Institutional investment in warehousing dips 44 pc to $868 million in 2020: Report

NEW DELHI: Institutional investment in Indian warehousing fell 44 per cent to USD 868 million in 2020 due to the COVID-19, but the long-term outlook remains attractive on rising demand from e-commerce players, according to US-based property consultant Vestian.

In its report ''Institutional Investment in Warehousing: Renewing Prospects'', Vestian mentioned that the warehousing sector has garnered a total institutional investment of USD 6.2 billion in the last five years (2016-2020).

"With the economic slowdown and COVID-19 crisis taking precedence, 2020 saw a substantial decline in warehousing investment, to the tune of 44 per cent, over the previous year," Vestian said in the report.

Investments in the segment almost dried up, particularly during the first half of 2020, as investors turned cautious due to the pandemic, it added.

According to the data, the warehousing sector attracted USD 125 million in 2016, USD 1,933 million in 2017, USD 1,731 million in 2018, USD 1,543 million in 2019 and USD 868 million during the 2020 calendar year.

"Interest in investment in warehousing has gained momentum since 2017... Propelled by ''infrastructure status'' allocated to the sector, the year 2017 witnessed a flurry of large-sized investment, tipping the scales at almost USD 2 billion," the report said.

However, investments have slowed down post-2017, largely due to a lack of mature, good quality rent-yielding warehousing assets.

With the COVID-19 significantly impacting businesses and the economy worldwide, Vestian noted that consumers have shifted consumption activity to online transactions, which will further lead to the growth of the e-commerce sector.

Going forward, the consultant said warehousing demand is likely to be driven by FMCG, e-commerce and 3PL (third party logistics) players.

"India warehousing story looks extremely attractive from a long-term demand-supply perspective," said the report, authored by Avijit Mishra ( Assistant Vice President - Investment and Consultancy Services) and Sangeeta Sharma (Director- Investment & Consultancy Services), Vestian.

Indian warehousing segment has a total stock of 215 million square feet of Grade A space. The average vacancies are 8-10 per cent and average Grade A rentals at Rs 20.5 per square feet, the report highlighted.

Commenting on the outlook, Ramesh Nair, real estate expert and former CEO JLL India, said: "The huge demand from the e-commerce sector driven by shoppers need for quick delivery resulting in a need for higher inventory will drive warehousing demand in India in 2021".

The country still has a very limited number of compliant logistics parks, Nair added.