Bangalore based Prestige Estates has plans to venture in Warehousing at Malur near Bangalore. A 15 acre plot has been acquired to cater to the needs of E-commerce and Logistics businesses.
Prestige Estates Projects Ltd, India’s second largest real estate company by market capitalization after DLF Ltd, plans to enter the warehousing business and tap its rising demand, particularly from e-commerce and logistics firms. As a pilot project, the Bengaluru-based company has procured around 15 acres of land at Malur in the suburbs of the city, where it is expected to start building warehouses soon. The company said it has the required approvals for the plan.
“Like any other business vertical, we thought warehousing would be a good opportunity as we see there is growing demand for space while there is a supply shortage. We expect it will give us a good return on investment in the near future,” said Irfan Razack, managing director, Prestige Estates Enterprises.
Razack said that depending on the success of this pilot project, the company will look at expanding into other parts of the country. He did not disclose investment details.
According to a report by real estate consultant firm CBRE released on 28 August, real estate transactions in the industrial and logistics segment saw a growth of 60% in the first half of this year compared with the same period last year.
During the first six months of this year, around 6 million sq ft of warehousing space was absorbed, mostly by third-party logistics, e-commerce and packaged food companies. The demand for logistics and warehousing spaces are concentrated in the National Capital Region, Mumbai and Bengaluru.
Property consultants and advisers said due to the huge demand and investments being made into the warehouse and logistics sector, several real estate developers are exploring opportunities in developing warehouses. Besides, real estate firms also expect the goods and services tax (GST), when enacted, to drive the demand for large warehouses.
Some other real estate firms have already announced plans to diversify into warehousing. Another Bengaluru-based firm, the Embassy Group, has created a business vertical called Embassy Industrial Parks Pvt. Ltd to set up warehouses and industrial parks. The new unit will build and lease spaces close to cities and plans to cater to various sectors, including packaged consumer goods, retail, e-commerce, auto ancillary and apparel.
Rival real estate firm Assetz Property Group is also entering warehousing with plans to raise around $100 million from institutional investors to acquire more land as it seeks to tap into the e-commerce boom.
Mahindra Group’s Mahindra World Cities said the company is seeing an increase in demand from customers looking to set up warehousing facilities as part of an integrated logistics supply chain.
Sangeeta Prasad, chief executive officer, integrated cities and industrial clusters, MahindraLifespace Developers Ltd, said that with the growth of the e-commerce, retail and consumer goods sectors, this industry will see an upward trend.
CBRE’s director (logistics services) Jasmine Singh said real estate companies with large land parcels around upcoming industrial zones may look at utilising the area to develop warehouses and lease out to companies that are constantly on the lookout for such a space.
“There is a lot of buzz happening because of the e-commerce boom. Developers are looking to expand their horizon either through joint venture model or tying up with landlords. We have a lot of queries coming from developers who have land parcels around various industrial corridors for war-ehousing purposes,” Singh said.
Global real estate consultancy JLL estimates that the e-commerce sector alone is expected to spend up to $2 billion on warehouses and logistics in the next two-three years to cut distribution costs, enable faster deliveries and increase their market coverage.
Last year, almost 25% of the total new premium warehousing supply in India was absorbed by e-commerce firms alone. An additional 8-10 million sq ft is expected to get absorbed by e-commerce players by 2017-18, said a report by JLL released last week.
Nirav Kothari, JLL’s national director (industrial services), said that expected changes in the central government’s taxation policies and regulation of service providers are likely to be important factors that would drive the growth of the warehousing and logistics sector.