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Logistics companies eyeing JVs to tap into warehousing demand

GMR Infrastructure is holding talks with the Warburg Pincus-backed e-Shang Redwood for a JV unit in Hyderabad.

, ET Bureau|
Last Updated: Sep 14, 2018, 05.10 PM IST
Large institutional and logistics developers are betting big on the growing demand for warehousing here.
Large institutional and logistics developers are betting big on the growing demand for warehousing in India either by forming joint ventures with local partners or by investing in the sector.

Some of the recent examples are GMR Infrastructure holding discussions with Warburg Pincus-backed logistics developer e-Shang Redwood (ESR) to form a joint venture for logistics and warehouses in Hyderabad. Temasek Holdings and Ascendas-Singbridge Group have also announced making joint investment of Singapore $400 million in logistics and industrial real estate across key locations of India.

“There’s more than $2 billion waiting to be invested over the next few years in the Indian warehousing segment. Large foreign investors are eyeing more opportunities,” said Aloke Bhuniya, CEO of Ascendas Firstspace, a joint venture between Ascendas-Singbridge and Indian industrial real estate firm Firstspace Realty. The joint fund will develop 13-15 million sq ft of portfolio in the next five years.

Embassy Industrial Parks, a joint venture between Embassy Group and private equity firm Warburg Pincus, is also looking to invest $1 billion over the next five years. In 2015, Warburg Pincus and Embassy Group had together infused $250 million equity capital to build industrial and warehousing spaces across India.

“Most of this equity capital has already been deployed across projects and we are open to investing more for right opportunities. In addition to ongoing projects, we are scouting for more projects. By 2019-end, we will have 6-7 parks operational and by the end of 2020, we’ll increase this number to 9-10 operational parks,” said Anshul Singhal, CEO, Embassy Industrial Parks.

By the end of this year, Embassy Industrial Parks will have 1 million sq ft fully operational and 3 million sq ft of partly ready, under-construction, but leased space.

LOGOS India has also received an investment commitment of $800 million from Ivanhoe´ Cambridge and QuadReal Property Group (QuadReal) in one of the largest logistics deal in the country.

Increasing demand from sectors such as ecommerce, fast-moving consumer goods, third-party logistics, consumer durables, and manufacturing along with a need for larger sized warehouses have opened up the segment for more organized and institutional players.

According to Knight Frank India, in the past four years, over $3.4 billion was invested by the domestic and overseas institutional investors in Indian warehousing. More than one out of four (26%) private equity Investments in the Indian real estate sector between January 2014 and January 2018 went into the warehousing industry.

“Investors had started taking cognizance of the opportunities in this sector much before the government could implement the reforms. The past few years have witnessed massive participation from institutional investors. Some of them have purchased ready assets, whereas others are investing in a mix of ready and greenfield assets,” said Balbirsingh Khalsa, National Director - Industrial and Asset Services, Knight Frank India.

The report mentioned around $3.4 billion (Rs 22,100 crore) of institutional capital poured in the warehousing sector between January 2014 and January 2018. Greenfield projects, or new developments, attracted more than two-third of these investments followed by 27% for acquisition of complete projects

“Industrial warehouse and logistics parks is the most important asset class in real estate that sees huge interest from global funds. Goods and services tax along with made in India reforms initiated by the government will drive the growth. Over the next 5-7 years, we will see a huge paradigm shift in the sector,” said Samantak Das, JLL India, chief economist and head of research.

Leasing transactions in the warehousing sector across key Indian markets grew to 25.7million sq ft in 2017 following an 85% year-on-year jump. The National Capital Region (NCR) attracted the highest footprint in terms of transactions in the warehousing space with leasing of 6.5mn sq.ft in 2017, followed by Mumbai at 5.2 mn sq. ft, said the Knight Frank India report.
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