Over 110 mn sq. ft. Grade A warehousing stock in India, Tier 2 and 3 cities rise: Report

High-intensity focus on making India a global manufacturing hub has caused clusters to expand rapidly beyond the top cities and into Tier 2 and 3 cities, reveals ‘Indian Industrial & Logistics – Gearing Up a Global Manufacturing Hub’ – a joint report by US-based Binswanger Commercial Real Estate Services and Group.

Over 110 mn sq. ft. Grade A warehousing stock in India, Tier 2 and 3 cities rise: Report

The two firms recently joined hands to offer boutique advisory, brokerage and transaction services on industrial real estate opportunities between India, USA and other global markets.

The report says that demand for small and multi-location warehouses is expected to rise significantly. Most of these emerging clusters are aligned with the industrial and freight corridors being developed in the country. The emerging Tier 2 and 3 warehousing clusters include Ludhiana, Ambala, Lucknow, Siliguri, Guwahati, Bhubaneshwar, Vishakhapatnam, Vijaywada, Coimbatore, Kochi, Nagpur, Indore, Jaipur and Dholera.

, MD & CEO, ANAROCK Capital says, “The rising demand for Grade A warehousing properties across the country is a key trend. Our data indicates that there is more than 110 mn sq. ft. of Grade A warehousing stock available across the country – most of it in the top 8 cities. 3PL (third-party logistics) and e-commerce are the largest occupiers of warehousing space. There is a massive opportunity for Grade A warehousing development in the smaller cities amidst rising demand.”

The report highlights that nearly US$ 7 billion worth platforms have been created for the warehousing sector since 2015. Over US$ 2 billion in PE investments have been infused in the Industrial and Logistics sector between 2017 and Q1 2020. Investors are upbeat on this sector and are working closely with developers to identify warehousing investment opportunities.

Emerging Trends in Warehousing

, Managing Partner, says, “COVID-19 has exposed the challenges of consolidation within the warehousing sector. The market is expected to de-centralize to mitigate future disruption, ensure business continuity and ease operations. To contain costs and maintain social distancing norms, automation will become a major focus area. Also, e-commerce will flourish in the post-COVID-19 era, giving an edge to online businesses which will eventually boost new warehousing demand – particularly multi-level warehouses within city limits.”

The current government has created a fertile arena for growth, with the total approvals needed to set up a warehouse in India reducing from 33 in 2015 to 15 by 2019-end. Likewise, the time taken to construct a warehouse has reduced to 3.5 months from the previous 6 months during the same period. Meanwhile, India’s high logistics cost – at 14 percent of its GDP – is still better than China’s 15 percent.

Other Report Highlights

– ~3,400 industrial clusters over 4.6 lakh hectares in India have only 25 percent vacancy; 10 industrial regions across India country drive manufacturing growth
– ~75,000 acres industrial areas planned across India’s top cities, including Dholera-SIR at Ahmedabad (22,734 acres), Pharma City (19,333 acres) and Zaheerabad NIMZ (12,635 acres) at Hyderabad, among others
– Policy push and incentives – reduced corporate tax rates, National Manufacturing Policy, Make in India & Self-reliant India campaigns to boost manufacturing
– India’s planned infrastructure investment of US$ 1.3 tn over the next 5 years is almost equal to Australia’s GDP