Investors and developers flock to industrial real estate

The industrial real estate encompasses manufacturing and warehousing infrastructure. This asset class over the past couple of years is garnering attention like never before from investors and developers alike. India has been always known for possessing inherent strengths such as good road/rail infrastructure, seaports, adequate in-land connectivity and robust manpower availability, which are key to success of any manufacturing establishment.

Real estate catering to this segment has always remained in the hands of promoters and ad-hoc developments were carried out to suit a particular end-use. Also, these set-ups were established outside city/urban limits owing to cheaper land and labor cost. Manufacturing set-ups were located predominantly in regions where there are abundant natural resources such as water coupled with basis civic infrastructure. However, these developments were scattered, low-quality and need-based. The growth of city limits and connectivity infrastructure fast caught up with these fringes and industrial clusters were rapidly seen engulfed amidst growing residential and commercial establishments. Ambattur & Padi in Chennai are classic examples of such growth followed by Madhavram & Manali micro-markets.  

With the growth of the automobile sector and growth in consumption FMCG companies, coupled with consumer durable industries were building robust supply chain systems and warehousing infrastructure began to gain prominence. From unorganized ‘godowns’, which predominantly catered to storage of agricultural produce warehousing infrastructure has grown by leaps and bounds.  The paradigm shift was seen when global FMCG brands had scaled up in India but the real explosion of demand for quality warehousing was the advent of E-commerce in India coupled with reforms such as the introduction of GST regime and push for local manufacturing through ‘Make in India’ program of the current central regime.

Cashing in on the strong fundamentals such as demographic dividend, cheaper land cost in peripheral locations of the city large fund houses had initially acquired large tracts of land closer to established and emerging industrial clusters. Armed with enough funds to deploy and technical know-how players like Indospace had reaped the first mover benefit in this segment. Flight to quality is the norm of the day, with players consolidating their warehouses keeping in perspective their supply chain strategy has opened up avenues for new developers as demand is clearly outpacing quality supply in major markets in India.

Ascendas, CPPIB, Warburg Pincus, Allcargo, e-Shang Redwood have made their foray into India to tap into the organized warehousing real estate market.  Developers such as Embassy have made diversification of their portfolio into industrial and warehousing segments apart from commercial and residential development. Also, following the suit are the developers with a city presence by virtue of their vintage in respective markets and traditional land banking experience. Chennai has seen the likes of ASV, Casa Grand who are commercial and residential developers foraying into Warehousing and Industrial park space. While Casa Grande is developing parks across Mapeddu and Oragadam, ASV has a big park in Walajabad which is easily accessible from the auto hub of Oragadam. This influx of developers flocking to develop Industrial infrastructure is definitely good for the industry, which was grappled and constrained by the dearth of limited real estate options that are organized and have world-class quality.      


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