By John Thomas, Group Director at Realistic Realtors
The logistics industry in India is now one of the most vital industries in the country with around 13% of the GDP being spent on the development of the logistics framework in the country.
As per the recent market study, warehousing investment is estimated around 25% of the total private equity (PE) investments into real estate during the past couple of years. India has witnessed massive change and development in the Logistic and Warehouse Industry over the past few years and 2017-2018 seems to be the best of all. These years witnessed the extraordinary shift in this industry with maximum investments from across the globe. Many National players and HNIs have also forayed into this industry with an expectation of high and stable returns. Few of the major investments from the Institutional funds were as..
Invanhoe Cambridge and Quadreal Group, Ascendas Firstspace, Warbug Pincus, DHL, All Cargo Logistics, Everstone Capital, Brookfield, Morgan Stanley, Tata Realty, Canada Pension Plan Investment Board ( CPPIB)
Space consumption of warehouse and industrial space during the first quarter of 2018 itself increased by almost 50% from the last year and continued with the same pace during the second and third quarter. This jump was attributed to Retail, Ecommerce, 3PL, Manufacturing industry across the major cities of India.
Few of the most vital factors of this industry which actually worked as the growth propellers are..
· Implementation of Good and Service Tax (GST)
· New Govt. Initiatives like Make in India and digitalization
· Emergence of advanced technologies and automation
· Ecommerce Growth
· Grant of Infrastructure status to the industry
· Growth in institutional investments in the industry
Emergence of organized Retail, 3PL and 4PL, Robust Trade Growth, Globalization of manufacturing industry, increasing investment in the industry and increase in the Global demand are few other factors of the exponential growth of this industry. Various segments of the Logistics industry in India like Express Logistics, E-Commerce logistics, Freight Forwarding, 3PL market have been the catalyst to the growth of the overall industry.
This industry is constantly growing at a rate of 10-12 % every year and will continue for better.
Year 2019 and ahead
The said Logistic and warehousing industry will keep changing and improving drastically in the coming years from single to multiple unit warehouse, from parks to mega logistic parks. The said sector is getting institutionalized and in the next few years we can witness a major shift to organized warehousing of institutional quality of Grade A warehousing space.
As per a recent report, it is estimated that Grade A and Grade B warehousing space will grow at a CAGR of 21% year on year estimating the supply to be around 170 million sqft by 2019.
Economic reforms and various Govt. initiatives have surely improved the ease of doing business and in turn benefited the industry. Having said that the logistics market in India is still largely unorganized and development of transportation and logistics related infra such as more dedicated freight corridors and logistics parks, free trade warehousing zones, port modernization, improvised automation and increased digitalization will surely help to improve the overall industry for enhanced growth. The logistics industry encompasses several components such as transportation, warehousing, and value added services.
Technology innovation and adoption, freight forwarding sector and fast logistic solutions will surely be the constant growth factors of the warehousing and logistic market.
E-commerce logistics industry in India expected to reach over 2 billion USD by 2019. With the integration of IT and technology, Education, training and policy framework, it is estimated that the industry will continue to grow at a robust rate of 10-15 per cent annually. Apart from E commerce, the next sector to get focus and expansion will be electronic and white goods.
Beyond the Tier 1 cities to get unparalleled growth and expansion in terms of this industry, Tier 2 cities are also bound to be the growth destination. Multifold growth of infrastructure and overall development in these cities are sure in recent years.
Massive Job creations will be yet another advantage of this propelled growth.
35K- 50K Cr. Investment in the industry is expected to bring in national and international players in the market.
New innovations and implementation of temperature controlled warehousing, Multi Modal warehousing and Multi storey warehousing are yet few of the required propellers of the next level growth of this dynamic industry.
(The author Mr. John Thomas is Group Director at Realistic Realtors which are the leading and prominent real estate consultants in India. The company offers to its clients in India a complete spectrum of professional services in the field of commercial and residential real estate, knowledge and experience for realisation of projects, increase of efficiency and profitability business in a diverse investment portfolio.)