Two prominent changes that have created a significant growth prospects in warehousing are the implementation of GST in India and creating a unified taxation, and the rapid growth of e-commerce necessitating building of large scale warehousing across various locations.
Peripheral locations of tier 1 and tier 2 cities are expected to be the prime beneficiaries of the new wave of growth in warehousing.
Of all the categories, warehousing will be witnessing the highest investment of over Rs 35,000 crore in the next 3 years, mostly in creating storage facilities for retail and consumer goods, while cold storage and agricultural warehousing will see about Rs 7,500 crore investments. Container storage would be attracting around Rs 500 crore during the same period.
The overall growth in e-commerce and a shortening turnaround time for delivery has necessitated a sharp growth in warehousing in the country. Apart from E-Commerce, the next big sector of spaces will be the electronic and white goods that command significant warehousing spaces in urban and semi – urban locations.
These are also sectors that, despite their incremental requirements in warehousing, are averse to owning the requisite place, therefore mostly reliant on third party warehousing facilities. It is estimated that rade A and B warehousing stock will grow at a CAGR of 21% year-on-year taking the total tally of warehouse space in India to 247 million sq ft by the end of 2020 almost doubling the current warehousing stock of 139.8 million sq ft in 2017.
“Warehouse and logistics is one of the biggest growth areas that have emerged in recent times. We have seen Rs 125,000 crore invested through private equity in warehousing space since 2014. While it made up approximately 10% of total PE investment in 2017, the share is expected to grow claiming larger share of investment. India’s logistics and warehousing sector is rapidly transitioning through a revolutionary phase,” said Ramesh Nair, CEO and Country Head, JLL India.
According to him, there have been multiple initiatives associated with large investments both domestic and international within this segment, underscoring the upcoming trend. With India’s logistics industry recently rewarded with infrastructure status, thereby providing the impetus for added interest and therefore investments.
Based on JLL, India Analysis of 6 Hours Distribution Potential and Composite Logistics Score Index estimating the potential of various locations as strong warehousing nodes in the future, aside of the metropolitan and tier 1 locations Surat, Kanpur, Lucknow, Ranchi, Madurai, Coimbatore, Ludhaina, Ambala, Tiruchirapalli, Nasik, Madurai and Jaipur have emerged as the the top favorable for the major warehousing spoke locations in the country.
Amongst the Tier 2 cities, these cities have shown strong growth characteristics that will allow them to emerge as warehousing hubs in a hub and spoke model, the report said. These cities are strategically located to be in proximity to other major markets and allow transportation to happen to their feeder locations in less than 6 hours. Further, these cities provide favorable policies for set up of businesses and have high manufacturing potential.