COVID-19 impact on realty: Warehousing attracts interest from e-commerce players

There has been a sharp rise in enquiries from the e-commerce segment since COVID-19 struck and the subsequent nationwide lockdown in the country, Shishir Baijal, chairman & managing director, Knight Frank (India), said. This response has resulted in the demand for setting up distribution centres in the cities, he said.

Warehousing segment was one of the segments of the real estate sector that was likely to benefit from the COVID-19 outbreak and a post-COVID-19 world, and as supply chains were clogged, a lot of players were asking for spaces across the country, Baijal said. “There is a possibility of unsold/ idle inventory, old manufacturing units, shopping centres being converted into warehousing space.”

This was a boon to the warehousing segment which is generating a lot of interest for a distribution centre in the heart of cities from e-commerce players and this would be the second wave for the segment after the first wave which took place after introduction of GST, Baijal said.

“The warehousing sector has been on a strong growth trajectory with high demand growth of 87% in 2017 and 77% in 2018. The trend of strong warehouse demand continued well in 2019 and initial part of 2020. Since COVID-19 struck the market early March 2020 with consequent nationwide lockdown, there has been a standstill in overall demand activity, however, a sharp rise in enquiries from the e-commerce segment,” Baijal said.

Similarly, the co-working space, too, will see an uptake and demand for shared office space will see a upswing especially with uncertainty looming large, Gulam Zia, executive director for valuation & advisory retail & hospitality, Knight Frank India, said. “Companies would work on new workplace strategy and co-working companies have been coming up with a lot of offerings to meet these needs.”

Baijal said real estate prices would have to come down and developers would be advised to let go of inventory even if it means reducing prices as it is important to have liquidity in the business and have cash flows.

Recovery in India is going to be different from the recovery seen in the US or China as they were in a strong position before the COVID-19 struck but India was in a very weak position before the virus outbreak with residential realty at eight-year low.

Many developers will go completely belly up and we have reached that situation, Zia said. This would result in more consolidation seen in the real estate industry, he said. Work at construction sites will not begin any time soon as the migrant worker has left or will leave after the lockdown is lifted, so more developers fear that there will be longer period of zero activity.

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