Home / Companies / Logistics firms look to ramp up tier-II, in-city expansion

BENGALURU : Top warehousing developers aim to ramp up expansion in tier-II locations and within metros this year for better reach and to fulfil last mile delivery demand led by retail, e-commerce, grocery firms, and third-party logistics providers.

Operators and investors such as ESR, LOGOS, Blackstone-led Horizon Industrial Parks, and Welspun One Logistics Parks (WOLP) are actively eyeing land acquisitions in smaller cities and vying for first mover advantage in setting up multilevel in-city logistics hubs.

ESR, which has 17 operational warehousing sites over 18 million sq. ft across large cities, is in advanced discussions to acquire 3-4 land parcels focusing on tier-II cities. It kicked off its urban logistics plan with the acquisition of 8.2 acres in Alipur, Delhi, to set up a 300,000 sq ft distribution centre to cater to e-commerce, grocery, pharmacy, cloud kitchen, and other companies.

“2021 was a mixed bag, with lot of leasing in e-commerce but slowdown in industrial. In the last six months light manufacturing and industrial sectors have revived. We are looking at significant expansion this year, incl-uding in tier-II markets, which have become important because of e-commerce penetration. Our strategy would be to build more plug-and-play (warehousing) facilities, which help customers to go live in three months," said Abhijit Malkani, chief executive officer (CEO), ESR India.

Warehousing as a real estate asset class has been a unique beneficiary of the pandemic largely because of the e-commerce boom. According to JLL India, the cumulative warehousing supply in the top 8 cities was 287 million sq ft in 2021-end and is expected to touch 500 million sq ft by 2025.

In 2021, logistics operator LOGOS signed 1.8 million sq ft new leases and delivered 2 million sq ft, but it couldn’t complete some land acquisitions because of challenges that came as a result of the covid-19 pandemic. “We want to expand in eight cities, but also beyond them and look at in-city logistics. The challenge in in-city logistics is fragmented real estate ownership and high values, but we are keen on exploring the space. There is demand and it will be led by e-commerce and quick commerce firms, but there may be a constraint in supply," said Mehul Shah, CEO, LOGOS India. It plans to build another 2 million sq ft by 2022-end and may acquire a ready portfolio of one or two million sq ft.

This year, Blackstone said it has set up a logistics vertical ‘Horizon Industrial Parks’ in India to house its existing assets. This will be scaled up through acquisitions and greenfield developments. Over 18-24 months, it plans to double its portfolio in and around large cities and selectively in smaller cities.

“We aim to buy land in Siliguri, Jaipur, Coimbatore, Bhubaneswar, and Guwahati. We are exploring in-city development but it will take more time to catch up. The future of shopping is hybrid, so there would be a lot of last mile delivery requirement but it’s a different product," said Anshul Singhal, managing director, WOLP, which leased 1.8 million sq ft in the last four months. “We believe the packaging sector can be a major demand driver in 2022, while leasing by e-commerce firms may moderate because they have committed to a lot of space last year," said Chandranath Dey, head of operations, business development, logistics and industrial, JLL India.

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