In logistics, warehousing realty, investors find a store of value

After commercial real estate, foreign investors and real estate players are aggressively pumping money into logistics and warehousing realty signalling a buoyancy in the segment.

Logistic and warehousing demand is booming followed by growth in consumer segment and e-commerce and most investors are seeking to capitalise on the flavour of the season.

In the last three months key players such as Ascendas-Singbridge, Assetz Property Group, Logos, Canada Pension Plan Investment Board (CPPIB) and Everstone Group have made major investments to grow the business here.

Earlier this week, Logos and Assetz Property Group together set up a logistics and warehousing platform that will invest around $400 million, asequity, to build and manage specialised logistics and industrial parks.

Logos India will look at investment, development and asset management of modern logistics assets and initially focus on the key logistics hubs of Mumbai, Pune, Chennai, Bengaluru, Hyderabad, Ahmedabad, and the National Capital Region (NCR).

“We are seeing extensive demand from our existing and new customers for institutional grade logistics facilities in the region,” said Trent Iliffe, Joint Managing Director, Logos.

In June, Singapore-based Ascendas-Singbridge formed a joint venture with real estate firm Firstspace Realty to enter India’s industrial logistics and warehousing market.

The two partners plan to invest up to $600 million over the next 5-6 years.

The Ascendas-Firstspace platform will invest in projects aimed at the development of logistics and factory spaces in Mumbai, the NCR, Pune, Chennai, Bengaluru and Ahmedabad.

“We have been in India for over two decades, developing iconic business and IT Parks... Entering the industrial and logistics sector is a natural progression,” Miguel Ko, group CEO Ascendas-Singbridge said in a statement.

In May, global pension fund CPPIB and Everstone Group’s industrial and logistics real estate development platform, IndoSpace, announced a joint venture, named IndoSpace Core, to acquire and develop modern logistics facilities.

CPPIB has initially committed around $500 million and will own a significant stake.

Srinivas N, MD, Industrial Services, JLL India, said, “Thanks to fresh investments, supply and interest in this sector, the Indian logistics industry is set to reach the next level. Although India is down the rungs on the Logistics Performance Index (India stood 35th among 160 countries in World Bank’s 2016 study) in comparison to some of the top regional markets, launch of GST and huge investments from global players will help the sector grow manifold.”

CBRE South Asia’s Industrial and Logistics Market View, H1-2017 report also points towards buoyancy in demand. According to the report, the implementation of the GST is having a positive impact on the warehousing segment. Approximately 7.3 million sqft of industrial and warehousing space was leased in H1, 2017 across key cities in India; a 50 per cent increase from H2-2016.

In H1-2017, 75 per cent of warehousing space was leased by Third Party Logistics Companies (3PL), engineering, manufacturing and FMCG companies. The average size of space take-up increased to 65,000 sqft in H1-2017, from approximately 50,000 sqft during H2-2016. The number of large transactions (above 2 lakh sqft) also more than doubled compared to H2-2016.

Real estate entity Collier too anticipates a pick up in FDI in e-tailing marketplace, especially with the roll-out of the GST. “It is a good time for developers/investors to evaluate this sector to add to quality organised warehousing infrastructure keeping in perspective the latent demand and consolidation/expansion expected post-GST roll out,” said Shyam Arumugam, Associate Director, Office Services, Colliers International India.

According to Colliers Research, logistics businesses are highly optimistic on the demand for supply chain services as quite a few companies such as Amazon, Delhivery and 4tigo Network Logistics have secured funds for their warehousing activities recently. Also, players like Amazon and DHL have announced plans to expand their warehouses.

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