E-commerce, essential services drove warehouse demand during Covid

Covid-19 has disrupted supply chains across sectors in the country. Consumption also declined as purchase was restricted to essential goods and services. This resulted in a sharp decline in demand for warehousing. Sectors such as retail, manufacturing, third-party logistics of auto were among those that were impacted the most. On the other hand, FMCG, e-commerce for essentials, pharmaceuticals/agriculture/cold-storage, saw an increase in demand.

“Increased online shopping was a result of the phenomenon of lockdowns and the pandemic situation. It effectively forced product and supply companies to scale up their supply chains in order to cater to the demand shifting in the segments which were hitherto being catered by offline retail,” said Sandeep Narayan Singh Deo, Head, Industrial Investments Services, JLL India.

“There was also the phenomenon of a large migration from metros to smaller cities of a sizeable population of white-collar employees who were working from home. E-commerce demand saw a rapid rise from Tier 2 cities in addition to the demand from Tier 1 cities. At the same time retail stores and offline retailing had to contend with the strict safety norms and social distancing practices, which inhibited their reach.”

He said that warehouses gained paramount importance in this scenario as they became the nodal point of ensuring that the goods and products reached customers, while the demand generation shifted to consumers' mobile handsets, laptops and desktops.

Demand post-Covid

“The warehousing demand in post Covid scenario would follow a Hub and Spoke Model, largely with product companies focusing on reducing the inefficiencies in supply chain which happen due to the bullwhip effect, by increasing availability of their products closer to consumption points (increasing more storage/replenishment points),” Deo added.

Balbirsingh Khalsa, National Director Industrial and Logistics and Branch Director – Ahmedabad, Knight Frank (India) said the government’s focus on making India a manufacturing hub for global supplies will boost demand for warehousing and industrial space, and that, companies planning to shift from China to India will fuel this demand further.

He added that in-city warehousing in all cities that have a population of greater than 25 lakh will show huge growth due to demand for same-day delivery of essential goods.

Khalsa also said that vaccine storage and delivery across India will boost the warehousing business in 2021.

Investments in the warehousing sector

According to data from Venture Intelligence, a firm that tracks private companies’ investments, financials and valuations, private equity and venture capital investments in warehousing companies in January-November this year rose to $54 million from $10 million in 2019. But only one company garnered funding this year against two firms last year, during the period.

Commenting on what investments in the warehousing sector post-Covid will be like, Apoorva Ranjan Sharma, Co-founder and President, Venture Catalysts said, “The warehousing segment is expected to rise 30% annually on the back of favourable regulatory policies such as GST streamlining, corporate tax reduction, Make in India and National Logistics Policy amongst others.”

“Another major factor that is attracting global investors to the warehousing sub-segment in India is the shifting away of the global supply chains from China to India,” he added.

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