E-commerce and Third-Party Logistics (3PL) to Drive Bengaluru Warehousing Demand

Bengaluru, also popularly known as ‘Silicon Valley of India’ is home to several large software companies which have set up their offices and development centers within the city.  It is the country’s fourth largest FMCG, clothing and footwear market, as well as the third-largest hub for high-net-worth individuals (HNWI/ HNIs), after Mumbai and Delhi.

It has continued to attract several people from all over the world, thanks to some of the best-in class educational institutions such as the Indian Institute of Science, the Indian Space Research Organization, Indian Institute of Management among others.

Another important aspect of the city is the growing industrial and logistics market. Boosted by the robust growth seen in the e-commerce and 3PL sectors, industrial and warehousing space absorption in Bengaluru is likely to grow by 150% to 7.0 million sq. ft in 2021 as compared to the previous year. 

The e-commerce sectors accounted for 36.5% of the total absorption in 2020, followed by 3PL sector at 32.9% and retail sector at 20.5%.  On the supply side, around 8.0 million sq. ft of supply is anticipated in 2021. Despite construction activities getting affected due to the lockdown, the city witnessed a fresh supply of 2.8 million sq. ft in 2020. 

The overall vacancy levels marginally decreased from 9.0 % in 2019 to 8.1% in 2020 and the rental values remained stable in 2020 across the major micro-markets of the city.

The Hoskote micro-market at East Bangalore comprising of Soukya Road, Hoskote, Old Madras Road (OMR)till Narasapura and Tumkur micro-market at West Bengaluru comprising of Nelamangala, T.Begur till Dobbaspet  holds immense potential for further development of industrial and logistics sector. These micro-markets, known for the presence of reputed developers, are emerging destinations for major e-commerce and 3PL occupiers. In addition, the current and upcoming infrastructure projects such as Peripheral Ring Road (PRR) and Satellite Town Ring Road (STRR) will help these markets in the coming years. 

Other micro-markets like the Hosur Road area has also witnessed improved demand from the e-commerce and 3PL segments particularly in locations such as Bommasandra, Attibele Anekal Road, Jigani -Anekal Road. The Bellaray Road micro-market comprising locations such as Doddaballapur and Devanahalli are also emerging due to its proximity to Bangalore International Airport (BIAL).  

We anticipate e-commerce, 3PL and retail sectors will continue to lead warehousing demand in Bengaluru in 2021 followed by manufacturing sector. The vacancy level is expected to increase marginally to 8.9% in 2021 from 8.1% seen in the previous year while the rental and land values are expected to remain stable in 2021.