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Indian warehousing needs $3.8 bn to meet 223 mn sq ft demand in next 3 yrs

Top-3 sectors, namely, 3PL, e-commerce, and manufacturing & automotive, account for a 78 per cent share of warehouse leasing space across seven cities

Warehouse
Warehousing has emerged as one of the most preferred asset classes for investors and developers to balance their real estate portfolios
Pratigya Yadav New Delhi
3 min read Last Updated : Nov 14 2022 | 9:49 PM IST
India needs to create adequate supply in order to meet an absorption of approx 223 million sq ft of Grade-A warehousing demand over the next three years, according to a Credai-Anarock report. An equity investment of about $3.8 billion will be required to support this scale of development.

The absorption of Grade-A warehousing increased from 34 million sq ft in 2018, to 48.5 million sq ft in 2021 at a compounded annual growth rate (CAGR) of 12.6 per cent, the report says. Meanwhile, supply in this category rose from 37.8 million sq ft to 51 million sq ft in the same period at a CAGR of 10.6 per cent.

The top-7 Indian cities achieved more than 160 million sq ft of Grade-A warehouse leasing, with the Western markets of MMR (Mumbai Metropolitan Region) and Pune topping the tables. They were followed by the primary southern markets of Bengaluru, Chennai, and Hyderabad, which together accounted for 32 per cent of the overall leasing volumes.

"The sector currently has 'dry powder' funding of $900 million from existing commitments. This signifies a latent investment opportunity of a further $2.8 billion in warehousing in the near future. Much of this funding will need to target Grade-A warehousing, where demand is increasing due to its direct and indirect beneficial impact on overall operational efficiencies,” said Shobhit Agarwal, MD & CEO, Anarock Capital.

Among the top-7 cities, MMR has the highest average rent at Rs 27/sq ft and Hyderabad lowest at Rs 20/sq ft. Of the top-10 micro markets, the western markets of Bhiwandi, Chakan, and Panvel/Taloja dominate Grade-A warehousing space leasing with a 41 per cent share, said the report.

"Warehousing has emerged as a preferred asset class for investors and developers to balance their real estate portfolios. The segment is range bound and a high revenue generator. While the IRR is higher, the risk is lower, and production is faster," said Harsh Vardhan Patodia, President, Credai, and CMD, Unimark Group.

The report also highlighted that the top-3 sectors, namely, 3PL, e-commerce, and manufacturing & automotive, account for a 78 per cent share of warehouse leasing space across seven cities. 3PL has the highest leasing space share at 42 per cent, given the upsurge in firms deploying their supply chains and logistics functions to 3PL players.

Warehousing Key PE Investment Deals & JV Platforms
 
Sector Share %
3PL 42%
E-Commerce 18%
Retail 12%
Manufacturing and Automotive 18%
Consumer Electronics and FMCG 8%
Pharma/Life Sciences 2%

Source: CREDAI-ANAROCK Report

Topics :WarehousingWarehousing sectorAnarockUniform warehousing normswarehousing receiptse-commerce marketAnarock Propertymetropolitan citiesBengaluruChennaiHyderabad

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