Over 15 tier-2 cities witness surge in warehousing demand

Tier-2 cities in India are experiencing greater warehousing absorption with big companies, including Amazon, Flipkart, Reliance, Udaan, among others.

Third-party logistics firms are taking large warehousing spaces to scale up operations to meet consumer needs.

Over 15 small cities like Lucknow, Raipur, Vadodara and Bhopal are witnessing greater warehousing demand since the beginning of the Covid-19 pandemic. According to the industry experts, these cities are experiencing around 100,000 to 200,000 sq ft deals, compared to 25,000 to 50,000 sq ft deals earlier.

In the next five years, the e-commerce segment may take up to 98 million sq ft, with 165% growth from 2017-2021. Some private equity funds are also looking to invest in secondary cities in India.

ESR and Indospace are stepping into investment in industrial and warehousing space in smaller cities across the country. CEO of ESR India, Abhijit Malkani, said there is a huge interest from institutional funds to invest in the warehousing and logistics sector in the country. The demand is also higher from the side of the e-commerce and third-party logistics industry.

CapitaLand again launched its logistic investment fund of Rs 2,250 crore to grow India's logistics sector. CEO of Ascendas-Firstspace, Aloke Bhuniya, said that the second fund would help to increase the geographical footprint of the company, as it is looking at tier-2 cities and their size would depend on the demand. The smaller towns in the country would have to be controlled by the nearest metro hubs.

Chandranath Dey, head, operations, and business development of logistics and industries of Jones Lang LaSalle Inc.

(JLL) India, said that the fund would expand capital in Kolkata, Jaipur, Guwahati, Coimbatore and Lucknow. As the customer demand grows, consumption in tier-3 and tier-2 cities are increasing due to disposable income, affordability and aspirations.

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