Post Date : July 1, 2019
India has off late started gaining global attention as being the largest growing economy and the next investment destination. Government’s effort to create a business-friendly environment has placed the country in the potential list of global investors.
World Bank’s Global Economic Prospects report released last year, India after conceding its position as the fastest growing major economy to China for a year in 2017, was likely to reclaim the position in 2018, with growth to 7.3% last year and 7.5% for the next two years, making it the fastest growing country among major emerging economies.
While sectors such as engineering and manufacturing, mining have already positioned themselves, logistics and warehousing are becoming a front runner in the economy. With the growing transparency and favourable business environment, various domestic and international players have already started investing or evaluating in the sector to reap the growth opportunity the sector has to provide.
Also, to promote and expedite investments in the sector, central as well as states governments are putting their best effort and eastern states are no exceptions.
In the early 2000s, Kolkata was the only eastern city to offer large warehousing space while acting as the gateway to the North East. Most of the Tier II city’s distribution was managed by the C&F network.
With the phenomenal growth of e-commerce in the past few years and with a robust economy, new opportunities have materialized in the Tier II markets, such as Patna, Guwahati, Ranchi, Bhubaneswar and Raipur with Patna and Guwahati leading the pack.
From a city perspective, the warehousing activity in Kolkata is primarily concentrated in the micro markets of Dankuni, Dhulagarh and Uluberia. However, other locations such as Madhyamgram (East) and Maheshtala (South West) are also coming up as new warehousing destinations of the city.
The tenant profile comprises mostly of companies from verticals such as E-commerce, 3PL, FMCG, Consumer Electronics, Industrial amongst others. Some of the prominent tenants who have established their presence in these markets are Flipkart & Safexpress in Dankuni, Godrej Boyce & Manyawar in Dhulagarh, and ITC & FCI in Uluberia.
Current rentals of Warehouses in the Eastern cities
The current rentals in the city remained in the range of INR 15 – 25 per sq. ft. per month, depending on the quality of the warehouses. Rentals (per square feet per month) in the micro market of Dankuni remain in the range of INR 18 to 25; Dhulagarh warehousing assets are being quoted in the range of INR 16 to 18 and Uluberia in the range of INR 14 to 16. Assets in the upcoming markets of Madhayamgram and Mahestala are being transacted in the range of INR 15 to 18 and INR 17 to 25 respectively.
The other eastern cities which are establishing their presence in the sector and growing as prominent warehousing markets are Patna and Guwahati. These cities are witnessing high demand from occupiers across sectors, which are concentrating on consolidation and expansion post implementation of GST.
Some of the key players leasing space in these markets in recent past are ITC, GlaxoSmithKline & Mondelez in Patna and Honda, Havells & DHL in Guwahati. Currently, the ongoing market rental in these cities is in the range of INR 18 to 25 per sq. ft. per month for Patna and INR 16 to 24 per sq. ft. per month in Guwahati.
Various government initiatives in terms of infrastructure development and policy reforms are also likely to provide an impetus to the growth of these cities as logistics hubs.
The world of logistics is fast changing in India with infrastructure projects of the central government such as Bharat Mala and Sagar Mala. These are aimed at strengthening the road and port infrastructure across the country and will boost the growth in these eastern cities.
Also, GOI’s steps to streamline work process and support business groups under ease of doing business; allowing 100% FDI for development of logistics infrastructure will also assist in the development of large & modern warehousing parks. A prime example is E Shang Redwoods buying 70 acres of land in Uluberia, Kolkata for building a large integrated logistics park.
The article is authored by Jasmine Singh,Senior Executive Director – Advisory & Transaction Services, India, CBRE