West Bengal will see a fresh supply of 2.5-3 million sq ft of warehousing space over the next three years with an investment of around Rs 750 crore to meet rising demand from e-commerce firms, according to realty consultant Vestian.
In its report ”Looking East: Warehousing in Kolkata”, the US-based property consultant highlighted that Kolkata and adjoining areas currently have 17.2 million sq ft of organised warehousing space. This accounts for 10 per cent of the total warehousing stock in the top 8 cities of the country. The region witnessed an absorption of nearly 3.1 million sq ft in 2019, depicting a slight year-on-year decline of 3 per cent.
“Going forward, nearly 2.5-3 million sq ft of warehousing space is likely to come up across the state in the next 18-36 months at an approximate investment of Rs 750 crore,” the report said.
More than 80 per cent of the total upcoming supply will be concentrated in and around the Kolkata clusters. Shrinivas Rao, CEO – APAC, Vestian, said, “The COVID-19 crisis, despite its apparent calamitous connotation, has heightened the opportunity and significance of several sectors as well – one of them being the warehousing sector in the country.”
Given the importance of Kolkata in the entire eastern and north-eastern region, he said it is only a matter of time before the region becomes a prime warehousing centre, substantiated by a number of prominent infrastructure projects. “The fact that e-commerce has received a boost during the pandemic would only serve to strengthen the warehousing sector in the region,” Rao said.
As per the report, the average rental trend across the warehousing clusters in the region has remained mostly steady. The current values are recorded in the range of Rs 17-22 per sq ft per month. The compounded annual growth rate for rents during 2016-2019 has been 4-7 per cent.
Listing the demand drivers, Vestian said Kolkata has location advantage being the gateway to the entire north-eastern provinces. Kolkata”s well-connected transport corridors and strategic location, that abet port-related activities as well, have facilitated it to serve several important consumption centres in the region, the report said. Besides its location advantage, factors such as GST, higher penetration of e-commerce and an active ”hub and spoke” distribution model have led developers and PE funds to look towards the eastern region, it added. While industries such as FMCG, cement, pharma and third party logistics (3PL) players traditionally led warehousing demand in the region, the recent rise in demand could largely be attributed to the fast paced growth of the e-commerce segment, the consultant said.