To capitalize on the growth potential of the reorganized segment, the sector has attracted significant investor interest
/ — The industrial and warehousing sector in India has attracted significant investor interest since 2017 owing to the reforms introduced by the government. To capitalize on the growth potential of the reorganized segment, the sector has attracted significant investor interest.
As per Colliers International, since 2017, the sector has attracted interest from multiple large institutional investors, with investment inflows of INR278 billion (USD3.7 billion). Between 2017 and H1 2020, the sector garnered a considerable 17% share of total private equity real estate investment. This segment’s share of total private equity real estate investment in India has been increasing year-on-year since 2017, signifying the increasing attractiveness. During 2019 through H1 2020, the industrial and warehousing segment garnered the third highest share of private equity investments after office and retail.
“We expect India, with its large labour force and domestic consumer market, to be a big benefactor and garner its fair share of the global supply chain market in the next 3-5 years. Our interaction with key developers and industry leaders suggest that e-commerce, electronics and automotive sectors are expressing keen interest in setting up facilities in NCR, Mumbai, Pune, Bangalore and Chennai. India is well poised in Asia to absorb demand arising from companies that may shift some manufacturing from China to India as well. Data localisation leading to creation of Data centres and local manufacturing owning to Aatmanirbhar Bharat call by the honourable Prime minister are the two trends to watch out for,” said Shyam Arumugam, Head – Industrial & Logistics (India) at Colliers International India.
Investment activity may be muted for the next one year due to slower decision-making by investors because of the ongoing pandemic. However, the inflow from both foreign and domestic funds is expected to grow over the next 2-3 years as existing participants expand their portfolio and new players enter the market. Owing to robust demand from e-commerce and other consumer-led occupiers, the segment to bounce back quicker than other segments of real estate is expected.
COIVD-19 has fast tracked the global supply chain rebalancing which was triggered by the US-China trade war. Globally, manufacturing companies are actively evaluating a China 1 supply chain strategy, wherein they establish an incremental supply base outside China. The electronics and pharmaceuticals companies should focus on Bengaluru and Hyderabad, while the automotive segment should focus on Pune and Chennai. The entry of global manufacturing multinationals into India should provide a boost to the country’s exports along with generating increased demand for warehousing facilities.
During the COVID-19 pandemic, the e-commerce ecosystem has witnessed a significant shift, with e-commerce players witnessing a steep rise in order volumes. To cater this growing online consumer demand, e-commerce players are looking to strengthen their supply chain and logistics capabilities. Leveraging accelerated adoption of e-commerce by consumers, the local developers and landlords should work closely with professional real estate consultants to upgrade their facilities while securing built-to-suit and pre-commitments from e-commerce companies. The companies should look for options in the vicinity of Delhi-NCR, Hyderabad, Mumbai and Bengaluru.
The e-commerce companies should consider securing warehousing locations close to their customer base within the city limits. Over the next 12 months, Colliers believes in-city warehouses will gain traction, to be used as small distribution hubs. Occupiers are expected o scout for in-city warehousing space in the range of 5,000-10,000 sq feet (464-929 sq metres) in major demand hubs such as Mumbai, Bengaluru and Chennai and the NCR. Considering the challenges of last-mile delivery due to the lack of such facilities in core city areas, occupiers are now turning to available older/lesser utilized ground level office spaces, service centres, pending minor structural changes.
“The industrial and warehousing sector in India has attracted significant investor interest since 2017 owing to the reforms introduced by the government. The ongoing pandemic has slightly delayed decision-making by investors which may lead to muted investment activity for the next one year. However, Colliers expects the inflow from both foreign and domestic funds to grow over the next 2-3 years as existing participants expand and new players enter the market on the back of robust demand from e-commerce and other consumer-led occupiers,” says Megha Maan, Senior Associate Director, Research at Colliers international India.
To download the full report, visit: https://www2.colliers.com/en-IN/Research/Revitalizing-the-Indian-industrial-and-warehousing-sector
About Colliers International Group Inc.:
Colliers International (NASDAQ: CIGI) (TSX: CIGI) is a leading global real estate services and investment management company. With operations in 68 countries, our 14,000 enterprising people work collaboratively to provide expert advice and services to maximize the value of property for real estate occupiers, owners and investors. For more than 20 years, our experienced leadership team, owning approximately 40% of our equity, have delivered industry-leading investment returns for shareholders. In 2018, corporate revenues were $2.8 billion ($3.3 billion including affiliates), with more than $26 billion of assets under management.
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