CHENNAI: Chennai is fast becoming a warehousing hub in the country. It has registered 79 per cent year-on-year surge since 2017 as private equity funds are investing in logistics and warehousing sector.
The city’s warehousing location is in Sriperumbudur-Oragadam cluster and National Highway 16-Periyapalayam cluster. Property consultant Knight Frank report has said Chennai warehousing market clocked 0.4 million sqft (4.2 million sqft) absorption in 2018, 79 per cent year-on-year surge over the previously recorded transactions.
This comes as private equity (PE) funds altogether pumped nearly $9.7 billion into Indian real estate between first quarters of 2017 and 2019. An Anarock Capital, another property consultant, report states this is an excess of $1.1 bn in logistics and warehousing sectors as against zero investments during 2015 and 2016 combined.
Shobhit Agarwal, MD and chief executive officer of Anarock Capital says infrastructure status, multi-modal logistics park policy and implementation of GST have caused private equity firms to take greater interest in logistics and warehousing sector.
Interestingly, Southern cities of Bengaluru, Chennai and Hyderabad have evoked maximum interest, followed by Mumbai and Pune. The logistics sector had a massive jump-start in the first quarter of 2019 when private equity players pumped in nearly $200mn into cities like Bengaluru, Chennai and Pune.
Interestingly, Knight Frank is betting big on projects like proposed Visakhapatnam-Chennai Industrial Corridor, Chennai-Bengaluru Industrial corridor and Tamil nadu defence industrial corridor. Knight Frank has stated that Madhavaram-Red Hills belt on NH 16-Periyapalayam cluster has seen increased traction last year due to more activity in e-commerce sector.
“There is an immense opportunity, backed by the growing demand from e-commerce businesses in the last two years, and the logistics and warehousing sector is consequently upgrading to higher levels of organisation. This shift is visible in various small Grade B and C warehouses converting into large Grade A warehouses equipped with modern facilities - a transformation which has attracted PE entities from US, Canada and Singapore to pump in funds into the sector,” says Anarock report.
Interest by PE players in logistics and warehousing is currently driven by favourable government policies, strong economic fundamentals and growth in organised retail and e-commerce. The rapid ramping up of e-commerce activity has caused a corresponding rise in demand logistics and warehousing, in both Tier I and II markets. Increasing use of technology will further boost this sector in India as it has been globally.
Among the major deals, IndoSpace - India’s leading developer of industrial real estate and warehousing facilities – saw maximum inflow in 2017 to the tune of $500 million from Canada-based CPPIB for projects across cities like Bengaluru, Chennai, Pune, Mumbai and Delhi. Another major deal includes LOGOS India investing nearly $100 mn into Casagrand Distripark in Chennai.