KOCHI: Kochi has long been a key centre for warehousing activities, but due to various reasons, including a lack of push from the administrators, the city has failed to live up to its potential. Things seem to be changing slowly with Kochi showing signs to emerge as a hub of warehousing activities. According to the latest reports, the port city has recorded a warehousing transaction volume of 0.3 million sq ft in the last financial year.
In its recent report, international property consultancy Knight Frank India reckoned that Kochi has a big potential to develop itself as a warehousing market, as indicated by the rise in the transaction volumes in e-commerce and manufacturing segments during FY2022.
In its ‘India Warehousing Report 2022’, Knight Frank India said industry-split transactions in Kochi showed that a majority of the transaction pie was made up by the e-commerce sector, which had a 32% share of the transactions.
Apart from that, the manufacturing industry was the second-most active in the market, contributing 28% of the overall amount of transactions during the course of the year. The state government is also taking steps to promote Kochi as a warehousing centre. This seems to be bearing fruit.
Early this year, Mumbai-based Geekom Logistech announced Rs 500 crore investment in Kochi to set up a logistics park. The logistics park is expected to create 2,000 new jobs, Industries minister P Rajeeve said recently.
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With respect to the split in business among the clusters in the city, the Kalamassery-Edayar cluster and the NH-85 cluster are Kochi’s two primary hubs for warehousing activities. Kalamassery-Edayar cluster accounted for 74% of the transactions in FY22 while the NH-85 cluster had the remaining 26% of the transactions.
“To serve a wider range of clients from a single location, many third-party logistics and manufacturing businesses have built warehouses in Kochi,” the Knight Frank study said. The development of top-notch pre-engineered warehousing facilities in Kochi has accelerated in recent years due to the advent of the two e-commerce giants. The jump in transaction volumes has dramatically reduced market vacancies, but queries for built-to-suit facilities have gone up.
Rental levels have also significantly improved in stability over the past years. In popular warehouse areas like North Paravur, Ernakulam, Kalamassery, Varapuzha, Koonammave, Eloor, Vytilla, Edappally, Perumbavoor, etc., rental costs for Kochi warehousing facilities range between Rs 183 and 237 sq m/month (Rs 16 and 21/sq ft/month).
Rent for grade A warehouses, like those used by Flipkart, GSK, and Pepsi, remained in the range of Rs 205 to Rs 226 per square metre per month (Rs 19 to Rs 21 per sq/ft/month), while rent for grade B warehouses was in the range of Rs 172 to Rs 194 per square metre per month (Rs 16 to Rs 18/ sq/ft/month).
Why warehousing is important
Logistics costs in India are high, accounting for 14 per cent of the GDP, according to Niti Aayog.
Transportation and inventory costs account for more than 90 per cent of these costs. These high costs are, in part, a result of low logistics efficiency due to a fragmented market, lack of standardised trucking assets, old vehicles and obsolete warehousing technologies. The performance of warehouses can be improved by implementing advanced digital tools.
New Projects
Early this year, Mumbai-based Geekom Logistech announced H500 crore investment in Kochi to set up a logistics park. The logistics park is expected to create 2,000 new jobs, Industries minister P Rajeeve said recently.
A game-changer
While Kerala is not a manufacturing state, it’s a big consumer state. Most companies use their own or third-party warehouses to store their stuff from washing powders to soaps, refrigerators to mobiles, and noodles to paints, which come from outside the state.
These are required to be stored in a safe and secure place for companies such as Nestle, Asian Paints, ITC, Sony, Philips, and PepsiCo for supplying to supermarkets, retail shops or e-commerce companies such as Flipkart. With e-commerce booming, it will be only a matter of time before the big player Amazon starts its own big warehousing facility in Kochi.