Warehousing Industry - the sunrise sector post COVID-19

 

The warehousing industry plays a pivotal role in the Logistics sector, as it acts as a centre point and ensures smooth operations of the entire supply chain. With new technologies and the ever-growing online shopping, the warehousing industry has become the sunrise sector in India.

 

The industry has been gaining steady traction for years, but the sector has emerged as the biggest beneficiary during recent COVID-19 pandemic. The supply chain is being redesigned to manage orders faster and for which the warehousing sector plays an important role. 

 

The rise in Tier-2 and Tier-3 cities, shift in consumer behaviour during COVID-19 times and rise in the e-commerce sector have all lead to a scale up in operations of warehousing to meet consumer demands. It is expected that the increase in the ecommerce sector will lead to jump in warehousing spaces in coming years.

 

By consolidating the warehousing market, developers are venturing into prominent clusters with land acquisitions for greenfield projects. A major player in this sector, IndoSpace, recently launched a new industrial and logistics park in Narasapura, near Bengaluru, Karnataka, to cater to the warehousing requirements of companies across sectors. It will offer Grade-A infrastructure, making it the only world-class warehousing and industrial facility of this scale in Bengaluru. Spread over 64 acre, it will cater to the warehousing requirements of companies across sectors, such as automotive, engineering, electric vehicles, e-commerce, and FMCG. Moreover, the company has announced plans to add four million sq ft of warehousing space by 2021-end. 

 

Another major developer, Stellar Value Chain Solutions, has launched one million sq ft of warehousing facilities in Hosur, Tamil Nadu, and Banur in Punjab. Each warehouse, spread over 5,00,000 sq ft, will offer fulfillment and distribution solutions to companies in sectors such as e-commerce, automotive and consumer durables. The company has identified 21 cities as core production and consumption centres. 

 

Varuna Group, a Gurugram-based third-party (3PL) logistics warehousing company, is looking to make an investment around Rs 500 crore to set up 30 Grade-A+ warehousing facilities across the country over the next five years. The company is looking at the hybrid model wherein both the developer and the company will invest. 

 

Varuna Group will invest around Rs 15 crore in each facility while the rest around Rs 35 crore per facility will come from the developers. As each facility is expected to come up at a cost of around Rs 50 crore, this will entail a total investment of around Rs 1,500 crore. In all, the company will invest around Rs 500 crore in setting up these 30 warehousing units. 

 

It mainly caters to segments such as tyres in which the company provides an end-to-end service, fast-moving consumer goods, pharma, lubes, food and beverage and other industrial products, among others. 

 

Avigna Industrial & Logistics Park plans to infuse around Rs 600 crore to set up a four million sq ft Grade-A warehousing facility near Bengaluru, Karnataka. The new facility will come up in the Hoskote Industrial Park. The project is part of the company’s Rs 2,000 crore plan for creating 10 million sq ft warehouse space over the next three years. Besides, the company is also looking for a presence in Bhiwandi, Jaipur, Farrukhnagar, Patna, Guwahati and Kolkata. 

 

The company recently leased out its first one million sq ft industrial warehouse at Hosur Park, in Tamil Nadu, to brands such as Whirlpool, Wakefit and Stellar Value Chain.

 

Apart from this, financial institutes are also lining up investment for developers to set up warehouses. The World Bank Group member IFC has extended debt support of USD 75 million to IndoSpace’s logistics fund to develop logistics and industrial parks with an objective to enhance warehousing and supply chain infrastructure in India. The development financial institution is extending the loan to IndoSpace Logistics Parks-III, a USD 580 million vintage fund, and the first tranche of this amount has already been disbursed to IndoSpace.

 

IFC’s investment is expected to help IndoSpace expand and lease to e-commerce players and online retailers in the country to meet their growing demand for warehouses. The first investment from this loan will help the company build a warehouse in Luhari-III, a site with connectivity to Gurugram (Haryana), Delhi and other key areas in the North. 

 

Embassy Industrial Parks, the entity acquired by the Blackstone Group, will develop a one million sq ft warehousing space on a land parcel 60 km away from Delhi Airport. Blackstone Group has already entered agreement to acquire land parcels spread over 36 acre from developer TARC for a total consideration of Rs 295 crore. The proposed development by Embassy Industrial Parks is expected to be completed over the next 18-24 months.

 

The warehousing segment is also gaining traction due to the government’s push towards making India a manufacturing hub. Also, a lot of companies are also considering shifting their base to India. With the rising demand for e-commerce activities during COVID-19 and doorstep delivery services in Tier-II and Tier-III cities, the warehousing sector is expected to grow potentially in the next few years. The e-commerce sector will drive the bulk of the volume, with the accelerated growth trajectory. 

 

E-commerce giant Amazon India has launched its largest fulfillment centre in the country, with a storage capacity of more than 2.4 million cu ft in Bengaluru, Karnataka. Ahead of the festive season, this significant expansion in infrastructure will give over 42,000 sellers in Karnataka greater access to a larger customer base across the country. 

 

Amazon India also announced expansion of its fulfillment network in Haryana with the launch of a new specialised fulfillment centre in the state. With a storage capacity of close to two million cu ft, the new fulfillment centre will house a wide selection of products from the large appliances and furniture category. The move is a part of the company’s plans to expand its pan-India fulfillment network to provide a total storage capacity of 43 million cu ft across the country.

 

Another major e-commerce player Flipkart has added 66 new large-scale fulfillment and sortation centres across the country over the past few months and created 1.15 lakh additional seasonal jobs to strengthen its supply chain network ahead of the festive season.

 

The new large-scale fulfillment and sortation centres have been added in the states of Assam, Chhattisgarh, Gujarat, Haryana, Karnataka, Maharashtra, Odisha, Punjab, Rajasthan, Tamil Nadu, Telangana, and West Bengal. These new facilities including warehouses and sortation centres have been added in the past four to five months, and the company now has more than 100 facilities across the country.