Industrial Warehousing, a key demand driver for foreign investors

Industrial Warehousing, a key demand driver for foreign investors

The warehouse industry of India is driven by superior logistics and warehousing systems. The key element of a warehouse influences the entire value chain starting from raw material to customer satisfaction. Logistics & industrial parks have lately seen the entry of many foreign investors. The advent of such a trend has taken place either by a potential partnership with a local developer or by liaison with global warehousing operators. The growth has taken place with increasing demand from occupants who are mainly into the manufacturing sector, 3PL and e-commerce.

Policy regime and robust business ensures foreign capital flows into the country

The implementation of GST, infrastructure status and such other conducive government reforms have enabled the sector in driving demand for large integrated warehousing parks. Rapid infrastructure development within the country has made the unit economics more favourable as it has unlocked more land for better prices. It’s also made transport easier and faster modern logistics & industrial parks are built in order to help companies avoid the extra sweat by building light manufacturing and warehousing space infrastructure of grade A quality. Various factors like operational conveniences and cost efficiency influence the growing demand of Grade A warehousing. The requirement has been observed to be more in metro cities and towns that are supported by the presence of manufacturing hubs in the vicinity, access to the transport network and Exim facilities.

There is also a rising consumption-driven demand among the urban population in the metropolitan areas. Currently, well-planned logistics parks are built with a commitment to offering superior experience& faster deliveries across major cities of India. Factors like strategic land positioning make business more convenient. To meet global standards,the park operators like us keep eye on attention to detail and provide globally approved amenities like dormitories, round the clock canteen, first aid centres, 24/7 security coverage, an excellent fire fighting system, and ample parking space for trucks so the flow of the traffic remains unaffected and does not hamper workflow. Superior logistics parks like Embassy Industrial Parks even provide built-to-suit industrial parks where clients can have up to 2X expandability. Big clients land up doing repeat business with the park providers across markets.

The current modern large-size logistics parks are either backed by capital invested from the global market or they are local associations with global warehousing operators. Recent reports from analyst firms state that the industrial and logistics segment has attracted USD 500 million (about 3,500 crores) investment since 2017, post the implementation of GST.

Sovereign and pension funds love stable and perpetual cash flow and this is an asset class similar to the commercial that provides predictable cash flow with growth. A survey conducted recently showed 70% of respondents indicating improvement in ease of doing business mainly on account of e-way billing which has removed a lot of bottlenecks in cargo storage and transport business. About 80 percent of respondents felt that the taxation system improved, while 40 percent of respondents indicated that they will increase the number of warehouses in this new post-GST era. 

New sectors like e-commerce, infrastructure development and digitization in industries catch the eye of the foreign investor

The position for warehousing will strengthen and estimated that leasing will be about 10-15 percent higher this year at 25-30 million sq. ft. compared to last year. Leasing warehousing spaces went up by 31 percent to over 13 million sqft across eight major cities in the first half of 2019, driven mainly by demand from third party-logistic and e-commerce firms.E-commerce is where IT was in the early 2000s. India’s online retail is less than 4% today so scope to go up is huge. The digital revolution is directly helping industrial space growth. With fundamental shifts across the industrial and logistics sector in the last two years and increased demand for quality space, developers such as us, are more likely to build compliant large-sized spaces.

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