Ecommerce Firms in India Reduce Warehouse Leasing Due to Falling Demand After Covid

Warehousing & Ecommerce 

Demand for e-commerce companies decreased as the pandemic subsided, whereas brick-and-mortar competitors rented 14% more space from January to June as demand increased.

In Covid-19, the proportion of e-commerce companies leasing warehouse space in India fell to 3% due to a decline in demand of more than 20%.

In 2020, during the pandemic, more than a fifth of warehouse space was occupied by e-commerce, while physical retailers held a 9% share, according to data from Savills India.

In the first six months of 2023, a total of 22.4 million square feet of space was leased in India, compared to 20.9 million square feet in the same period the previous year. "During Covid, e-commerce companies overcommitted space, anticipating that their exponential growth would continue.

According to Gagan Randev, executive director of India Sotheby's International Realty, there are numerous facilities where tenants continue to pay rent without utilising the entire space. 

According to Savills data, after five years of increasing demand for warehouse space, tier-2 and tier-3 locations saw the proportion of e-commerce fall from 34% to 4% between January and June.

"Over the past three years, year-over-year space absorption from e-commerce has changed significantly due to increased investments in their warehousing operations and footprint optimisation by means of automation, shelving, and enhanced racking.

According to SrinivasN, managing director, Industrial and Logistics, Savills India, "these investments have enabled them to increase their existing storage space and enhance their overall operational efficiency."

According to experts, corporations are also seeking to delegate the space they occupied during the pandemic.

"They overbuilt e-commerce capacity as Covid-led growth was harvested. Currently, this capacity is inactive. Therefore, many marketplaces attempt to externalise their services. That is not the result of a business model; it is the result of unused space, according to Ashvini Jakhar, proprietor of Prozo, a company that manages supply chains for businesses.