India Warehousing – the steady transition to modern warehouses

The construction cost ‘rough’ estimates are having a legacy of the older generation warehouses. The cost sheet of a fully equipped, compliant and certified modern warehouse is not comparable to legacy warehousing. Warehouse rentals are some of the most intensely negotiated rents in corporate real estate. Since this is a direct part of the supply chain costs, and with transportation costs having uncontrollable variables, warehouse rentals have had to be brute minimum till recent times. If construction costs vs rental yields are pegged to legacy facilities, it will become harder to come out and setup in large floor modern warehousing.

But with companies now being open minded about a more secure and compliant warehouses which offers a host of long term benefits and risk reduction, developers are able to build better warehouses Now, fully approved world standard compliant warehouses have come up in India and many of the first movers are global MNCs who prefer a safe and certified warehouse for their inventory. This trend is expected to continue gradually in the coming months and years as old leases reach expiration.

The transition is taking time because when a company is working at a certain margin and has successfully gained a big market share, out of the blue, they cannot bump up the costs in supply chains. But as and when leases are expiring, we are witnessing companies moving into more standardized facilities on longer leases.