Bengaluru’s Warehouse Absorption rises to 3.9 Mn Sq. ft. in 2022: India Sotheby’s International Realty 

Bengaluru, June 7, 2023: Bengaluru is likely to witness a surge in investment for developing premium warehousing park to meet growing demand for storage space from e-commerce and third-party logistics players, according to a white paper named ‘Ahead of The Curve – Bengaluru Warehousing’ by India Sotheby’s International Realty with inputs from real estate data research company CRE Matrix.

The demand-supply trend of the last five calendar years (2018-22) shows that demand has outstripped new supply by far, resulting in very low vacancy levels in existing warehousing parks and a decent growth in rentals.

According to white paper data provided by CRE Matrix, the cumulative absorption of warehousing space in Bengaluru during the 2018-22 period stood at 16.34 million square feet, while new supply was 10.5 million square feet.

“Bengaluru will be in the spotlight for investments in warehouses with greater capacity for e-commerce fulfilment. Based on the anticipated rise in demand, we project that more than 250 acre of land would be required in the periphery of Bengaluru city to develop new warehousing facilities,” said  Gagan Randev, Executive Director – Capital Markets, India Sotheby’s International Realty.

Another significant trend observed in the market is the notable and recent rise in market rentals within the sector.  In 2022, market rentals experienced a remarkable increase of 10%, surpassing the average rental hikes of 5-6% witnessed in previous years.

“This upward trajectory indicates a further tightening of the market. As a result, owners have gained the advantage of negotiating more favourable rental terms with new occupiers. The considerable rise of 10% in market rentals, compared to the in-place rental increase of 2% in 2022, clearly reflects this positive trend,” opined  Harikesh Ananthamurthy, Senior Vice President – Capital Markets, India Sotheby’s International Realty.

The paper further said the demand for land in Bengaluru is expected to be evenly distributed among different clusters, facilitated by the city’s expansion and peripheral ring road, allowing for seamless transfer between clusters and consumption centres.

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India Sotheby’s International Realty said organized large players are acquiring land with long-term demand in mind, facing challenges in availability and conversion. Valuation depends on expected earnings, construction costs, and approval expenses. The sector sees a drive towards automation, IoT, better warehouse management, security, and sustainability.

Landowners, it added, often have high expectations and asking prices, and valuation depends on anticipated earnings from warehousing rentals, construction costs, and approval expenses.