International property consultancy, Knight Frank India, in their latest report ‘India Warehousing Market Report 2021’, reported that Mumbai witnessed warehousing transactions of 5.8 mn sq ft in FY 2021. A significant drop of 23% YoY compared to 7.5 mn sq ft FY 2020. This decline can primarily be attributed to the economic disruption caused by the pandemic, which slowed down the expansion plans by companies.TRANSACTION IN WAREHOUSING SPACECityFY2020FY2021FY2021 mn sq m (mn sq ft)mn sq m (mn sq ft)change YoYNCR0.8 (8.6)0.64 (6.9)-20%Mumbai0.7 (7.5)0.54 (5.8)-23%Bengaluru0.4 (4.3)0.4 (4.3)0%Chennai0.32 (3.4)0.33 (3.5)4%Kolkata0.37 (3.9)0.28 (3.1)-22%Ahmedabad0.47 (5.1)0.27 (3)-42%Pune0.45 (4.8)0.26 (2.8)-42%Hyderabad0.32 (3.4)0.22 (2.4)-30%Total3.82 (41.2)2.95 (31.7)-23%Source: Knight Frank ResearchAccording to the report, the largest demand driving sector for warehouses in Mumbai was 3rd-Party-Logistics (3PL) players which accounted for 53% of the transactions during FY 2021, compared to 72% in FY 2020. E-commerce companies accounted for 30% of the share of transactions for the same period, up from 12% during FY 2020. The increased reliance on online shopping during the pandemic has resulted in many e-commerce players to expand their last-mile-delivery footprint and take up additional warehousing space either directly or through their 3PL partners.Source: Knight Frank ResearchWith respect to cluster split transactions, Mumbai’s warehousing cluster in Bhiwandi took up over 99% share of transactions during FY 2021. The transformation of Bhiwandi into an affordable housing destination will prove a major challenge for warehouse operations in the region. Warehouses moving out of Bhiwandi are shifting along with Mumbai – Nasik Highway (NH 3), which provides better access routes to MMR. Major warehouse projects such as KSquare, BGR, Renaissance and ESR are in Bhiwandi; along with large occupiers such as Amazon, Flipkart, DHL, Neelkamal and DB Schenkar all have their presence in the region. FY 2021 saw less than 1% of transactions in the Panvel warehousing cluster. This region has been unable to attract the consumption demand from Bhiwandi, despite having better infrastructure. Export-import (EXIM) demand is the prime demand driver for warehousing in this cluster.Source: Knight Frank ResearchThe report also adds that the warehousing activities (i.e. storage related activities) accounted for almost 100% of the transactions by volume during FY 2021. When considering warehouse rentals during the same period, Bhiwandi cluster saw corrections of 4% – 8% as occupiers asked for better contractual terms because of the pandemic. While rents remained unchanged in the Panvel warehousing cluster during the same period. The regions of Palaspe – Goa Road and Taloja from the Panvel Cluster recorded having the highest rent in the range of INR 269 – 323 /sq m/month (INR 25 – 30 /sq ft/month).Balbirsingh Khalsa, National Director, Industrial & Logistics, Knight Frank India said, “We saw a blip in warehousing demand in MMR in FY 2021 on account of the extended lockdown in MMR. However, the rapid growth in the e-commerce and 3PL segments has made up for decline in demand from other segments to some extent. These two segments made up to 83% of transactions in FY 2021. As the pace of vaccination rises and the lockdown restrictions are eased further, we expect the demand from the other segments to bounce back in this financial year.”MUMBAI: LAND RATE AND RENTSWarehouse clusterLocationLand rate (INR mn/acre)Rent in INR/sq m/month (INR/sq ft/month)Grade AGrade BBhiwandi warehousing beltMankoliLarge land parcels not available226–258 (21–24)161–194 (15–18)Vadpe23–28236–269 (22–24)194–215 (18–20)Padgha18–25226–269 (21–24)183–194 (17–18)Vashare/Sape20–25226–248 (21–23)172–194 (16–18)Lonad17-20No Grade A supply172–205 (16–19)Sonale25–30226–269 (23-25)No Grade B supplyYewai25–30236–269 (22–24)No Grade B supplyBhorigaon15–18205–226 (19-21)172–194 (16–18)Dhole15–17194–215 (18–20)172–194 (16–18)Kosambi15–18215–227 (20–22)172–194 (16–18)Panvel warehousing beltPalaspe-Goa Road25–30269–323 (25–30)194–215 (18–20)JNPT 16–25258–291 (24–27)183–205 (17–19)Taloja20-40280–323 (26–30)215–269 (20–25)Patalganga16–25205–237 (19–22)151–194 (14–18)Source: Knight Frank ResearchImage Source