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Webinar Report April 28th 2020

COVID 19 -Impact on Warehouse Space Absorption & Future Trends in Logistics Industry

PREFACE

Our recent Webinar on COVID 19 - Impact on WarehouseSpace Absorption & Way Forward to Logistics Industry’ wasattended by over 1200+ individuals with a mix audience ofSupply Chain, 3PL, Transportation, Last Mile and otherlogistics companies professionals. Many attendees were fromEcommerce companies, fund houses, online groceriesplatforms, warehouse occupiers & developers

The goal of this session was to share various thoughts on thecurrent situation in the Warehouse Space and Logistics sector,which might support businesses in these difficult times. Withthis report, our endeavor is to take you through the insightfuldiscussions and predictions, which were discussed during thewebinar.

TABLE OF CONTENT

1. Panelists2. Moderator & Co-Host3. Impact on Absorptions4. Impact on Occupiers5. Impact on Developers & Owners6. Impacts on Investments 7. Impact on Tier II & III cities 8. New Normal9. About Realistic Realtors

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PANELISTS

Pro connect is a Redington group company and is one of theleading PL for IT/Telecom and eCommerce across India. Dr.Arunachalam is a Visionary Leader, business manager andchange management specialist with Executive oversight ofmore than two decades in Supply Chain Management,developing logistics network, distribution, real estate & globalprocurement's.

Dr. Arunachalam RCEO, ProConnect Supply Chain Solutions

GoBOLT is a fastest growing tech-logistics start-up,disrupting the $200bn Indian B2B logistics space withinnovations in IOT & AI. Mr. Sumit is responsible for BusinessRelations and Marketing/Branding domain for his startupGoBOLT. Coming from investment banking background, hebegan his career as a Consultant with Ernst & Young.

Mr. Sumit Sharma Co-founder, GoBOLT

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Grofers is a house hold name now and Mr. Gautam is one ofthe major contributor to this. A Professional with extensiveexperience of 15+ Years in Real Estate Acquisition, FacilitiesManagement, Designing, Vendor Management, for RealEstate Sector & E-Commerce.

Mr. Rahul GautamHead of Real Estate, Grofers

PANELISTS

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Embassy Group one of the giant into Commercial, Retail,Residential and Warehousing sector pan India. Sandeepcomes from a pure Real Estate Background, having morethan 16+ years of experience in the domain. He specializesin RE, Acquisitions and Real Estate Funds.

Mr. Sandeep Chanda Head of Strategy and Acquisitions, EmbassyIndustrial Parks

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John ThomasMRICS – Group Director, Realistic Realtors

Mr. Thomas comes with around 20 years of experience inReal Estate in several streams of business. A well knownprofessional in the Real estate fraternity, he has been avaluable contributor to have initiated and managed newbusinesses & RRPL expansion across India.

A seasoned professional, Mr. Zafeer is a real estate expertwith over 12 years of experience in Logistics andWarehouses Leasing and Investments. With his stronganalytical power, business development skills and profitcenter management, he is leading the Logistics andWarehousing vertical at RRPL.

Moderator

Zafeer AhmedVice President, Realistic Realtors

Co-Host

Impact on Absorptions

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• The net absorption of warehouse space in 2019 wasapproximately 37 million sq. ft. as compared to 32 millionsq. ft. in the year 2018. 2020 was projected to toucharound 40 million sq. ft., but with the COVID’s impact, it isnow estimated to be around 30 million sq. ft.

• A-Grade warehouse absorption was approx. 21 millionsq. ft. out of the total absorption of 37 million sq. ft. andthe remaining 16 million sq. ft. was absorbed by Grade Band C. Irrespective of COVID, the demand for A-Gradewarehouses is going to increase as they supportAutomation, Multilevel Racking System, have higherCubic Capacity and thus saving on the operational costsas these have ample sky lighting, insulation, etc.

• Warehouse space absorption is likely to rise in tier II andIII cities subject to competitive pricing and quality.Government may also introduce initiatives to supportwarehouse setups in these cities in future.

• Traditionally, local retail network is very strong in Indiaand small retailers would collaborate with big boxretailers, backed by technology, to increase the demandof warehouse spaces across the various geographicalareas of the country. Brick & Mortar retail will co-existalong with big box retailers.

• Probability on the shifting of industrial activities from mostof the COVID-affected countries like US, Europe, Korea,Japan, etc., might boost the warehouse absorption in ourcountry.

Impact on Occupiers

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• Impact of COVID is witnessed across all the businesssectors, including the warehouse industry, due to thedisruption of business activity and consumption. With thecurrent restrictions, the logistics & warehouse businesseslargely operates at approx. 40% capacity.

• Occupiers be it 3PL, Ecommerce or any other business,have to manage their cash flow under the currentsituation for cost optimization.

• Since logistics and warehouse industry is labour-focused,it is largely affected due to the shortage of labour. This isexpected to disrupt the business in short and mid-termperiod.

• Rent concession/ waiver is one of the ongoing propositionby occupiers to ease out the pressure specially for realestate costs. Though Force Majeure clause and terms ofthe agreement is gaining relevance under the currentcircumstances, the best possible way to move ahead iswith mutual dialogue and understanding.

• Long leases with attractive terms or short leases withlimited financial liabilities could be amongst the possibleoptions to sail through this situation.

• Professional real estate consultants with subject expertisecan bridge the gap between the occupier and thedeveloper. Role of a real estate consultant plays a vitalrole to achieve a win-win situation to the involved parties.

• Occupiers would prefer A Grade warehouses withAutomation, Artificial Intelligence and Technology.

Impact on Developers & Owners

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• Considering the current need of hour, the developers/owners would prefer and contribute to A Gradewarehouse supply across the industries, leading tooperational advantages

• Rent concession/waiver has emerged as a challenge fordevelopers and owners specially who are running onLRD’s/ loans or have returns commitments in lieu ofdebt or equity based funds. Moreover, constant cashflow is required to Menten and operate the warehousefacilities.

• Boost expected in absorption across the country withthe increase in industrial and othermanufacturing/assembling activities from the COVIDaffected countries, but an adequate supply of A Gradewarehouses is imperative for the same.

• Prominent warehouse suppliers, specially A Gradedevelopers across the country, might witness asubstantial surge in demand of their warehouse spaces.

• Warehouse developers/owners has to adapt the Newnormal way. Immense care and precautions should betaken by them to ensure the required hygiene andhealthcare measures for an uninterrupted businessactivity for the occupiers.

Impact on Investments

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• As per the reports, Indian warehouse sector witnessedhuge investments of approx. INR 254 billion (3.6 billionUSD) since 2017 and was estimated to reach around INR495 billion (7 billion USD) by 2023. This boost wasmajorly backed by the ecommerce and 3PL industrialdemand.

• Industrial and warehousing sector is one of preferredrental class for investment after commercial office spaceand retail malls. It is being considered as a long-terminvestment class because of high demand, low riskfactors, long-term stability and high leasing probability.

• Better return on Investment and high leasing probabilitymight increase investment in logistic and warehouseindustries considerably.

• Many PE Funds, sovereign funds and other largedevelopers have already ventured in this industry andhave expansion plans. Few amongst them areBlackstone, Xander Group, Mapletree, Warburg backedESR and are developing huge logistics and industrialparks In India.

• The growth of Ecommerce industry is expected to resultin further investment in warehousing industry. Consideringthe growing demand of the warehousing sector, manyprivate players and HNIs/investors are focusing on thewarehousing sector at different levels.

Impact on Tier II &III cities

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• As per the latest reports on Tier II & III cities likeLucknow, Jaipur, Patna, Ahmedabad, Hyderabad,Guwahati, these cities reported 6 million sq. ft. ofabsorption out of the total absorption of 37 million sq. ft. inthe year 2019.

• The change in consumer behaviour from retail toEcommerce across the Tier II & III cities is expected toincrease the demand of warehouse space in these cities.

• Cheap labour and improving infrastructure in Tier II & IIIcities, backed by adequate connectivity across othergeographical areas, might bring in the attention of bothoccupiers and developers to construct their futuredevelopments in these cities. The availability of cheaplabour might also trigger the surge in demand ofwarehouse in such cities.

• Last mile and on-time delivery would also be a majorfactor in attracting the small and mid-size warehouserequirements in various geographical areas.

• Cities, like Lucknow, Patna, Jaipur, Ludhiana, Ambala,Ahmedabad, Hyderabad, Guwahati, Sillguri, etc., areexpected to receive the demand of warehouses in shortand mid-term period.

• Better investment opportunity can also motivate manylocal developers and 3PLs to surge warehouse demandin these cities.

• Several government initiatives like Make in India, GSTregulation, FDI Policy and other infrastructureimprovements will also contribute to increase in demandof warehouse space across these cities.

NEW NORMAL

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• Ecommerce is the real booster for this industry and pavethe new way in the long run.

• Automation and digital technology is required now morethan ever.

• Re-defining of new normal will focus more on socialdistancing, hygienic environment, revamping ofinfrastructure and making it conducive to work in terms ofhealth and safety measures.

• New pie charts will be developed by consumers in termsof their behaviour, hygiene and good quality products.

• Money investment will be more intelligent move now andpeople’s preference will be changed due to cash flowlimitations.

• Government support and initiatives will contributeimmensely to bring this industry back to normal at theearliest.

About Realistic Realtors

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India’s largest commercial real estate advisory firmserving across 400+ citiesREALISTIC REALTORS PVT. LTD. (RRPL) is one of theleading and prominent real estate consultants in India. Thecompany offers to its clients in India a complete spectrum ofprofessional services in the field of commercial and residentialreal estate, knowledge and experience for realisation ofprojects, increase of efficiency and profitability business in adiverse investment portfolio. RRPL is renowned andrecognised in the Indian real estate industry for its specialisedleasing and investment advisory services. Bringing a gamut ofstrategic, operational and consultancy services, our focus is toattain global service standards with local expertise. As a resultof the core values of service excellence, fair negotiation andtransparency, we achieve the highest levels of clientsatisfaction in our transactions

Disclaimer: RRPL has taken due care and caution in compilation of this presentation. However, RRPL does not guarantee the accuracy,adequacy or completeness of any information and is not responsible for any errors or omissions or for the results obtained from the userof such information and especially states that it has no financial liability whatsoever to the users of this presentation. The informationherein, together with all the services being provided by RRPL, is only indicative in nature and may change without notice as it is general innature and do not address any particular circumstances or requirements. The services provided by RRPL may vary depending upon theAgreement between RRPL and the Prospective Client. Neither RRPL nor its Directors or Employees accept any liability whatsoever nordo they accept responsibility for any financial consequences arising from the use of information provided herein.

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