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

Anarock Capital
Shobhit Agarwal, MD & CEO – ANAROCK Capital
  • 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

Top 10 Micro Markets Area %
Chakan 22%
Sriperumbudur 18%
Bhiwandi 16%
Luhari 9%
Around Bilaspur Chowk 8%
Nelamangala 8%
Medchal 7%
Dankuni 5%
FarukhNagar 4%
Panvel / Taloja 3%

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

Capital Provider Recipient Amount (USD Mn) Period
Ivanhoé Cambridge and Bain Capital Macrotech Developers 1,000 May-22
GIC ESR 750 Dec-20
Blackstone Embassy Industrial Parks 709 May-21
GIC ESR 600 Nov-22
CDC Group TVS Industrial and Logistics Park 55 Dec-20
Blackstone Allcargo Logistics Ltd 50 Mar-22
Mapletree Logistics Trust KSH Infra Ltd 40 Jun-20
Blackstone Tarc 40 Sep-21
Morgan Stanley
(Further, Hillhouse Capital bought Morgan Stanley’s share in Pragati in Q2 FY23)
Pragati 12 Jul-20

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%.

City Rental Range
(INR/Sq ft/month)
Average rentals
(INR/Sq ft/month)
Bengaluru 20 – 25 22
Chennai 22 – 28 25
NCR 18 – 25 21
Hyderabad 18 – 23 20
Kolkata 20 – 26 23
MMR 24 – 30 27
Pune 21 – 32 25

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.

Sector Share %
3PL 42%
E-Commerce 18%
Retail 12%
Manufacturing and Automotive 18%
Consumer Electronics and FMCG 8%
Pharma/Life Sciences 2%

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


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