Hyderabad, Jul 6 (IANS): Hyderabad recorded 2.4 million square feet of warehousing leasing activity during the financial year 2021, a 30 per cent drop year-on-year.

Knight Frank India, in their 'India Warehousing Market Report 2021', said this fall in warehousing absorption in the city is largely due to the pandemic-induced economic slowdown.

The e-commerce sector was the primary driver of warehousing demand in Hyderabad in FY 2021 with a 54 per cent share in the total transactions pie. Third party logistic players accounted for 24 per cent of the FY 2021 transactions followed by the FMCG sector with a 20 per cent share.

In terms of geography, with a 51 share in the FY 2021 total transactions pie, the Shamshabad cluster has seen a significant spike in activity compared to its 5 per cent share last year.

Two transactions by Amazon totalling 0.1 mn sq m (1.1 mn sq ft), that is 46 per cent of the total FY 2021 transaction activity, is the reason for this huge jump in this cluster's demand share. The more popular Medchal cluster accounted for 48 per cent of the FY 2021 warehousing demand, a fall from its share of 87 per cent last year. The fall is a result of the skew caused by the two Amazon transactions in the Shamshabad cluster.

"Hyderabad's transaction volumes in warehousing were subdued from last year, ending at 2.4 mn sqft in FY21. While Covid-19's impact on markets brought a disruption to the demand, the shortage of Grade A inventory, lack of feasible lands and high prices are factors hindering the anticipated growth. However, warehousing remains a promising sector for Hyderabad due to its strong consumption base, led by e-commerce and e-retail segments, which necessitates the focus on development of a robust warehousing infrastructure to draw further demand," sad Samson Arthur, Branch Director, Hyderabad, Knight Frank India.

During FY 2021, land rates grew marginally in the Patancheru and Shamshabad clusters, while rentals remained largely steady across locations in the three warehousing clusters.