With online shopping the trend, warehouses and logistics parks to store retail products are gaining more importance. By ZAIN FAROOK – Director, Silverline Realty.
When life is increasingly getting glued to the virtual world with work transpiring through the ubiquitous internet portals, is it surprising that choices and in turn purchases are done online? With physical meetings and exchanges that will soon see a slower pace, online shopping is surely seen catching up and increasingly becoming a way of life.
While most consultants in the real estate market too aver that matters are unfolding online, a question arises: what will happen to the multiple malls that have been mushrooming across major metros, and in tier-II cities and tier-III cities? Will these spaces continue to see footfall or will they face a slow fading out, as many are seen metamorphosing into experience centres?
We are witnessing a massive transformation, perched as it is on the tip of change, a change that will be seen as a renaissance, hitherto identified with. This brings us back to the same question. What will happen to the countless retail spaces that dot the cities?
Resource base: A point worth noting here is the need for a resource base to cater to this increasingly popular online shopping. To cater to this online market, suppliers require large spaces in strategic locations to stock their goods, run the office where the stock is managed and arrange for speedy, timely disposal to where the orders have been placed. There is a requirement for large logistic parks which will stock the material and arrange for shipment to addresses from where the order arises.
Logistics is in fact one of the most critical factors in the e-commerce space, absorbing as it does a major chunk of the investments in the retail segment globally. United States online retail giant, Amazon, has diverted half its investment in India to building its logistics capabilities. Amazon India runs the largest e-commerce warehouse in the country, in Telangana, spanning 400,000 sq. ft.
The United States, known for its high retail transactions, is experiencing a massive switch to online shopping, with sales having crossed $459 billion in 2017 by Forrester Research, which translated to roughly 12.9 per cent of the projected total retail sales. Forrester further estimates that this will move up to 17 per cent by 2022. Not surprisingly, many malls in the U.S. are already looking to adapt to the altered landscape. Does that mean the mall culture is fading away? Not really. But the old mall culture certainly is, or is in the process of moving out.
In this altered scenario, it is not surprising to see home grown e-commerce major like Flipkart planning to set up a 4.5 million sq. ft logistics park in Bengaluru. The integrated park spread across 100 acres, expected to be one of its kind in the country, is all set to house multiple warehouses that will rival in size those set up by Amazon in the U.S. and Alibaba in China.
Interestingly, considering the rate at which online retail sales is picking up in India, and certainly so in the tech capital Bengaluru, it is estimated that over the next 10 years, the requirement for warehousing space to cater to this demand in Bengaluru alone would be 4.5 million sq. ft. This means the massive logistics park on the anvil would be adequate merely to serve the city alone, calling for similar units in other regions of the country.
So what does this spell for retail real estate? Will future developments veer less towards creating retail outlets? Will there be more warehouses and logistics parks? What will happen to the malls that have mushroomed in various parts of the city? Will they have to shut down?
The answer is yes and no. While certainly the future will see less takers for conventional malls and traditional retail spaces, malls are here to stay. The spaces will transform to accommodate more experience centres, but retail will continue, albeit at a lower expanse, as compared to the past. Mall culture will continue to prevail though in an altered state where multiplexes, food courts and eateries, entertainment zones and spas will continue to attract with a lower play of retail outlets.
Designer retail and skilled retail ware will continue to command traditional retail space. Standard items will, however, recede from traditional retail stores, moving more to the online segment. Massive transformation is on the cards, though the basic fabric of conventional retail will not be completely wiped out.