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Investments in Warehousing sector post Covid-19

Investments in Warehousing sector post Covid-19

The Covid-19 crisis led to a global turmoil and resulted in further headwinds on a slowing Indian economy which had a significant impact on the overall macro economy including the real estate sector. However the warehousing sector has evolved as a more resilient asset class within the real estate sector despite an obvious slow down on both the demand and supply side in the last 12-18 months. The sector which had been the backbone of the E-commerce industry during the pandemic is expected to grow further owing to the following indicators

Demographics: Despite recent headwinds on the GDP growth, India is expected to be fastest growing large economy over the next 8-10 years and approximately 20% of the world’s working age population will be Indian by 2030 thereby driving an increase in consumption

E-commerce growth: The Indian e-commerce industry is currently valued at c.$30 billion and is expected to grow at a CAGR of 21% to reach c.$188 billion by 2030. India currently has the second largest internet user base with an estimated 600 million internet users. However, the E-tail penetration remains low at 8% as compared to other large economies such as Brazil (30%), China (45%) and USA (62%).

3PL growth: The second largest demand driver for the sector will be the continued growth of third part logistics as most companies look to transition from managing in house logistics to better manage supply chain costs. The 3PL industry in India is currently estimated to be valued at c.$3.5 billion and projected to grow at a CAGR 19% to c.$11.9 billion by 2025

Manufacturing Growth: The US- China trade war and disruptions in supply chain from China due to Covid-19 are causing a lot of companies to diversify manufacturing to other locations. Backed by a supportive regulatory environment as well as competitive cost environment, India is well poised to benefit from such a move and cater to additional demand.

Government Policies: The central government over the past 4-5 years have brought in significant policy changes and tax benefits to boost FDI investments in India. Most notable among these are the implementation of GST, corporate tax reforms, interest rate cuts, make in India initiatives as well as creating a favorable market environment for listing of real estate portfolios through REITs and InVITs

Investments in Warehousing sector post Covid-19

Investor Expectations

With clear positive indicators, there is enhanced investor interest in the Indian warehousing and logistics sector, particularly for operators with a proven execution track record. With more players entering the segment, investors have had to realign yield and return expectations. IndoSpace is uniquely positioned as the undisputed market leader in the Indian warehousing and logistics space with a current portfolio size in excess of 53 million square feet across 10 major markets in the country.

In 2020, despite the pandemic related headwinds, IndoSpace was able to achieve record leasing levels in excess of 6 million square feet and close more than 300 acres of land acquisitions across the country. The inherent challenges to acquiring contiguous and compliant land parcels remains the biggest hurdle in accelerating supply particularly for new entrants with little or no experience in the Indian markets

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