An In-Depth Guide On Choosing A Warehouse In India. An Industry Perspective.
Choosing an ideal warehouse is a crucial step in the growth and expansion plans for many businesses. Reason why it deserves an in-depth research and a detailed understanding of the industry as well as the options available. But before we get into the details of how to choose the right warehouse, let us understand the challenges faced and opportunities offered by the Indian warehousing Industry to both occupants and investors. You will also garner insights related to top sectors for investing in this space and the ones which are projected to grow in the future.
This piece will explore how geographic aspects benefit or be detrimental to businesses, how different sectors strategically prioritise location, and what are some of the location-based challenges which India confronts. We will also address the difference in rentals between Grade-A and Grade-B warehouses.
To ensure that we bring you concrete, credible and relevant information, this article has been seasoned with data which has been extracted from credible resources. Towards the end, you will also learn what IndoSpace as one of the leaders in the industry brings to the table, and how we complement the transition of the warehousing industry in India with future-driven offerings and approach.
Warehousing and Logistics – A Wider Perspective
The manufacturing and e-commerce industries have grown exponentially in the past 5 years and the logistics and warehousing sector has kept up to become a vital link in connecting these businesses to their consumers. While this is the case, businesses need to adhere to ecommerce warehousing best practices to satisfy customers and remain profitable.
While the logistics sector in India has always remained promising, measures like GST and the Logistics Parks Policy brought about by the Central Government has truly changed the game in recent times, making it seem like the perfect time for the industry to prosper. The warehousing sector in India is drawing great interest from investors who are willing to invest long-term capital in this asset class.
What’s more? There is greater momentum in the development of Grade-A industrial and logistics parks due to demand from warehouse occupiers who are increasingly opting for world class compliant facilities which are better managed and facilitate operational efficiencies.
The warehousing sector in India has also witnessed a significant interest from large e-commerce and FMCG companies, and the perishable goods sector during and after the COVID-19 lockdown period, as these companies need to keep their inventory in proximity to major consumption centres.
IndoSpace, as India’s premier developer of industrial and logistics real estate, is geared up to meet the rising demand of the industry with a vast network of 36 Grade-A parks present across the country.
India is Betting Big on Warehousing
According to a Knight Frank 2020 report, warehousing transactions saw a three-fold increase in the last 3 years- from 14 mn. square feet in 2017 to 46 million square feet as of 2019. A Research and Markets report from September 2020, also states that the Indian Warehousing Market is expected to grow from USD 12.2 billion in 2020 to an estimated USD 19.5 billion by 2025. Till a decade back, in the absence of a centralised tax system and limited focus on automation, there was little incentive for companies to partner large, organised logistics real estate developers. However, with the introduction of policy reforms and greater thrust on productivity, sustainability and compliance, organised warehousing has gained traction in India.
The growth-drivers of this industry are:
Large and Growing Economy
India has sustained its stance as one of the fastest growing large economies in the world. It is expected to break into the world’s three largest economies by the next decade.
Draft National Logistics Policy 2018
India currently faces a big challenge because the logistics cost in India is a massive 13%-14% of GDP compared to a much smaller figure of 8%-10% in its global counterparts. According to Knight Frank’s India Warehousing Market Report 2019, the Draft National Logistics Policy 2018 has been drafted with a focused aim of giving a boost to integrated development of the logistics sector in the country. The industry is very unorganised in nature and has a very skewed multi-modal mix under which road amounts to almost 60% of the freight movement that takes place. It is such numerous inefficiencies that this ground-breaking policy is set out to tackle. And that too, as quickly as possible. The division of logistics formed under the Ministry of Commerce will also serve as a single agency for the integration of various factions of the logistics value chain and create efficiencies.
What contributes tremendously to new investment prospects of the country’s warehouse property sector is the implementation of GST and the ‘Make in India’ thrust on manufacturing. The continued government focus on building industrial corridors and the promise offered by the Indian consumption market further add value and contribute towards the growth of this industry.
Institutional investors and developers have together invested over USD 6.8 billion in the warehousing sector since 2014, with an average investment per deal of USD 282 million.
There’s no doubt that the pandemic has changed consumers’ purchasing patterns. As people make a behavioural shift from buying offline to shopping online, many e-commerce categories are expected to boom.
While other developers are trying to corner the market, IndoSpace is India’s largest developer of industrial and warehousing parks offering 37.3 mn. sq. ft (3.47 mn. sq. m) pan India, of which 17.3 million square feet) has already been delivered.
Manufacturing Sector Leads Storage Requirement
Today, the manufacturing sector of India accounts for 80% of total storage space requirement in the warehousing market, and a large part of this is serviced by unorganised players or comprises captive spaces.
However, 3PL and e-commerce players are the greatest adopters of organised warehousing and continue to dominate the space taken up since 2017.
The Sectoral Focus of IndoSpace
With 38% of the occupiers comprising Fortune 500 companies, IndoSpace caters to a variety of industries including Automotive, 3PL, e-commerce, Engineering, Retail, and Consumer Durables. The company has also recently partnered with a leading pharma cold chain logistics service provider to create a pan-India pharma-dedicated warehouse network, combining the network and strength of IndoSpace with that of the client’s pharma domain knowledge.
Some Regions Better Suited for Certain Sectors
As location plays a key role for businesses to be close to their upstream suppliers or down the stream distributors, retailers or customers, we can observe that each sector or a cluster of sectors can be associated more easily with different regions of the country. Some of the key regions/cities and their ideal sector matches are as follows:
Ahmedabad is home to mainly, retail, automobile, pharma and FMCG sectors. Listed below are industrial clusters suited to the specified sectors in and around Ahmedabad.
- Vithalapur-Becharaji Cluster: Automobile
- Changodar-Bagodara Cluster: Pharma and e-commerce
- Aslali-Kheda Cluster: FMCG and Retail
- Sanad-Viramgam Cluster: Automobile
The city of Bengaluru offers an opportune environment for the growth of the e-commerce sector, with a higher percentage of population preferring online shopping compared to Mumbai and Delhi. This has put the spotlight on bigger, more efficient warehouse spaces in proximity to the city. Third Party Logistics Providers (3PL) and e-commerce accounted a share of 25% and 35%, respectively, in the overall warehousing space leased across sectors in the year 2018. Listed below are clusters suited to the specified sectors in and around Bengaluru.
- Nelamangala-Dabaspet Cluster: Logistics and e-commerce
- Hoskote-Narasapura cluster: Auto and Auto-Ancillaries, e-commerce and Logistics
Coimbatore, Tamil Nadu
Avinashi Road Cluster is suited for the Auto and Auto Ancillaries sector while Pollachi and Palladam-Cochin Cluster is suited for the sectors of 3PL, e-commerce and Fast-Moving Consumer Goods (FMCG).
Chennai, Tamil Nadu
The city of Chennai was renowned as a textile hub, but today it has evolved into a manufacturing centre for heavy industries due to its closeness to the sea. The cluster of NH-16-Periyapalayam is suited for FMCG, while Sriperumbudur-Oragadam cluster is apt for the Auto and Auto Ancillaries sector.
Guwahati is a strategic location as a warehousing gateway to the seven North-East States of India. The NH-17 cluster is best suited for pharma, and NH-27 for FMCG, FMCD, e-commerce and pharma.
Tie ups between organised, industrial real estate developers and local land-owners have led to the emergence of a thriving grade A warehousing market in some clusters in Hyderabad. Listed below are clusters suited to the specified sectors in and around Hyderabad.
- Jeedimetla-Medchal-Kompally Cluster: FMCG, Electronics and e-commerce
- Patancheru Cluster and Shamshabad Cluster: Retail, Fast-Moving Consumer Goods (FMCG), Electronics, Cold Storage and Pharma
Kolkata, West Bengal
The demand for warehousing has rapidly surged in the peripheral warehousing clusters of Kolkata Because of the thrust on setting up industrial corridors and GST implementation, the warehousing industry established in the periphery of Kolkata is able to serve the demand not only in the main city but also in the catchment areas of South Bengal. Listed below are clusters suited to the specified sectors in and around Kolkata.
- Dankuni and Suburbs: Steel, Coal, Cement, e-commerce and Manufacturing
- NH-16 (Old NH-6): Automobile, Food Processing and Steel Industries
- Taratala-Maheshtala: FMCG
Manufacturing, Export-Import and e-commerce consumption are three primary drivers of the warehousing space demand in Mumbai. The Bhiwandi cluster is suited for e-commerce while the Panvel and JNPT cluster is apt for EXIM.
Rise in the need for organised warehousing with quality infrastructure has drawn large-scale warehouse developers to enter the NCR market. Listed below are clusters suited to the specified sector in and around NCR.
- NH-48/Kundli Manesar Palwal Expressway (KMP): Auto and Auto Ancillaries, Metals, Retail, Textile and Engineering
- Ghaziabad Cluster: Food Processing, Metals, Chemicals and Pharmaceuticals
Chakan, in Pune, is an established manufacturing belt providing access to a robust support ecosystem to get a head start in commencing business operations. The Chakan-Talegaon belt is best suited for manufacturing, 3PL and retail sectors and the Wagholi-Ranjangaon belt for manufacturing and retail.
This region in Punjab is best suited for FMCG, manufacturing, food processing, furniture and warehousing. The Rajpura-Zirakpur cluster is the gateway for distribution into North India. Companies setting up mother warehouses in this region, can easily reach nearby states of Punjab, Himachal Pradesh, and Jammu and Kashmir.
Growing Preference for Grade-A Warehouses
Grade A warehouse infrastructure offered by organised developers in India is now at par with that offered by international players. In addition to standardization of type of construction and amenities, organised players are increasingly adopting sustainable methods of construction and environmentally friendly material. These practices, and the outlook towards compliance and sustainability reflects the maturity and globalisation of this sector. Grade-A warehouse spaces offer the advantages of plug and play, reduce operational risks, support businesses to achieve time-bound order fulfilment and drive greater customer satisfaction.
As per the Logistics Insider portal, the operational advantages of Grade-A spaces include:
- Up to 30% additional open space
- Up to 30% space for internal cargo handling
- Up to 40% storage height to entrance traffic and cargo movement
- Use of modern MHEs
- Maximum load storage
Wider cargo lines:
Up to 50% additional floor-load capacity and storage height facilitate heavy / odd-dimension cargos and increase pallet position for standardised cargo, especially for long-term storage.
- Firefighting system
- Drainage system
- Floor-height and construction quality for additional protection from unexpected threats
- Minimum risk of probable in-store damages
Operational time management:
- Sufficient parking
- Material handling and marshalling space
- Optimised operational time and cost-effectiveness for vehicles, MHE operation and also for sorting / identification of products
The predominant criteria for MNCs / national brands which sought after Grade-A spaces are:
- Planned storage space
- Efficient material handling space
- Safety and security
- Better access / connectivity
The Indospace Advantage
IndoSpace is India’s largest investor, developer and manager of Grade-A industrial and logistics real estate. It has a portfolio of 37.3 million sq. ft (3.47 sq. m) of space, including 36 Grade-A developed and under-development parks. IndoSpace is the only player with a pan-India presence, contributing to the growth story of over 90 industry leaders across categories. Each IndoSpace facility is fully compliant, with several approvals taken throughout the customer journey: pre-acquisition, pre-construction, post construction and operations phase. From concept to delivery and beyond, we partner with customers to deliver customised turnkey solutions. Our turnkey solutions have standardised phases of Land Acquisition, Master Planning, Facility Design, Building Approvals, Project Management, Property / Facility Management.
As an industry leader, IndoSpace has always been conscious and responsible about the long-term impact of its business. We have established stringent Environmental & Social Governance (ESG) standards in operations, and we follow Environmental Clearance (EC) norms set by the Government of India. In recognition to the sustainability initiatives at our parks, we have become the first company in India to be awarded the Platinum Certificate by IGBC for green logistics parks and warehouses. We have also received the esteemed EDGE Certification from GBCI (Green Business Certification Inc.) for 45% of the buildings, and the Advanced EDGE Certification for 55% of the buildings.
IndoSpace has an existing land bank of zoned and entitled land across India, located near large industrial clusters, consumption centres and major highways. We continuously add new land parcels to our already existing land banks. These select parcels provide our customers prime logistics locations and allow ease of expansion into new markets across India.
At IndoSpace, we believe in giving your business the right space to grow. As your partner in growth, we provide value added services like rooftop solar panels for reducing cost of operations, financing options for racking and storage solutions, and e-learning tools for your employees through teh IndoSpace Learning Management System, to name a few.
The well-being of our employees and customers is a top priority for us. To ensure that your work environment remains safe and hygienic, we are continuously upgrading the preventive measures at our parks. We also organise medical camps, fire drills and health & safety awareness sessions at our parks in a timely manner to inculcate the right attitude towards health, safety and well-being.
Let us help you choose the right space for your business to grow. To get in touch, call us at 1800-267-4636 or fill out your details in this quick and simple form, and our Sales team will get in touch with you for helping you chart the way forward.