Private equity investment in warehousing segment falls 92 pc in January-June: Report

New Delhi: Private equity (PE) investment in warehousing and industrial space segment plunged 92 per cent to USD 102 million (around Rs 750 crore) during the first six months of this year as investors turned cautious because of COVID-19 pandemic, according to Colliers International. Investment and leasing activity are likely to remain muted over the next year due to slower decision-making by investors because of the pandemic, but the long-term outlook for the segment remains promising, Colliers International said in a report.

PE Investment in India’s industrial and warehousing segment fell to USD 102 million in January-June from USD 1,250 million (about Rs 9,300 crore) in the year-ago period, the consultant’s data showed.

“Since 2017, the sector has attracted investment inflows of Rs 27,800 crore (USD 3.7 billion). Between 2017 and H1 2020, the sector garnered a considerable 17 per cent share of total private equity real estate investment,” the report said.

The consultant noted that the industrial and warehousing sector has attracted significant investor interest since 2017 owing to the reforms introduced by the government.

These reforms include implementation of the Goods and Services Tax (GST) regime, accordance of infrastructure status to the sector, creation of logistics park policy and development of multimodal infrastructure, among others.

“The warehousing sector that was characterized by fragmented sheds and godowns in the past is now becoming more organized, buoyed by the government policies,” Colliers said.

To capitalize on the growth potential of the reorganized segment, the sector has attracted significant investor interest.

“This segment’s share of total private equity real estate investment in India has been increasing year-on-year since 2017, signifying the increasing attractiveness, ” the report said.

During 2019 through H1 2020, the industrial and warehousing segment garnered the third highest share of PE investments after office and retail.

The investment capital came from foreign investors such as the Abu Dhabi Investment Authority, Canada Pension Plan Investment Board (CPPIB), Ivanhoe Cambridge, Ascendas and Blackstone among others.

“Investment activity may be muted for the next one year due to slower decision-making by investors because of the ongoing pandemic.

“However, we expect the inflow from both foreign and domestic funds to grow over the next 2-3 years as existing participants expand their portfolio and new players enter the market,” the report said.

The consultant expects the warehousing segment to bounce back quicker than other segments of real estate, driven by robust demand from e-commerce and other consumer-led occupiers.

US-based Colliers International is a leading global real estate services and investment management company. It has operations in 68 countries, with 14,000 workforce.

In 2018, its corporate revenues stood at USD 2.8 billion (USD 3.3 billion including affiliates), with more than USD 26 billion of assets under management.

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