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

Institutional investment in Indian warehousing dips 44 per cent to USD 868 million in 2020 due to the COVID-19 pandemic, but the long-term outlook remains positive on rising demand from e-commerce players, stated US-based property consultant Vestian in its report ”Institutional Investment in Warehousing: Renewing Prospects”.

Vestian underlined that the warehousing sector has attracted 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,” it said in the report.

In the early half of 2020, the warehousing segment witnessed a dip in investments with investors becoming cautious due to the rise of the pandemic.

“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.

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, as per data.

However, in the absence of mature, good quality rent-yielding warehousing assets, investments have retarded after 2017.

Vestian highlighted that in consequence of the pandemic, consumers have shifted consumption activity to online transactions, which will further bolster the growth of the e-commerce sector.

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

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 INR 20.5 per square feet, the report highlighted.

At a time when the demand for e-commerce has outdone itself, the warehousing demand for 2021 is expected to be fuelled by this demand for ecommerce, together with the need for quick delivery resulting in a need for higher inventory.

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