Warehousing sees surge in private equity investment and leasing activity

Warehousing as a sector is witnessing  rapid growth, with a surge in private equity (PE) investment and leasing activity. Institutional capital in the sector is estimated to grow to Rs 50,000 crore by 2020, says real estate consultancy Knight Frank India.

“Of all the PE investments in India in real estate, 26 per cent have come into warehousing alone. Also, the average ticket size of leasing activities have  risen in 2018. This has led to organised warehousing leasing activity witness a growth of 80 per cent in 2018," said Balbir Singh Khalsa, national director at Knight Frank.

Those in the sector attribute the surge to a rise in demand from different sectors and implementation of the Goods and Services Tax. “Ever since GST was implemented in 2017, the sector has been seeing growth. Reports say  the warehousing space clocked an unprecedented growth of 60 per cent year-on-year, by adding almost 32 million sq ft (msf) in 2018,” P V Sheshadri, chief executive at Future Supply Chain Solutions, told Business Standard.

An estimated 55-60 per cent of the growth in warehousing has been driven by industrial (manufacturing) and retail players. Followed by cold storage products, agriculture and horticulture products, says Sheshadri. 

“With the e-commerce industry playing the disruptor, we envision the next five years to comprise of the industrial sector, closely followed by e-commerce and then by cold storage, agri and horticulture products. It is estimated that e-commerce will soon account for nearly 25 per cent of all the warehousing space in the country,” he added.

The top eight cities saw total warehousing leasing activity grow from 25.7 msf in 2017 to 46.2 msf in 2018, an 80 per cent growth over the previous year, shows Knight Frank data. Of these, the Delhi region saw 94 per cent growth, to 12.7 msf of warehousing leasing activity. Followed by Mumbai at 7 msf, up 34 per cent; Bengaluru at 5.6 msf, up 120 per cent; and Ahmedabad at 4.9 msf, up 69 per cent, in 2018.

Players like Future Supply Chain Solutions are increasingly banking on tier-2 and tier-3 cities, which are set to see a surge in leasing and investment activity in warehousing. In recent years, for instance, Ahmedabad has emerged as one of the top regions in terms of both. 

From 2015, Mumbai has seen the highest amount of PE/VC deals in warehousing, at $998 million or Rs 6,900 crore, from seven transactions, says Venture Intelligence. Followed by Gurugram (Gurgaon) at $651 million or Rs 4,500 crore from six deals and Ahmedabad at $500 mn or Rs 3,470 crore from one deal.

As against five deals with a total value of $425 mn or Rs 2,950 crore in 2018, PE/VC investment in warehousing already stands at three deals valued at $470 million or Rs 3,200 crore up to May 31 in 2019, shows Venture Intelligence data.

Logistics and warehousing players IndoSpace Core, Delhivery, Continental Warehousing Nhava Sheva, LOGOS India and Embassy Industrial Parks have seen investment from the likes of SoftBank Corp, Carlyle, CPPIB, Fosun Group, NIIF, and Warburg Pincus, among others. since 2015.