Fundamentals of Multi-level Warehouse Development

'E-commerce sector in India is expanding at brisk rate. The funding world has witnessed multi-billion dollar transactions in this space and same trend is expected to continue. This segment requires different scale of warehousing infrastructure for supply chain management and one of the requirements is small distribution centers. In coming years requirements of small distribution centers across the city will grow multi-fold.

Currently, these requirements are fulfilled by small industrial sheds, godowns, large shops, non-functional marriage halls, houses and others. However, in near future, scale (numbers) and efficiency requirement need to improve for these centers. Therefore, we believe this need (small distribution centers) can be fulfilled by multi-level warehousing developments across different location of the city.

The typical size for distribution centers is SBA of 3,000 sqft to 7,000 sqft; and parking area needs to be from 2,000 to 4,000 sqft.

Following are the specifications required for building a multi- level warehousing:

  • A typical floor plate in multi level warehouse: 7,000 to 10,000 sqft;
  • Land parcel: 12,000 sqft to 20,000 sqft
  • A building structure of 2B+G+3 or B+G+2;
  • Total development size: 25,000 sqft to 40,000 sqft (excluding basement).

Average rent for cities like Bangalore is expected to be between INR 30/sqft and INR 35/sqft and for open space and basement will be charged at INR 10 – 15/sqft; Cost of construction: INR 2500 – 3000 per sqft. And the investor will receive get similar yield rate as that of other commercial assets: 8% – 10%.

There are many land parcels which are available and not suitable for other activities like office space, retails on account of location, neighborhood and other reasons but can be used to construct multilevel warehousing.

Hence , this segment will gain traction in coming years and multi-level warehousing across the country would be a reality soon.

(Data Source: Meraqi Research)