analyses the views of over 90 respondents from China, Japan, Australia and India among others and it includes Third-Party.

Logistics companies (3PLs), manufacturers, e-commerce platforms, retailers, grocers and F&B services firms. Respondents are primarily senior individuals overseeing their respective company’s logistics real estate portfolios in single or multiple Asia Pacific markets.

“There is absolutely no doubt that warehousing is poised to continue its good demand trajectory in the next couple of years. Ecommerce and Industrial occupy the biggest space in this market and these along with 3PL are expected to continue to grow at a 25-30% per annum trajectory,” said Gagan Randev, Executive director, India Sotheby’s International Realty.

As per the report, occupiers are already displaying a strong appetite for new, high quality logistics space. Net absorption in major Asia markets reached 35.6 million sq. ft. in H1 2021, the highest first half figure on record. CBRE expects occupiers to continue to adopt an aggressive approach to space take-up in the short- to medium-term.

“We work closely with funds who are building out the warehouses in the country and they continue to be on the lookout for land in prime and upcoming locations around the Tier 1 cities and are looking at growth in Tier 2 cities as well,” he added.

The Asia Pacific logistics sector has performed resiliently since the onset of the COVID-19 pandemic on the back of accelerating e-commerce penetration, the development of omnichannel retail, and the evolution of supply chain strategies for sourcing and inventory locations.

“The one concern that owners have is on the increase in rentals as that has not kept pace with the increase in land costs, cost of construction (given the ever increasing demand of specs and prices of Steel, cement) but most funds believe that we are poised to see moderate rental increases going forward as well,” Randev said.

The survey found that most occupiers (84%) are optimistic about the outlook for the operating environment, with positive market sentiment being underpinned by the growth in e-commerce penetration and the evolution of consumption patterns.

Within individual sectors, a large proportion of manufacturing respondents (93%) expect to see their business recover over the next three years, backed by strong demand for industrial output and manufactured goods. CBRE expects occupiers to continue to adopt an aggressive approach to space take-up in the short- to medium-term.

Asia’s rapidly growing population and increasing urbanisation rate is creating business opportunities in lower tier cities and emerging areas. Mainland China is home to four Tier I cities along with 17 other cities with an urban population exceeding 5 million 5, each with significant potential for logistics development.

In recent years, developing markets such as Southeast Asia and India have seen strong expansionary demand from occupiers, along with a wave of upgrading demand to newer and more efficient facilities.

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