Warehousing Leasing – What does it hold in Indian scenario

Indian warehouse leasing sector is on the cusp of experiencing unparalleled growth in the overall Indian economic landscape, seldom visible in other sectors. Largely driven by online e-commerce boom, positive technological disruptions and favourable governmental policy reforms, the warehousing construction and leasing market is fast becoming a major peripheral sector indispensable to contribute towards positive user experience. No wonder, developers don’t want to lose out on this high yielding asset, and are tying up with global investors to capture a foothold in this exciting market. The magnitude of the sector’s growth can be gauged from the fact that leasing of warehouses increased by a whopping 31% year-on-year in 8 major cities in first 6 months of 2019 alone, according to CBRE.

The race to acquire huge land spaces to build and maintain massive warehousing spaces is a phenomenon largely fuelled by technological advancements, with user demand and contemporary business models triggering demand for high quality spacious warehouses. This is a sunrise sector which even big conglomerates like Amazon invests in heavily, with 50 Fulfillment centres spanning 20 million cubic feet across India, only slated to grow more. Such built-to-suit facilities are only going to flourish more with commensurate growth in e-commerce model and B2C model implemented on full throttle only slated to grow. Roll out of government schemes which promote indigenous manufacturing and development have contributed towards building and leasing modern warehousing facilities.

Nondescript locations lying at major cities outskirts have started embracing business value propagation all year round, thanks to the warehouse leasing model adopted by corporates. Big international players like Warburg Pincus, Blackstone have evinced interest through investments to the tune of $10 billion. Knight Frank’s report ’India’s Warehousing Market 2019’ is a testament to the burgeoning demand for warehousing establishments, and the huge demand supply gap. According to three report,  FY 2018-19 witnessed a 77% surge in warehouse space leasing demand, majority of which sourced from e-commerce, retail and manufacturing sectors.

An interesting feature is the development of large size warehousing facilities in Tier 2 cities as well. In addition to economic powerhouses like Delhi-NCR, Bengaluru, Hyderabad, cities like Ludhiana, Nagpur and Lucknow are now home to huge warehouses which are leased to corporates. Consolidation and expansion by occupiers has been cited as the reason for such exponential growth. Development of dedicated freight corridors spanning across the country has led to the establishment of modern warehouses, en route critical highway lanes connecting mega cities. This growth is further assisted by transformation in supply chain value and larger investments. This is likely to remain high on investor’s radar with private equity and infra firms expanding their realty portfolios to maintain high-quality warehousing facilities.

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