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Two significant trends have emerged in the last few years in both the international and Indian logistics sectors. The transformation of the warehouse’s role is the first of these. The warehouse has evolved from being just a place to keep inventory to one that helps logistics operations run more efficiently. Warehouses are becoming a significant factor in the growth and success of the business. The second trend is that more and more warehouse construction companies are now witnessing heavy demand for Grade A warehouses and warehousing space in general. This trend has accelerated over the past few years due to the rise of e-commerce and more recently the emergence of q-commerce (quick commerce/on-demand delivery). To meet the growing demand from these segments, warehouse construction companies are building warehouses with increased size and space.
After the disruption caused by the COVID-19 pandemic in global supply chains, single-warehouse dependency was expected to decrease across global supply chains. This would have resulted in a decrease in demand for large warehousing spaces. However, evidence suggests that warehouse construction companies have witnessed a heavy demand for large warehouses in recent years. This trend continued even during the pandemic. While newer, smaller warehouses have emerged, they have only been used for last-mile operations in urban areas. According to JLL research, the average size of Grade A warehouse construction in India nearly doubled between 2016 and the first half of 2021, from 80,000 to 150,000 square feet. The reason for this is an increase in warehousing demand from third-party logistics (3PL) providers as e-commerce, D2C (Direct to Customer), and omnichannel business models become more popular.
To compete for warehousing space with larger players in retail and e-commerce, smaller companies, particularly those in the D2C segment, are increasingly enlisting the services of 3PL partners. As a result, warehouse construction companies are now seeing heavy demand for warehouses from 3PL players.
The implementation of the unified GST regime in India since 2017 is another factor contributing to the increased preference for larger Grade A warehouses. Previously, warehouses were scattered across multiple states with the primary goal of minimizing central tax liabilities associated with inter-state transactions. As that objective is now redundant, logistics players and their customers are focusing on improving supply chain performance through efficiency upgrades. And an increasing number of business leaders are realizing that such performance improvements are only possible with the consolidation-driven operating model enabled by large Grade A warehouses. Furthermore, with the national logistics infrastructure improving in recent years and the GST regime resulting in faster transportation, businesses are more focused on reducing inventory costs, which big-box warehouses enable. These trends are expected to continue in the future as warehouses evolve and offer more than just extra space.
In terms of benefits, large Grade A warehouses provide functional and economic value. Large warehouses serve as fulfillment centers, which have a direct impact on the customer experience.
This requires that they have more than just storage space. They have been upgraded with automation technologies for faster turnaround, larger outdoor spaces for easy vehicle loading, unloading, and movement, and adequate indoor spaces for value-added activities such as labeling, repacking, and kitting, among others.
Large warehouses, especially those leased by 3PL providers, can provide lower-cost and more flexible warehousing services to their clients. They accomplish this by serving multiple clients within their large, shared warehouses, which allows them to take advantage of economies of scale. As a result, they can use automation to improve the speed and accuracy of logistics operations while lowering operational costs. Such spaces also allow 3PLs and logistics providers to provide on-demand warehousing, which is becoming increasingly popular among Indian companies.
Warehouse construction companies are now seeing heavy demand for multiple Grade A warehouses in India specifically around major trade hubs like Mumbai, NCR, and Bengaluru. These warehouses will be critical in making India not only a competitive manufacturing hub but also an appealing consumer market for businesses around the world.
The role of a warehouse has transformed over the years. It has evolved from a place to store inventory to one that helps logistics operations run more efficiently. The demand for Grade A warehouses has also increased over the years. Buildmyinfra is a one-stop solution for your infra projects that can provide you with the best warehouse construction service. For any query related to warehouse construction contact Buildmyinfra.