Post Date : February 20, 2020
The “City of Joy”, as it is fondly called, has proved to be a major Warehousing Hotspot of the country. With key investments and crucial government projects in the offing, we look into what makes Kolkata a lucrative choice for investors and industries alike.
Warehousing prospects have taken off quite swiftly in the east. Located in the banks of river Hooghly, the city of Kolkata offers a strategic choice as a logistics hotspot. The capital of India’s West Bengal state, Kolkata has now become a symbol of unprecedented growth in the industrial domain.
Higher penetration of e-commerce and an expanding ‘hub and spoke’ model have proven to be reasons for which companies have undivided interest in the eastern region. Kolkata has served the requisite demands of the entire eastern belt of the country. The recent emphasis on developing its transport corridors has even provided the required impetus for its already-growing warehousing prospects. With the government rolling out the Goods and Services tax (GST), the demand for warehousing has rapidly risen especially in the warehouse clusters in the fringes of the city.
According to Knight Frank Report, in 2018 alone, warehouse leasing of 0.4 mn sq m (4.68 mn sq ft) was recorded in Kolkata. The sudden rise in demand for warehousing space in Kolkata over 2017 led to a massive 191% year-on-year (YoY) growth in total leasing making it the highest across the top eight cities in india. In 2017, 0.1 mn sq m warehousing space was leased in the city.
Government Projects: Dedicated Freight Corridors
The long-anticipated DFCs come as rays of hope for the logistics and warehousing sector of the region. The planned Eastern Dedicated Freight Corridor (EDFC) exclusively for rail transport extending 1,839 km from
Ludhiana to Dankuni towards the port of Kolkata, will be a crucial factor in enabling intermodal logistics prospects of the region.
Dankuni and its suburbs are a major warehousing cluster and both,the Durgapur Expressway from Dankuni as well as Old Delhi Road are brimming with industrial parks and warehouses of industries such as steel, coal,cement and manufacturing. Dankuni as an area has been a wise choice owing to its easy access to labour and raw materials. It can be accessed seamlessly across both the national highways, that has made it a popular choice for transportation and logistics. Many e-commerce companies and 3PL players have their eyes on this belt for setting warehouse footprint in eastern India.
National Highway 16
The lifeline of the region, the six-lane highway is replete with multiple small-scale industrial parks and Grade B warehouses that are paving way for high specification Grade A warehousing facilities and many private players are actively revamping this warehousing belt that provides seamless connectivity to areas like Bagnan, Jangalpur, Alampur, Kharagpurand finally to Mumbai.Sankrail in Howrah District is a prominent warehousing hub for consumer goods just beyond city limits with transit hubs in the Bardhaman-Durgapur belt that lies in proximity.
Apart from being a well-connected cluster, 3PL players have found this to be a go-to place for its accessibility to Haldia port for transporting huge vessels carrying freight from other countries dock at Haldia dock complex in comparison to Kolkata port trust,which is a partner to this port. This cluster accounted for 70% of the warehousing leasing in Kolkata in 2018.
Taratala-Maheshtala is an erstwhile regional warehousing hub in Kolkata to the Kolkata port and Kolkata Suburban Railway. This area boasts of established industrial plants set-up ages ago and it has proven to be a viable choice for FMCG players. Due to high land prices and lack of land availability, new warehouses have not come up in this area as it has
not proven to be feasible. But this area has been located strategically to serve the needs of occupiers across sectors, who require frequent cargo movement via waterways while simultaneously being in proximity to the consumption centers.
Apart from the mentioned areas, Barrackpur Cantonment, Madhyamgram-Barasat are two key areas that have potential to expand even further.
US-based private equity firm Blackstone Group recently announced that it has formed a joint venture with premium real estate developer Hiranandani Group to acquire and operate logistics and warehousing assets all across India.With this joint venture, both the companies are expected to initially invest over 2,500 crore in developing the assets of Hiranandani’s logistics wing GreenBase spread across 12 million sq ft. as well as other assets pertaining to land or warehousing in other areas.
This will comprise of 267 acres of Hiranandani GreenBase in Pune, 115 acres spread across Chennai’s industrial suburb Orangadum, 73 acres in Nashik and nearly 25 acres in Durgapur, West Bengal. Hiranandani is not the only group to target warehousing space in Kolkata and its suburbs.
It has been predicted that approximately 2.5 -3 million sq ft of warehouse space is likely to come up across Bengal in the coming 2-3 years at an approximate investment of 750 crore. According to a report by property consulting firm Savills India, warehouse absorption stood at 3.3 million sq ft in 2019, a tad lower than the 3.4 million sq ft absorbed in 2018.
The report further states that nearly 30% of the absorption was by e-commerce firms, another 26% by 3PL (third-party logistics) and distribution players, 15% by electronics firms and another 12% by FMCG firms. Pharma and auto ancillary companies constituted the other major buyers.
Global firms and developers such as Morgan Stanley, ESR, Allcargo Logistics, Indospace, and Embassy, among others, are said to be in different stages of discussions for projects across suburbs that are located some 30-50 km away from the city.
So far as the world of e-commerce is concerned, companies have surely taken off in this region in the past few years. Flipkart and Amazon are some of the major players alongwith FMCG companies.
“Most warehouses find occupancies within six months and a major chunk of this demand is now coming from e-commerce companies.”Swapan Dutta, Senior Management in Knight Frank (India) Pvt Ltd
Warehousing companies like Mahindra Companies are also taking up space or across upcoming logistics parks.
In a nutshell, Kolkata has lived up to its potential by attracting global attention and investments in the region. With substantial projects lined up for implementation, we look forward to the region breaking more records with such pace.