$3.8 Bn Funding Needed To Meet India’s 223 Mn sq. ft. Warehousing Demand In The Next 3 Years

• Grade A warehouse absorption rose from 34 Mn sq. ft. in 2018 to 48.5 Mn sq ft in 2021 at a CAGR of 12.6%, supply up from 37.8 Mn sq. ft. to 51 Mn sq. ft in the same period at a CAGR of 10.6%
• Grade A warehouse leasing across 7 cities at approx. 160+ Mn sq ft, highest in West (MMR & Pune) with 37%, followed by South (Bangalore, Chennai & Hyderabad) with 32%
• Among the top 7 cities, MMR has the highest average rent at INR 27/sq. ft., Hyderabad lowest at INR 20/sq. ft.
• Of the top 10 micro markets, the Western region (Bhiwandi, Chakan & Panvel/Taloja) dominates Grade A warehousing space leasing share with 41%

MUMBAI: India will need to create an adequate supply to meet an absorption of approx. 223 mn sq ft of Grade A warehousing demand over the next 3 years, find 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 – of 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 a 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

Harsh Vardhan Patodia, President – of 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

Warehousing Rentals

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

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 functions to 3PL players.

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 the 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