$3.8 Bn Funding Needed to Meet India’s 223 Mn sq. ft. Warehousing Demand in Next 3 Years

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Mumbai, 14 November 2022 – India will need to create adequate supply to meet an absorption of approx. 223 mn sq ft of Grade A warehousing demand over the next 3 years, finds the CREDAI-ANAROCK report ‘India Warehousing – A Sunrise Sector’. The report was released at NATCON 2022 held from in Abu Dhabi from 11-13 November, 2022. An equity investment of around $3.8 bn will be required to support this scale of development.

 

Shobhit Agarwal, MD & CEO – ANAROCK Capital, says “Based on the data, the sector currently has ‘dry powder’ funding of $900 mn from existing commitments.  This signifies a latent investment opportunity of further $2.8 bn in the warehousing sector in the near future. Much of this funding will need to target Grade A warehousing facilities, which is witnessing increasing demand due to its direct and indirect beneficial impacts on overall operational efficiencies.”

 

The absorption of Grade A warehousing increased from 34 Mn sq. ft in 2018 to 48.5 Mn sq. ft in 2021 at a CAGR of 12.6%, states the report. Meanwhile, supply in this category rose from 37.8 Mn sq. ft to 51 Mn sq. ft in the same period at a CAGR of 10.6%.

 

The top 7 Indian cities witnessed approx. 160+ Mn sq. ft of Grade A warehouse leasing and was highest in the Western markets of MMR and Pune, followed by the primary Southern markets of Bangalore, Chennai and Hyderabad, which together saw 32% of the overall leasing volumes.

 

 

Top 10 Leasing Micro-Markets

 

Top 10 Micro Markets

Area %

Chakan

22%

Sriperumbudur

18%

Bhiwandi

16%

Luhari

9%

Around Bilaspur Chowk

8%

Nelamangala

8%

Medchal

7%

Dankuni

5%

FarukhNagar

4%

Panvel / Taloja

3%

 

 

Harsh Vardhan Patodia, President – CREDAI & CMD – Unimark Group, says, “Warehousing has emerged as one of the most preferred asset classes for investors and developers to balance their real estate portfolios. The warehousing segment is range bound and a high revenue generator. While the IRR is higher, the risk is lower, and production is faster. Moreover, this sector is consumption-led, unlike other sectors which a primarily developer-led.”

 

 

Warehousing Key PE Investment Deals & JV Platforms

 

Capital Provider

Recipient

Amount (USD Mn)

Period

Ivanhoé Cambridge and Bain Capital

Macrotech Developers

1,000

May-22

GIC

ESR

750

Dec-20

Blackstone

Embassy Industrial Parks

709

May-21

GIC

ESR

600

Nov-22

CDC Group

TVS Industrial and Logistics Park

55

Dec-20

Blackstone

Allcargo Logistics Ltd

50

Mar-22

Mapletree Logistics Trust

KSH Infra Ltd

40

Jun-20

Blackstone

Tarc

40

Sep-21

Morgan Stanley
(Further, Hillhouse Capital bought Morgan Stanley’s share in Pragati in Q2 FY23)

Pragati

12

Jul-20

 

 

Warehousing Rentals

 

Among the top 7 cities, MMR has the highest average rent at INR 27/sq. ft., and Hyderabad lowest at INR 20/sq.ft. Of top 10 micro markets, the Western markets of Bhiwandi, Chakan and Panvel/Taloja) dominate Grade A warehousing space leasing share with 41%.

 

City

Rental Range
(INR/Sq ft/month)

Average rentals
(INR/Sq ft/month)

Bengaluru

20 – 25

22

Chennai

22 – 28

25

NCR

18 – 25

21

Hyderabad

18 – 23

20

Kolkata

20 – 26

23

MMR

24 – 30

27

Pune

21 – 32

25

 

 

Sectors Driving Warehousing Demand

 

The top 3 sectors – 3PL, E-commerce, and Manufacturing and Automotive account for a 78% share of warehouse leasing space across 7 cities. 3PL has the highest leasing space share at 42%, given the upsurge in companies deploying their supply chain and logistics function to 3PL players.

 

Sector

Share %

3PL

42%

E-Commerce

18%

Retail

12%

Manufacturing and Automotive

18%

Consumer Electronics and FMCG

8%

Pharma/Life Sciences

2%

 

 

Warehousing Outlook

 

  • Investors – both foreign and domestic – can expect an entry yield of 9-10%
  • Going forward, many international developer funds are expected to enter Indian Warehousing space.
  • So far, the warehousing development were led by funds – the next round of funding will be led by JV platform deals
  • A warehouse sector-specific REIT/ InVIT expected to be announced in 2024
  • Large scope for air cargo, cold-chain structures and in-city multi-level structure warehouse development
  • ESG to become an integral factor as ESG standards-compliant projects see easier planning process, tenant retention and investor trust

 

 

Click to download CREDAI-ANAROCK report ‘India Warehousing – A Sunrise Sector’