Indian logistics - Taking giant leaps forward - August 2015 - JLL India
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Indian logistics - Taking giant leaps forward August 2015
Introduction
The Indian Logistics Sector has in recent times been in a transformation
mode. Against the backdrop of expansion in the economy, the logistics
industry has assumed a pivotal role in reducing costs by improving
efficiency and increasing competitiveness. The interplay of infrastructure,
technological advancements and newer types of services associated with
this industry is likely to define how it is going to help the customers in
reducing costs with the provision of efficient services.
Interestingly, likely change in government taxation policies and regulation
of service providers would be the most important factors in the process of
development of the industry. That apart, growth of overall logistics network
from the perspective of trade would be essential in assisting Government of
India’s ‘Make in India’ strategy.
In this paper, we tried to establish our views on the overall logistics sector
dynamics, location and cluster level analysis across top Indian cities
while estimating the impact of e-commerce on the industrial real estate
sector and effect of future Government taxation changes on the sector.
Subsequently, we have treated logistics related properties as a separate
and individual asset class within the industrial real estate sector.
2 Indian logistics - Taking giant leaps forward Indian logistics - Taking giant leaps forward 31. Evolution of warehousing in India
The integration of the fragmented components of the logistics sector (such as services, transportation, packaging, tracking, etc.) and the move
from the use of traditional “godowns” to functional warehouses has, indeed, made the logistics sector much more efficient.
Evolution of Warehousing in India - From Godown to Distribution Centre
PARAMETERS GODOWNS (Grade C) WAREHOUSES (Grade B) DISTRIBUTION CENTER (Grade A)
Clear Height 10 - 12 ft | 3 - 4 m 20 - 24 ft | 7 - 8 m 37 - 42 ft | 9 - 13.5 m
Flooring Indian Patent Stone (IPS) VDF with Steel and M20 Concrete FM Global II Compliance Laser Creed Floors
Floor Load 2 - 3 Tons / sqm 5 - 7 Tons / sqm 8 - 10 Tons / sqm
Type of Structure RCC & fabricated steel structure Steel structure or pre-engineered structure Pre-engineered structure
Loading platform, fork lifts, dock levellers Dock levellers, mechanized loading,
Equipment Manual operation etc. conveyors, cranes etc.
Less than 1.2 m plinth height, limited 1.2 m above Ground level, Docking platforms
Docking N/A set back on docking side, Canopy only if with 5 to 6.5 m Canopy, 25 to 30 m set back
required. on docking side
With or without fire hydrant with required Sprinklers, fire hydrants with required DG &
Fire Fighting None DG’s and Water storage system. Water Storage system.
Sky lighting < 4% of roof area 4 - 5% of roof area 4 - 5% of roof area
5 to 6 Air Changes with Ridge & Turbo 5 to 6 Air changes with Ridge Monitor,
Air Circulation N/A Ventilators Louvers and Forced Ventilation Mechanism
STP, Insulation, D.G., Drainage Systems,
Infrastructure Septic Tanks Septic Tanks, Asphalting Concretised Roads and setbacks
90% or above ground 70 - 80% ground coverage with limited 50 - 60% ground coverage with sufficient all
Layout coverage setbacks and parking facilities around set backs and parking facilities
Note: There is no defined specification for the type of warehouses in India. JLL through its varied experience in the field and undertaking studies RCC: Reinforced Cement Concrete
on the best in the market has listed out specifications for the Grade A,B & C warehouses. Specifications are not universal for warehouses and MS: Mild Steel
may change from location to location
Disclaimer: While every effort has been taken to provide authentic data and analysis, the consultant or any of its employees are not responsible STP: Sewage Treatment Plant
for any loss, major or minor incurred on the basis of the information and analyses provided or are liable to any damages in any form or shape. VDF: Vacuum Dewatered Floor
Figure 1: Growth of Indian logistics sector USD
200 billion
2020E
USD
110 billion
2014
Source: CII Institute of Logistics, India,
and extrapolated by JLL
4 Indian logistics - Taking giant leaps forward2. Scenario in Indian logistics
Indian logistics sector has come a long way to its current growth state. We have tried to compare the same with one developed economy
(United States) and a similar developing economy (like China) to understand where does it stand.
Parameters INDIA United States CHINA
Logistics Performance Index
(LPI), 20141 Score: 3.08 (rank: 54/160) Score: 3.92 (rank: 9/160) Score: 3.53 (rank: 28/160)
Logistic cost as % of GDP 13% 8.5% 18%
Different sectors’ share of 8% 3%
18%
the logistic cost
22%
29% 52%
Transport 63% 67% 45%
Warehousing
Others
Major industries driving the Auto components, Pharmaceuticals Food processing and beverages Metals, Electronics, Cement
logistics sector Cement, Textiles e-commerce Textiles
Major challenges
● Inadequate road network ● High employee cost
● High toll charges
● Loss during transportation ● Shortage of trained manpower
Sources: Multiple sources (World Bank database, JLL Research, etc.)
Although it has come a long way, India’s logistics sector still has a lot more to achieve in order to stand out in the global market. This can be
done primarily by the gradual improvement of two major aspects, e.g., transportation as well as warehousing and storage.
Growth of Indian
logistics
Improvement of Improvement of
transportation warehousing & storage
1
The LPI is an interactive benchmarking tool created to help countries identify the challenges and opportunities they face in their performance in trade logistics and what they can do
to improve their performance. It is measured by the following parameters: customs, infrastructure, international shipments, logistics quality and competence, tracking and tracing, and
timeliness (World Bank). As per World Bank report, 2014, India, ranks 54 out of 160 countries on LPI
Indian logistics - Taking giant leaps forward 52.1. Transport infrastructure as backbone
Transportation, the largest stakeholder in the logistics pie in India, Figure 2: Cost efficiency for different modes of transport
is primarily by roadways, with nearly 57 percent of the goods 120
105
transported by volume via road2. Thus, India depends on the costliest Cost efficiency in tonne-km 100
mode of travel (road) for majority of its domestic freight transfers.
per litre of fuel
80
80
Although India has the 2nd largest road network (4.68 million kms as 60
per CIA, World FactBook) in the world after USA, in terms of quality of 40
25
road, its lags significantly behind others. 20
0
However, a lot is proposed in India for infrastructure development, which Inland Water Rail Road
is clear from the planning commission documents and proposals. Source: Multiple sources (NITI Aayog, Govt. of India, JLL Research and REIS, etc.)
2.2. Robust infrastructure in making
Total Investment Proposed in 12th Five Year Plan - USD 892 Bn*
Roadways Railways Sea Ports Airport power
Inv - USD 146 Bn Inv - USD 102.9 Bn Inv - USD 31.6 Bn Inv - USD 14 Bn Inv - USD 291.2 Bn
12th Plan target- Daily carrying Increase port cargo AAI targets to 6th Largest in the
1,000 km of 30 Mn passengers handling Capacity bring 250 world in Power
expressway; in over 19,000 trains to 3200 MT by 2020 operational Metro Generation
10,000 km of NH; airport till 2020
19,200 km of road Increase Rail Capital Dredging Energy generation
up gradation freight share of 14 m by end of USD 81 Bn capacity (Sept, 2013)
by 2% till end of 12th Plan investment to - 228.7 GW
New schemes for 12th Plan upgrade non-metro
roads in Rural & 100% FDI in airports Further planned to
North East areas Attracted FDI construction & add 88.5 GW by
worth INR 349.4 maintenance of ports 100% FDI for 2017
Investment of billion till May, 2014 & harbours greenfield airport
about INR 9.14 Investment of
trillion is proposed Investment of INR Investment of INR Investment of INR INR 18.2 trillion
during the 12th Five 6.43 trillion during 1.97 trillion during 877 billion during declared during 12th
Year Plan 12th Five Year Plan 12th Five Year Plan 12th Five Year Plan Five Year Plan
Source: 12th five-year plan (2012–2017), Planning Commission, Govt. of India (now known as NITI Aayog). Exchange rate assumption: USD 1 = INR 62.5
Note: *Total investment number includes all the sectors apart from the ones highlighted. Other sectors are telecommunications, irrigation, storage, and oil and gas pipelines.
2
Source: Building India: Transforming the nation’s logistics infrastructure, McKinsey
6 Indian logistics - Taking giant leaps forward3. Storage and warehousing
Storage and warehousing is the second most important component in India’s logistics sector. With the modernisation of the logistics supply
chain, warehousing has become a critical function, and today, warehouses not only provide safe custody for goods, but also offer value-added
services, such as sorting, packing, blending and processing. Based on the type of goods stored, storage and warehousing can be categorised
under five major heads.
Driven by high retail
Industry/ FedEx, DHL, Kuehne+Nagel, Safexpress,
demand and consumer
retail Continental Warehousing, Indo Arya, Allcargo,
appetite. Currently on most
warehousing Nippon Express
promising growth trajectory
Mainly refers to the storage
IMC Ltd., Vopak India, Indian Oil Tanking, Kesar
Liquid of liquid bulk such as
Terminal, Ganesh Benzoplast, Aegis Logistics,
storage crude, petroleum products,
Sealord.
chemical and edible oil
FCI, CWC, SWC and other government agencies
Targeted to store
Agri- apart from private players like Adani Agri Logistics,
agricultural goods
warehousing Star Agriwarehousing, Shree Shubham Logistics,
with larger shelf life
Ruchi Infrastructure, Guru Warehousing, Paras
Storage of perishable
Gati Kausar, Snowman, Cold Star, ColdEx,
Cold goods. High potential of
Kelvin Cold Chain, RadhaKrishna Foodland, MJ
storage growth targeting un-
Logistics, Dev Bhumi Cold Chain
broken cold chain
Primarily targeting
Container Container Corporation of India (CONCOR), APM
export-import led
storage Terminals, Arshiya, AllCargo
container handling
Indian logistics - Taking giant leaps forward 74. Major demand drivers for logistics
In India, export/import (EXIM) cargo, agriculture and manufacturing (textiles, auto and auto ancillary) have been identified as the traditional
growth drivers to the demand for warehouse space. Meanwhile, new growth drivers such as organised retail, information technology (IT),
telecommunications and healthcare can be considered as high potential sectors. The growth these drivers bring, coupled with the advent of
technological advancements, is likely to soar the demand for organised and automated warehouses going forward. The following are the major
demand drivers in the warehousing sector:
Consumption-led demand
• Per capita income - Growth of 10.4% in 2013-14
• Boomimg e-commerce industry
• E-commerce industry to reach USD 20 billion to USD 25 billion by 2017
• The fast-moving consumer goods (FMCG) market is also gaining traction
Manufacturing-led demand
• Indian manufacturing GDP is approximately 15% of the total and stood at INR 8.6 trillion in 2013–14
• The manufacturing sector is growing at a compound annual growth rate (CAGR) of 7.3% since the past nine years
• The "Make in India" initiative is expected to boost the manufacturing sector to 10% growth
• The manufacturing sector spends 2-20% of its revenue on logistics
Agriculture-based demand
• India is the second largest producer of vegetables and fruits after China
• Because of the lack of infrastructure and broken cold chain, more than 30% of agri-produce is lost in fields
post harvesting
• According to a report by KPMG and the Associated Chambers of Commerce and Industry of India
(ASSOCHAM), there is a shortage of more than 10 million tonnes of cold storage for agri-produce in India
EXIM-based demand
• In 2013-14, all major and non-major Indian Ports in India, as listed by Indian Ports Association (IPA)
handled about 972 Million Metric Tonnes (MMT) cargo.
• EXIM cargo is expected to increase to 2,800 MMT by 2020
• Containers handling is growing at about 11% CAGR
8 Indian logistics - Taking giant leaps forward5. Primary warehouse locations
We have tried to identify the top/primary warehousing hubs in India based on three major factors:
Consumption-led locations: Primary
locations are able to cater to about 60% of
Indian demand within 12-hour drive time.
Seaport-led locations: The
locations are strategic being Facilitator-led locations: These locations
in proximity to sea ports which have high-level requirement of skilled
can cater to the Export-Import manpower, support from government
(EXIM) trade generated through policies, infrastructure availability and
the major seaports in India. presence of warehouse stock.
Location Delhi NCR Kolkata Hyderabad Chennai Bangalore Pune Mumbai Ahmedabad
Consumption
Led
sea port
Led
facilitators
Led
Notably, eight top cities including Ahmedabad, Bangalore, Chennai, Delhi NCR, Hyderabad, Kolkata, Mumbai and Pune together contribute
close to 42 percent of the country’s total GDP3. And as a result, they can be considered as the country’s primary warehousing hubs. The Indian
warehousing sector is gradually shifting from unorganised to organised mode, and more high-quality warehouse spaces are being developed.
These high-quality warehouses, typically coined as Grades A and B warehouses, require automation and safety in operations and would be
equipped with vertical racking, reach trucks, automated conveyor systems, and fire sprinkler and hydrant systems, among others.
3
Source: NITI Aayog, Government of India
Indian logistics - Taking giant leaps forward 9Primary
Warehousing Hubs Figure 3: Top warehousing hubs in India
These eight city hubs put together
have a cumulative supply of organised delhi ncr
Grades A and B warehouses to the
tune of 97 million square feet in
2015, recording a remarkable 21%
Compounded Annual Growth Rate
(CAGR) between from 2010 - 15. The
Ahmedabad
growth thrust in the e-retail business
and major companies realigning their
kolkata
supply chain network to get “goods and
services tax (GST)-ready” is expected
mumbai
to drag the growth northward in 2016 to
around 116 million sft.
hyderabad
pune Golden Quadrilateral
North-South Corridor
East-West Corridor
bangalore Western DFC Line
chennai
Eastern DFC Line
International Airport
Domestic Airport
Major Sea Port
Source: JLL, India
Figure 4: Cum. Grade A & B Warehouse space in 8 Primary Locations
120.0
116
100.0 97
Grade A & B Warehousing Space in Mn sqft
80.0 79
60.0 63
53
37 45
40.0
20.0
0.0
2010 2011 2012 2013 2014 2015E 2016E
Source: JLL, India. Note: The figures are cumulative warehouse supply in million square feet and are only for Grades A and B organised warehouse spaces.
10 Indian logistics - Taking giant leaps forwardA hmedabad
Major transactions
Location Tenant Size (sq ft) Rent (INR/sq ft/month)
Changodar e-commerce 1,20,000 15
Changodar e-commerce 55,000 15
million million sq ft million sq ft Changodar e-commerce 53,000 18
Source: JLL
Population in 2011 *Total WH *Vacancy, Changodar 3PL 40,000 15.5
(Ahmedabad Metropolitan Region)4 supply, 2015 2015 Aslali Telecom 28,000 10
*Considers Grades A and B supply of warehousing space only
Major growth corridors Ahmedabad - Warehousing Map
• Ahmedabad is home to several manufacturing sectors,
including pharmaceutical and automobile (and its
components). Kalol
• A moderately large consumer market and a growing
manufacturing base have made Ahmedabad one of the
warehousing hubs in India.
• Ahmedabad’s connectivity to Mumbai and Delhi and its
location in the Delhi Mumbai Industrial Corridor (DMIC) has
given an impetus to the warehousing sector.
• Historically, warehouses were developed along National
Highway 8 (NH 8) (Aslali and Kheda), which connects
Naroda
Ahmedabad to Mumbai, where almost all major FMCG
players have their warehouses.
• However, more recently, locations such as Changodar and Sanand
Bavla along NH 8A (connecting Rajkot) have emerged as
preferred locations, with FMCG and e-commerce players
Aslali
taking up Grades A and B warehouses in this corridor. Changodar
Warehousing corridors - ahmedabad
Major Land values Monthly rents 12-month
(INR crore/ (INR per sq ft per
locations acre) month) outlook Bavla
Changodar 3-4.5 15-18
Bavla 1-1.2 12-14 Kheda
Aslali 1.1-1.3 10-15
Kheda 0.9-1 10-12
Naroda 4.3-6 12-24
Sanand 0.9-1.2 15-17
Kadi-Kalol 1.4-1.75 12-15
Note: Rental ranges are indicative only. Actual rentals vary as per the
specifications provided in a specific property.
Strong/ marginal decrease Stable Marginal/strong increase
Source: JLL
4
Census of India, 2011
Indian logistics - Taking giant leaps forward 11banga l ore
Major transactions
Location Tenant Size (sq ft) Rent (INR/sq ft/month)
T. Begur, Tumkur Road 3PL 2,95,000 17.5
Soukya Road e-commerce 2,00,000 17
million million sq ft million sq ft Bommasandra, Hosur Road e-commerce 175,000 19
Source: JLL
Population in 2011 *Total WH *Vacancy, Siddhalghatta Road e-commerce 147,000 17.5
(Bangalore Metropolitan Area)4 supply, 2015 2015 Bidadi, Mysore Road Furniture Co. 60,000 15
*Considers Grades A and B supply of warehousing space only
Major growth corridors
• Bengaluru, considered as the “Gateway to South India,” stands out as a major warehousing hub in India.
• Quality warehouse supply is available at reasonable costs and relative proximity to high-demand centres (such as Hyderabad, Chennai,
Cochin and Mangalore), helping the warehousing industry in the city to grow.
• Most of the warehousing demand is expected to come from the eastern and north-eastern quadrants of Bengaluru, namely Old Madras Road
(OMR) and areas in its vicinity such as Soukya Road, Siddhalghatta Road and Chintamani Road.
• Proximity to the airport, NH 207 and presence of an inland container depot (ICD) makes OMR a hot warehousing destination in Bengaluru.
• Prominent occupiers include Decathlon, Kuehne + Nagel, Safexpress, DHL and Lifestyle Group.
Note: Rental ranges are indicative only. Actual
Warehousing corridors - bangalore rentals vary as per the specifications provided
in a specific property.
Major locations Land values (INR crore/acre) Monthly rents (INR per sq ft per month) 12-month outlook
Tumkur Road 1-2.5 10-18 Strong/ marginal decrease
Hosur Road 3-5 18-22 Stable
Marginal/strong increase
Mysore Road 1.5-3 17-20
Source: JLL
OMR 1.5-2.5 16-20 4
Census of India, 2011
bangalore - Warehousing Map
Tumkur
Dabaspet
Peenya
Narsapura
Hoskote
Bommasandra
Attibele
Bidadi
12 Indian logistics - Taking giant leaps forwardchennai
Major transactions
Location Tenant Size (sq ft) Rent (INR/sq ft/months)
Periyapalayam Road 3PL 1,92,000 16
Durainallur Soft Drink Co. 1,60,000 12.5
million million sq ft million sq ft
Oragadam Engineering Co. 1,00,000 27
Document
Source: JLL
Population in 2011 *Total WH *Vacancy, Maraimalainagar Management Co. 70,000 26
(Chennai Metropolitan Region)4 supply, 2015 2015
Periyapalayam Road e-commerce 60,000 16
*Considers Grades A and B supply of warehousing space only
Major growth corridors chennai - Warehousing Map
• The warehousing industry in Chennai is
driven by its large manufacturing base, huge
consumer base and presence of major ports,
e.g., Chennai and Ennore ports.
• Places such as Sriperumbudur and Oragadam
Periyapalayam
have warehouses primarily for the auto and
ancillary manufacturing units. Low availability/ Cholavaram
supply of warehouses in these locations has
pushed the rentals high in these corridors.
• One of the most promising warehousing
corridors in Chennai is along the Irrungattokotai
Periyapalayam Road in the Red Hills and
Sriperumbudur
Puzhal areas, with presence of large box
warehouses, including one of the largest in
India at 0.55 million square feet (single-box
warehouse).
Oragadam
• Periyapalayam Road has registered the
largest supply of Grades A and B warehousing
supply in the city, with Periyapalayam Road
in presence of major players across FMCG,
e-retail and logistics 3PL, such as Hindustan Marai Malai Nagar
Unilever and Future Supply Chain.
Warehousing corridors - chennai
Major locations Land values Monthly rents 12-month outlook
(INR crore/acre) (INR per sq ft per month)
Note: Rental ranges are indicative
Irungattukottai 3-4 20-26 only. Actual rentals vary as per
the specifications provided in a
Sriperumbudur 2.25-3 22-25 specific property.
Oragadam 2-2.25 23-28
Marai Malai Nagar 4.5-6 24-29 Strong/ marginal decrease
Stable
Cholavaram-Red Hills 2.5-3.6 18-22
Marginal/strong increase
Periyapalayam Road 2-2.50 16-18
Source: JLL
Tada, Andhra Pradesh (AP) 0.60-0.80 18-22 4
Census of India, 2011
Indian logistics - Taking giant leaps forward 13D e l hi N C R
Major transactions
Location Tenant Size (sq ft) Rent (INR/sq ft/month)
Rewari e-commerce 1,52,000 14
Mewat 3PL 1,15,000 12
million million sq ft million sq ft Mewat 3PL 1,00,000 14
Source: JLL
Population in 2011 *Total WH *Vacancy, Pataudi 3PL 1,00,000 12
(National Capital Region)4 supply, 2015 2015 Farukh Nagar e-commerce 1,00,000 13
*Considers Grades A and B supply of warehousing space only
Major growth corridors Delhi NCR - Warehousing Map
• Huge consumer base is the biggest advantage of Delhi NCR
for being one of the largest warehousing nodes in India.
• Apart from this, Delhi’s position as a huge manufacturing
location and hinterland, including the entire North India, also
helps in the development of the warehousing locations.
Panipat
• Almost all major warehousing national-level developers
are present in Delhi NCR, including IndoSpace, NDR
Warehousing, AS Cargo, Acorn and Arshiya.
• Good-quality Grade A warehouses are being built by most of
these developers in locations such as Pataudi, Dharuhera
along NH 8, the busiest national highway in India.
• Large-scale Grade A warehouses are also being developed
in the Farukh Nagar-Patli Road area near Manesar, where
e-retail players have leased in the recent past.
• Being close to manufacturing hubs such as Manesar and Sonipat
Neemrana, the Farukh Nagar-Patli Road area also houses
some large ICDs that have provisions for railway siding, thus Rohtak
connecting to ports like Jawaharlal Nehru Port Trust (JNPT)
Ghaziabad
and Mundra.
Bahadurgarh
Warehousing corridors - Delhi NCR
Major Land values Monthly rents 12-month
(INR crore/ (INR per sq ft per
locations acre) month) outlook
Pataudi 3-4 13-18 Manesar
Dharuhera 3-4 13-18
Pataudi
Neemrana 2.75-4 14-20
Bahadurgarh 3.5-5.5 13-18
Rohtak 2.5-4.5 14-17 Dharuhera
Sonipat 3.5-5.5 13-18 Palwal
Panipat 3.75-5 17-20
Ghaziabad 3-4 17-20
Neemrana
Palwal 4-5 15-18
Note: Rental ranges are indicative only. Actual rentals vary as per the
specifications provided in a specific property.
Strong/ marginal decrease Stable Marginal/strong increase
Source: JLL
4
Census of India, 2011
14 Indian logistics - Taking giant leaps forwardH y derabad
Major transactions
Location Tenant Size (sq ft) Rent (INR/sq ft/month)
Mahabubnagar e-commerce 3,60,000 15
Medchal e-commerce 2,00,000 13.5
million million sq ft million sq ft Kompally FMCG 60,000 10
Source: JLL
Population in 2011 *Total WH *Vacancy, Kompally Tyre Co. 60,000 10
(Hyderabad Metropolitan Area)4 supply, 2015 2015 Kompally 3PL 60,000 10
*Considers Grades A and B supply of warehousing space only
Major growth corridors
Warehousing corridors - Hyderabad
• The formation of the new state (Telangana) and the stable Land values Monthly rents 12-month
political climate in the city of Hyderabad have helped in improving Major locations (INR crore/acre) (INR per sq ft per month) outlook
investment sentiments in the city. Kompally/Medchal 1.5-2.5 11-14
• The Shamshabad and Mahabubnagar areas have emerged as Shamshabad/
major warehousing corridors in the city. 1.2-2.2 12-14
Mahabubnagar
• Proximity to the airport, lower rentals and availability of land parcels Cherlapally 2-3.5 11-14
have led to large, organised warehousing development in the
Uppal/Nagole 4-9 14-17
Mahabubnagar area.
Patancheru 1.7-3 10-13
• Medchal, which is located in the northern part of the city, is another
Balanagar 4-6 14-16
established warehousing destination.
Note: Rental ranges are indicative only. Actual rentals vary as per the specifications
provided in a specific property.
• These areas have the presence of almost all major FMCG and
Strong/ marginal decrease Stable Marginal/strong increase
e-retail players.
Source: JLL 4Census of India, 2011
Hyderabad - Warehousing Map
Medchal
Patancheru
Cherlapally
Secunderabad
Uppal
Shamshabad
Balanagar
Indian logistics - Taking giant leaps forward 15K o l kata
Major transactions
Location Tenant Size (sq ft) Rent (INR/sq ft/month)
Old Delhi Road Confidential 1,30,000 17
Sankrail Retailer 70,000 14
million million sq ft million sq ft Dhulagarh 3PL 60,000 14
Source: JLL
Population in 2011 *Total WH *Vacancy, Dhulagarh Electrical 50,000 14
(Kolkata Metropolitan Area)4 supply, 2015 2015 Maheshtala Steel 45,000 18
*Considers Grades A and B supply of warehousing space only
Major growth corridors Kolkata - Warehousing Map
• Kolkata’s strategic location as a gateway
to North-east India and its proximity to the
Kolkata port has made the city a major Kalyani
warehousing location in India.
• Locations along NH 06 like Dhulagari and
Uluberia and along NH 02 like Dankuni are
established warehousing corridors in Kolkata.
• Dankunj (on NH 06) and Old Delhi Road (on
NH 02) are preferred locations because of
their proximity to industrial areas and good Dankuni
connections to North-east India and the city
of Kolkata.
• Other warehousing corridors in Kolkata
include Kalyani along Belghoria Expressway,
Sirakol and upcoming locations in Bantala.
Warehousing corridors - Kolkata
Land Monthly 12
Major values rents month Dhulagari, Alampur
locations (INR crore/ (INR per sq ft
acre) per month) outlook
Dankuni 1-1.5 18-22
Old Delhi
0.9-1.4 16-22
Road
Dhulagarh 1.5-2.2 14-18
Uluberia
Alampur 1.5-2.2 14-18
Uluberia 0.7-1.1 10-14
Sirakol 0.9-1.2 9-12
Kalyani 0.9-1.4 9-12
Note: Rental ranges are indicative only. Actual rentals vary
as per the specifications provided in a specific property.
Strong/ marginal decrease
Sirakol
Stable
Marginal/strong increase
Source: JLL
4
Census of India, 2011
16 Indian logistics - Taking giant leaps forwardmumbai
Major transactions
Location Tenant Size (sq ft) Rent (INR/sq ft/month)
Bhiwandi e-commerce 2,50,000 18
Bhiwandi e-commerce 1,40,000 18
million million sq ft million sq ft Padgha Paper Co. 1,31,500 15
Source: JLL
Population in 2011 *Total WH *Vacancy, Palaspe Phata Tyre Co. 1,10,000 18
(Mumbai Metropolitan Area)4 supply, 2015 2015 Kalambasure Engineering Co. 60,000 16
*Considers Grades A and B supply of warehousing space only
Major growth corridors mumbai - Warehousing Map
• The two busiest ports of India, JNPT and Mumbai
ports, are major demand generators.
• The Panvel/JNPT area has evolved as a major
warehousing location in Mumbai because of
its proximity to the port and availability of large
expanse of land. Multiple ICDs and free trade
warehousing zones (FTWZs) are present here.
• Extended areas in Palaspe have become
locations for warehouses such as that of Apollo
Tyres. However, very expensive land parcels result in
difficulty in the development of new warehouses here.
Padgha
• Warehousing locations in Bhiwandi, Mankoli and
Padgha along NH 3 and State Highway 35 (SH 35)
can be considered as the most vibrant and largest
Bhiwandi
warehousing areas in Mumbai.
• Major supply of Grade A warehouses are available
in this area, with the presence of FMCG and Mankoli
e-commerce companies. However, high costs of land
and restriction in land usage (mostly in green zone)
have restricted the development of warehouses.
Warehousing corridors - mumbai
Major Land values Monthly rents 12-month
(INR crore/ (INR per sq ft
locations acre) per month) outlook
JNPT
1.5-2.2 18-22
and Uran
Palaspe
2.5-3 22-26
Panvel
Palaspe
Mankoli
3-5.5 10-12
Bhiwandi
Vadpe
2-3 10-12
Bhiwandi
JNPT
Padgha
1-1.5 11-16
Bhiwandi
Note: Rental ranges are indicative only. Actual rentals vary as per
the specifications provided in a specific property.
Uran
Strong/ marginal decrease
Stable
Marginal/strong increase
Source: JLL
4
Census of India, 2011
Indian logistics - Taking giant leaps forward 17pune
Major transactions
Location Tenant Size (sq ft) Rent (INR/sq ft/month)
Nagar Road Consumer Goods Co. 1,00,000 12
Chakan Engineering Co. 70,000 27
million million sq ft million sq ft Chakan e-commerce 65,000 24
Source: JLL
Population in 2011 *Total WH *Vacancy, Nagar Road FMCG 60,000 11
(Pune Metropolitan Area)4 supply, 2015 2015 Pirangut Soft Drink Co. 55,000 18
*Considers Grades A and B supply of warehousing space only
Major growth corridors
Warehousing corridors - pune
• The large consumer bases in Mumbai and Pune, huge Land values Monthly rents 12-month
Major locations
manufacturing base and affordable prices have helped Pune (INR crore/acre) (INR per sq ft per month) outlook
become a major warehousing location. Chakan 2-3.5 24-30
• The Chakan-Talegaon area can be considered as the most vibrant Talegaon 1.8-2.5 23-27
warehousing location in the city. Proximity to large-scale manufacturing Nagar Road 1.2-2.2 20-25
units and easy connectivity with Mumbai, as well as the presence Ranjangaon 1.4-2 24-26
of large-scale organised warehousing parks has helped positioned Shirwal 1-1.6 18-25
Chakan-Talegaon as the prime warehousing area of the city.
Hinjewadi 6.5-8 31-38
• Pune has the presence of players such as Mahindra Logistics, PCMC 7.3-9 30-35
Nippon, Bosch, and Safe Express.
Jejuri 0.6-0.8 18-20
• Nagar Road and Shirwal are the two other warehousing corridors in Note: Rental ranges are indicative only. Actual rentals vary as per the specifications
Pune, with the presence of major occupiers in FMCG, engineering, provided in a specific property.
Strong/ marginal decrease Stable Marginal/strong increase
auto accessories, white goods etc. Source: JLL 4Census of India, 2011
pune - Warehousing Map
Talegaon
Ranjangaon
Hinjewadi Chakan
PCMC Nagar Road
Jejuri
Shirwal
18 Indian logistics - Taking giant leaps forward6. Movers and shakers of the Indian warehousing sector
The Indian warehousing sector is going through a transformational phase with some major
“movers and shakers” in the market that are expected to take it to the next level.
e-retail catalyst
Warehousing sector to catch up with the e-retail
boom in India
Getting GST-ready
Harmonisation of warehousing space for an optimal
and efficient supply chain planning
Cold storage potential
Huge demand for temperature-controlled warehouses/cold storages
Indian logistics - Taking giant leaps forward 196.1. The e-retail catalyst
E-commerce, more specifically, e-retail, is playing a major
189
role in increasing the demand for warehousing in India, Figure 5: Value of Indian
especially retail warehousing. As more customers rely e-retailing market (INR billion)
on online portals for buying goods, the demand shifts
from traditional retail space to warehouse. It increases 117
warehousing space demand, as the products are delivered
77
to the customers’ doorstep directly from the warehouses.
The e-tailing market has grown at a CAGR of 57 percent 49
32 57% CAGR
from 2009 until 2014. As per a PricewaterhouseCoopers 40
(PwC) report, India’s Internet penetration stands at only 19
2009 2010 2011 2012 2013 2014
percent of household in 2014 as compared to 87 percent
Source: IBEF, JLL India
in the United States and 46 percent in China. The future
growth potential in the e-commerce sector in India is going
to be exponential, as India is all geared up to catch on the
Internet penetration levels.
Interestingly, books, electronics, and apparels and accessories provide the biggest e-tailing demand and account for more than 75 percent
of the total as per ASSOCHAM report. Other popular goods are healthcare products, furniture, beauty and baby products, as observed in the
following graph.
3%
6% Healthcare
10% Home & Furnishing
30%
2% Beauty and Personal
Figure 6: Share of different
categories in e-retail Baby Products
15% Books
Electronics
Apparels & Accessories
34%
Source: ASSOCHAM
20 Indian logistics - Taking giant leaps forwardMajor e-retail market
trends that require
efficient logistics
Cash on delivery
Typical Indian customer wants to inspect the product before paying
Brings in confidence in e-commerce
Free delivery
To compete with retailers, free and quick delivery is a must
Need for optimised logistics cost
Return/exchange
Consumers expect an easy return/exchange process
Demands strong reverse logistics process
Insurance cover
Products stored in the warehouse are insured
Demands higher and safer specification of warehouses
Existing concerns
Increasing order returns, fake address issues and increased
costs for cash on delivery services
• Industry is expected to spend USD 1 billion to USD 2 billion on warehousing and logistics functions in the next two to
three years to reduce distribution cost, faster delivery and increase market coverage.
• In 2014, almost 25 percent of the total new Grades A and B supply were absorbed by e-commerce players.
• Additional 8 million to 10 million square feet is expected to be absorbed by e-commerce players in the next two to three years.
• It is expected that gradually, e-retail players would be evaluating and taking up good ready-built warehouse space as compared to the
current built-to-suit warehouses.
Indian logistics - Taking giant leaps forward 216.2. Getting GST-ready
Understanding GST and its impact
lottery
Goods and Services Tax (GST) is a multi-stage tax Tax
sad vat
on domestic consumption charged on all taxable
supplies of goods and services in India except
Service
What is it ENTRY
those that are specifically exempted. Tax going to do? Tax
How is it going to do it?
excise luxury
• Dual GST model is proposed: central GST Tax Tax
GST
(CGST) to be governed by the central authority
and state GST (SGST) by state-level authorities.
cvd LEVIES
• Integrated GST (IGST) will be levied by the
Centre on all interstate transactions, which will be
cst adc
CGST + SGST.
• Cross-utilisation of tax credit will not be allowed
between CGST and SGST except in interstate
transactions where IGST is applicable. Subsume multiple existing indirect taxes (both central & state level)
The anticipated implementation of the GST from April 1, 2016 is also expected to bring in harmonisation of warehousing space in India. In the
current taxation environment (central sales tax or CST and value-added tax or VAT regime), companies that sell their products across India are
subject to both central and state taxes. As a result, these companies are forced to design their supply chain networks around the existing tax
frameworks rather than operational efficiencies. JLL analyses the pre- and post-GST scenario with a sample case as follows:
Before GST Implementation after GST Implementation
Manufacturer in State X (SP = C + P = 100) Manufacturer in State X (SP = C + P = 100)
D
Sale Through Small Sale to Multiple States through Single
Direct Sale
owned WH in State Z Big Regional Warehouse
A State X
+ VAT B State Y
+ CST C + VAT + GST
X Y Z Distributors Y Z
SP = 104 + P - ITC = 110 SP = 104 + P = 114 SP = 104 + P - ITC = 110 SP = 104 + P - ITC = 110 SP = 104 + P - ITC = 110
+ VAT + VAT + VAT + VAT + VAT
X1 Y1 Z1 retailer Y1 Z1
SP = 114.4 +P-ITC = 120 SP = 118.56+P-ITC = 124 SP = 114.4 +P-ITC = 120 SP = 104 + P - ITC = 110 SP = 104 + P - ITC = 110
+ VAT + VAT + VAT + VAT + VAT
X2 Y2 Z2 consumer Y2 Z2
FP = 124.8 FP = 128.96 FP = 124.8 FP = 124.8 FP = 124.8
Above Flow chart shows 3 supply chain scenarios. A: Sale to distributor in the After implementation of GST, warehousing structure is
same state as of manufacturing | B: Sale to distributor in state other than state of expected to Restructure. Case D shows sale of the product
manufacturing & C: Sale to distributor in state other than state of manufacturing but via to multiple states through a single Big Regional Warehouse
Manufacturer’s small warehouse in the distributor’s state. without increasing FP to the consumer.
FP to the consumer is maximum in Case B due to application of CST. In order to reduce This will eliminate presence of multiple state warehouses
FP, manufacturer sells the product through owned small warehouses in the state of sale which will further optimize operational cost by implementing
which will result into multiple small warehouses across country. state of the art technologies and modern equipments in WH
Abbreviations and assumptions: VAT = Value-added tax (4%); CST = Central sales tax (4%); GST = Goods and services tax (4%); ITC = Input tax credit; SP = Selling price; FP = Final
price; C = Cost (INR 90); P = Profit (INR 10) | Note: The cases shown above use the same VAT and CST tax percentage across different states in order to explain the concept. Taxes
vary across different Indian states. Application of the type of taxes at different levels of sale is shown at each level. The current Indian taxation system does not allow tax collected
under CST to be adjusted against subsequent tax collected under VAT, as taxes under CST go to the central account and taxes collected under VAT go to the states’ accounts.
22 Indian logistics - Taking giant leaps forwardGST to restructure Indian warehousing
• Theoretically, post the GST implementation, if any manufacturer • However, the consumer demand and market size of each product
has uniform sales distribution/consumer market across the country type are very different and complex. The larger the market size, the
and wants to have a single distribution centre (DC) to cater the greater is the pull force of the CG toward it.
entire country, the DC would be typically located near the country’s • Consumer demand typically is skewed more toward the northern,
geometrical centre of gravity (CG) (i.e., equidistant from all parts of western and southern regions of the country, thus pulling the CG
the country). toward it and thereby shifting from the geometric centre to demand
attraction locations along the lines shown in red.
• With the onset of GST, once the physical state boundaries lose their
North
significance from the taxation point of view, supply chain dynamics
30% - 35%
Consumer Market would rule supreme for warehouse location selection.
• JLL undertakes an empirical derivation of emerging warehousing
hubs in India apart from the existing eight major hubs.
Existing Hubs (Pre- GST)
Ahmedabad Kolkata
West East Bangalore Mumbai
25% - 30% 5% - 20% Chennai NCR - Delhi
Consumer Market Consumer Market Hyderabad Pune
Geometric CG Emerging Hubs (Post GST)
Belgaum Guwahati Lucknow / Kanpur Raipur
Bhubaneshwar Indore Ludhiana Ranchi
Coimbatore Jaipur Nagpur Vapi
Goa Kolhapur Patna Vijayawada
GST, once implemented, will look at re-engineering the supply chain
architecture with fewer and larger strategically placed DCs along with
smaller warehouses for daily milk runs. Apart from harmonisation of
warehousing space, companies are also taking this opportunity to
South give high importance to operational efficiencies and safety standards
25% - 30% in the new warehouses with the use of vertical racking, reach trucks,
Consumer Market
automated conveyor systems, fire sprinklers, hydrant systems, etc.
Thus, GST is expected not only to optimise the supply chain networks,
but also to bring in high-quality international standard warehouses in
the Indian market.
Note: This is JLL’s empirical derivation of emerging warehousing locations post GST implementation.
Indian logistics - Taking giant leaps forward 236.3. Cold storage potential
• The sector is highly fragmented (more than one-third of the total cold Cold Storage Temperature Scale
storages have a capacity of less than 1,000 million metric tonnes or
MMT) and unevenly distributed (almost two-thirds of the cold storages Vegetables Pharmaceuticals Vaccines
are located in the states of Uttar Pradesh and West Bengal).
• Organised players share 8-10 percent of the cold chain market size. Fruits Ice cream Meat
Figure 7: India cold chain market size Dairy & Milk Chemicals Fish
33
350 35 15°C 0°C -15°C -30°C
29
300 26 30
23 Cold Storage Market Distribution
25
250 20
Value in INR Billion
Capacity in MMT
200 20
150 15 Pharma
Agro & & Frozen
100 10 FMCG Food
50 5
115 134 175 228 298
0 0
2010 2011 2012 2013 2014 75% - 80% by volume 20% - 25% by volume
20% - 25% by revenue 75% - 80% by revenue
Value (INR Billion) Capacity (MMT)
India needs to evolved significantly on the sub-zero / cold category
Source: National Summit on Cold Chain; Associated Chambers of Commerce and
Industry of India (ASSOCHAM) & Tech Sci Research storage space
Needs Analysis Challenges
• Less than 11 percent of the total produce that • Majority of the cost for cold supply chain is
needs cold storage can be stored within the loaded on the storage component mostly
current capacity. because of the high energy costs and increasing
• Out of 127 MMT of produced milk in 2011-12, real estate prices.
only 70,000-80,000 Tonnes are being stored in cold storages. • Unavailability of quality vehicles (especially with facility) is a
• Out of 105 MMT of perishable produce transferred across India, concern.
only 4 MMT are being transferred through reefer vehicles. • Unavailability of skilled manpower is a concern. Skilled workforce to
• Almost 30-40 percent of the total perishable goods are wasted before manage cold storages will mitigate risks of high inventory levels and
consumption because of the broken cold supply chain infrastructure. poor service offerings.
Government has made a Plan allocation of INR 786 Crore in the 12th five-year plan for implementation of Scheme of Cold Chain,
Value Addition and Preservation Infrastructure.
(Source: Response to Lok Sabha Question# 352 dated 25th Nov, 2014)
24 Indian logistics - Taking giant leaps forward7. Foreign and private equity investments in the sector
The growth story of the Indian warehousing and logistics sector has indeed lured foreign investors and private equity firms in recent times.
Further, conducive policy environment-such as allowance of 100 percent foreign direct investment (FDI) in warehouses and food storage
facilities under automatic routes and tax-free zones such as free trade warehousing zones (FTWZs)-has attracted many
foreign and private equity investments in the sector in the last few years.
625 Crores 365 Crores 81 Crores 68 Crores 40 Crores
2011
INR INR INR INR INR
Warburg Pincus Standard Fidelity Growth Infrastructure Tara India Fund
invested in Continental Chartered Private Partners invested India Holdings III invested in
Warehousing Corporation Equity invested in in Transpole Fund LLC invested JICS Logistic
(Nhava Seva) Limited Redington India Logistic in Aegis Logistics
625 Crores 277 Crores 242 Crores 206 Crores
INR
OPIC invested in
INR INR
Everstone Capital KKR invested
INR
New Silk Route 2012
IndoSpace Logistics invested in AS in TVS Logistics (NSR) invested in
Parks Ltd Cargo Services VRL Logistics
220 Crores
2013 INR
Everstone Capital
invested in Transpole
Logistics
813 Crores 625 Crores
Disclaimer: Information provided
above is collated by JLL from
INR
Warburg Pincus
INR
Warburg Pincus to 2015
various sources. JLL has not to invest in Ecom invest in Embassy
verified the investments proposed Express group
herein and do not take any
responsibility on its authenticity.
Indian logistics - Taking giant leaps forward 258. Leaps ahead
Like in a hurdle race, Indian logistics is in a path of overcoming hurdles. While it has left certain hurdles behind, some still lies ahead.
Regulatory improvements: Indian government’s urge to improve the regulatory and taxation
regime for a globally competitive environment.
• Rolling out of much anticipated and debated Goods and Service Tax (GST) in India.
• ‘Single Window’ along with easy and simple clearance procedures
Manufacturing Thrust: Current thrust in manufacturing to strengthen and re-configure Indian
logistics sector all the more to live up to global standards.
• ‘Make in India’ initiative to strengthen the manufacturing base in India
• Delhi Mumbai Industrial Corridor (DMIC) - infrastructure driven industrial investment corridor.
• Country specific investment regions and industrial parks on Public Private Partnership (PPP)
model - (Eg. Japan to invest USD 35 billion - Nimrana, Bechraji, Supa; China to invest USD 20 Billion
in next 5 years; UK - Belgaum)
Connectivity Push: Large scale investments in infrastructure sector is deemed to improve
connectivity to nook and corner of the country.
• Road: Develop a total of 66,117 km of roads i.e. building 30 km of road a day from 2016.
• Rail: Heavy duty, high speed, extra-wide, doubly stacked Dedicated Freight Corridors (DFC) in west
and east India
• Seaports: Target capacity of over 3,130 MT by 2020 with over 50% anticipated to be generated at
privatized non-major ports.
• Airports: Plans to develop 200 low-cost airports in Tier II and Tier III towns.
With the economy transforming itself, mega infrastructural projects, modifications in regulatory regime, the Indian Logistics sector is definitely
taking giant leaps ahead in its endeavour to become future-ready and globally competitive.
Disclaimer: In most cases, Jones Lang LaSalle Property Consultants (India) Pvt. Ltd. has relied on market information, whether from public or private sources, and has ensured to
the best of its ability the correctness and the validity of the same, by cross checking from various sources. Whilst every effort has been taken to provide authentic data and analysis,
Jones Lang LaSalle Property Consultants (India) Private Ltd. or any of its employees are not responsible for any loss, major or minor incurred on the basis of the information and
analyses provided or are liable to any damages in any form or shape.
26 Indian logistics - Taking giant leaps forwardAuthors Profile
Chandranath Dey
Associate Director & Head - Industrial Consulting
chandranath.day@ap.jll.com
+91 90999 71598 / 079 4015 0021
Chandranath Dey joined JLL in May 2006. Based out of Ahmedabad, Chandranath currently leads
industrial & logistics consulting business in India. His key experiences include formulation of business
plan, entry strategy formulation, business location advisory and site selection studies for some of the largest Fortune 500
companies of the world across multiple industrial sectors. Chandranath with more than 10 years of consulting experience
holds a bachelor’s degree in architecture, master’s degree in City Planning from Indian Institute of Technology, Kharagpur
and certification on Applied Finance from IIM, Calcutta.
Sujash Bera
Manager, Research & REIS
sujash.bera@ap.jll.com
+91 033 3343 6125/ +91 98305 43922
Sujash Bera joined JLL in 2012 and contributes to topical white papers, property market deliverables
on the commercial, retail, residential and industrial real estate as well as Real Estate Intelligence Service (REIS) offerings.
He is the editor of ‘Pulse’, the monthly property market digest of JLL, India. Sujash holds a Master’s degree in City Planning
from Indian Institute of Technology, Kharagpur besides being an architect. He has five years of experience in the industry.
Strategic Inputs:
N. Srinivas, National Director, Industrial Transactions
Acknowledgments:
We would like to acknowledge the invaluable support from Nirav Kothary, Rishabh Shah & Liju Mathew in putting this
project together.
For more information about Research
Ashutosh Limaye
Head, Research and REIS
ashutosh.limaye@ap.jll.com
+91 98211 07054
For more information about Industrial Services, contact
Nirav Kothary N Srinivas
National Director National Director
Industrial Services Industrial Transactions
nirav.kothary@ap.jll.com srinivas.n@ap.jll.com
+91 79 4015 0015 +91 98454 45495
Indian logistics - Taking giant leaps forward 27About JLL JLL (NYSE: JLL) is a professional services and investment management firm offering specialized real estate services to clients seeking increased value by owning, occupying and investing in real estate. With annual fee revenue of $4.7 billion and gross revenue of $5.4 billion, JLL has more than 230 corporate offices, operates in 80 countries and has a global workforce of approximately 58,000. On behalf of its clients, the firm provides management and real estate outsourcing services for a property portfolio of 3.4 billion square feet, or 316 million square meters, and completed $118 billion in sales, acquisitions and finance transactions in 2014. Its investment management business, LaSalle Investment Management, has $56.0 billion of real estate assets under management. JLL is the brand name, and a registered trademark, of Jones Lang LaSalle Incorporated. For further information, visit www.jll.com JLL has over 50 years of experience in Asia Pacific, with 31,100 employees operating in 81 offices in 16 countries across the region. The firm was named ‘Best Property Consultancy’ in seven Asia Pacific countries at the International Property Awards Asia Pacific 2014, and won nine Asia Pacific awards in the Euromoney Real Estate Awards 2013. www.jll.com/asiapacific About JLL India JLL is India’s premier and largest professional services firm specializing in real estate. With an extensive geographic footprint across 11 cities (Ahmedabad, Delhi, Mumbai, Bangalore, Pune, Chennai, Hyderabad, Kolkata, Kochi, Chandigarh and Coimbatore) and a staff strength of over 8000, the firm provides investors, developers, local corporates and multinational companies with a comprehensive range of services including research, analytics, consultancy, transactions, project and development services, integrated facility management, property and asset management, sustainability, industrial, capital markets, residential, hotels, health care, senior living, education and retail advisory. The firm was named the Best Property Consultancy in India at the International Property Awards Asia Pacific 2014-15. For further information, please visit www.joneslanglasalle.co.in Jones Lang LaSalle Property Consultants (India) Pvt Ltd © 2015. All rights reserved. All information contained herein is from sources deemed reliable; however, no representation or warranty is made to the accuracy thereof.
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