Grade A Warehousing – The Way Forward

by Manish MalooSept 16th, 2021

Warehousing forms the core component of supply chain of any company that relies heavily on efficient distribution of its products encompassing the entire chain right from factories to shops to end-users. Based on prevailing costs, companies may choose to lease or own warehousing

The distinction between Grade A and Grade B warehouses is made on the basis of myriad factors such as construction quality, location, space, amenities, clients, etc. There is no standard definition available to categorize a warehouse space in either Grade A or Grade B. This categorization is a globally acknowledged variant and purely done for the ease of understanding.

Grade A warehouses are categorized based on their state-of-the-art and robust construction quality, prime locations, ample space, and superior facilities. Globally Grade A warehouse follows the below criteria-

  • Additional storage height along with higher load bearing capacity.
  • Land available for parking heavy vehicles easy movement of MHEs, multi-modal connections.
  • Improved infrastructure with easy access to automated MHEs, better working environment, fire detection and prevention system.

From last few financial years, the development of Grade A warehousing facilities has been gradually increasing, with FY 2021 comprising 35% of the total stock (34% for FY 2020).  Chennai and Pune have the maximum concentration of Grade A warehouse stock as these are the cities with primary demand for auto and auto ancillary occupiers. Vacancy in Grade A properties is significantly less than the total vacancy for key primary markets. 

Grade A warehousing plays a vital role in enabling the industrial and logistics sector to be more organized and standardized, as it consequently helps in time bound supply, seamless working
environment and augmented customer satisfaction. Land cost constitutes the major component of Warehousing investment. Land Cost of Grade A warehousing space is generally higher than Grade B warehouse, however, as per a JLL research report, while the rental premium paid on Grade A space is higher, per tonnage rental is lower due to operational advantages of Grade A Warehousing space.

Some of the Advantages of Grade A warehousing are as under-

  • Grade A warehousing provides efficient storage space, sufficient material handling space, ease of connectivity which are some of the key requirements of MNCs and other top companies. Hence the tenant profile is sound.     
  • Improved facilities, accessible location and sound safety measures attract customers to Grade A warehousing space, it also leads to higher retention ratio and increased loyalty towards Grade A warehousing space.
  • Grade A warehouse provides an added 30% space for internal cargo handling, and up to almost 40% storage height to increase internal traffic and cargo movement. This helps to conduct the operations efficiently.
  • Such Warehouses provide sufficient parking spaces, convenient material handling and ample marshalling space which optimizes operational time and cost.
  • Grade A warehouses are equipped with cutting edge AI-rich technologies like Automated Storage & Retrieval (ASRS) Automatic Identification and Data Collection (AIDC), QR codes to help fast-track the delivery process. These warehouses use Artificial Intelligence, Internet of Things, Radio-frequency Identification, and modern WMS that considerably reduces human error and ensure faster processing.
  • Improved firefighting system, drainage system, floor height and construction quality provide an additional layer of protection from unforeseen threats and minimizes risk of probable
    store damages.

To conclude, we believe with the growth of e-commerce, and government initiative of “Make in India”, warehousing space will play a pivotal role in the growth of the Indian economy. Of the total increased take up in warehousing properties by e-commerce players in FY 2021, 64% of the area was located in Grade A properties.  The massive growth seen in the e-commerce and 3PL sectors and the onset of Goods and Service Tax have caused warehousing demand to grow at a CAGR of 44% for the period of 4 years from FY 2017-2020. The preference for organized space and other initiatives will drive the demand for Grade A warehouse space in the future.

1.India Warehousing Report, Knight Frank 2021
2. Logistics Insider
3. Fm Logistics
4. JLL Industrial Research report
5.Construction Week Online