Tier-2 cities are witnessing greater warehousing absorption with big ecommerce companies — Amazon, Flipkart, Udaan, Reliance — and third-party logistics firms taking up large spaces to scale up operations to meet consumer demand.
More than 15 small cities including Lucknow, Raipur, Bhopal and Vadodara are seeing greater warehouse demand since the Covid-19 pandemic started and experts said these cities are now witnessing 100,000 to 200,000 sq ft deals compared to 25,000-50,000 sq ft deals signed earlier.
As per the industry projections for the next five years, the ecommerce segment is expected to take up space estimated to be 98 million sq ft, registering an increase of 165% from the preceding period of 2017-2021. Private equity funds are also increasingly looking to invest in secondary cities in the country.
Warburg Pincus-backed logistics development platform ESR and Indospace is stepping up investment in the industrial and warehousing space in smaller cities. “There is huge interest from institutional funds in the warehousing and logistical segment in the country. There is huge demand from ecommerce and 3PL players,” said Abhijit Malkani, CEO, ESR India.
CapitaLand has also launched its second ₹2,250 crore logistics fund to expand in India’s logistics sector. “The second fund will increase our geographical footprint as we are looking at tier-2 cities and the size of the facilities will depend on demand.The smaller town locations have to be controlled by the nearby metro hubs,” said Aloke Bhuniya, CEO, Ascendas-Firstspace.
The fund will deploy capital in Coimbatore, Guwahati, Jaipur, Kolkata and Lucknow. “As customers climb the development graph, consumption in tier-2 and 3 cities is increasing due to rise in disposable incomes, higher aspirations and affordability,” said Chandranath Dey, head, operations & business development, logistics and industrial, JLL, India.
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