In a report released by JLL, India's largest real estate services firm, it is estimated that close to Rs 450 billion will be invested in creating storage facilities across India from 2018 - 2020. In these three years, different categories of warehousing will also create jobs to the tune of 200,000 at different levels of specifications and specialisations. The report notes that the two prominent changes that have created significant growth prospects in warehousing are firstly the implementation of GST in India and creating a unified taxation, and the rapid growth of e-commerce necessitating the building of large-scale warehousing across various locations. The report estimates that the prime beneficiaries of the new wave of growth in warehousing will be the peripheral locations of tier 1 and tier 2 cities. This investment comes at the back of the fact that nearly Rs 100 billion was invested in 2017 only.

 

Of all the categories, warehousing will be witnessing the highest investment of over Rs 350 billion in the next 3 years, mostly in creating storage facilities for retail and consumer goods. Cold storage and agricultural warehousing will see approximately Rs 750 billion. These two aspects of warehousing will lead the way in the future as they contribute greatly to the regular living and lifestyle. Container storage would be attracting approximately Rs 5 billion in the same period mostly to boost India's logistical prowess.

 

The report observes that 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 sectors of space are 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 grade 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 square feet (mil sq. ft.) by the end of 2020 almost doubling the current warehousing stock of 139.8 million square feet in 2017.

 

Ramesh Nair, CEO and Country Head, JLL India, said, "Warehouse and logistics is one of the biggest growth areas that has emerged in recent times. We have seen Rs 1.25 trillion 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. There have been multiple initiatives associated with large investments (both domestic & international) within this segment, clearly 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, the top favourable for the major warehousing spoke locations in the country are as follows: Surat, Kanpur, Lucknow, Ranchi, Madurai, Coimbatore, Ludhiana, Ambala, Tiruchirapalli, Nasik, Madurai, Jaipur.

 

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. 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 setting up of businesses and have high manufacturing potential.