Investcorp joins global funds to bet on Indian warehouses

Investcorp Holdings BSC, the Middle East’s largest alternative wealth manager, is doubling its inventory investment in India, betting that the country’s manufacturing ambitions and e-commerce boom will spur demand for logistics.

Warehousing currently accounts for almost 16% of the Bahrain-based company’s $350 million real estate portfolio in India, and it plans to increase that percentage in the coming year, according to Ritesh Vohra, the firm’s head of real estate in India.

“Warehouses could end up being our biggest strategy in Indian real estate,” he said in an interview.

Investcorp joins a spate of international capital investment in a sector boosted by the government’s plan to turn India into a manufacturing hub and a steady rise in online shopping on platforms such as Walmart Inc.’s Flipkart and Amazon.com Inc had received.

“Institutional capital is flowing in,” Vohra said. “Warehousing is where office space was 7-8 years ago.”

The company, whose Indian real estate portfolio is currently dominated by residential real estate, last year committed US$55 million to acquire Chennai-based developer NDR Warehousing Pvt. ltd This helped increase NDR’s inventory from 9 million square feet to 14 million square feet.

Private equity is increasing its bets on Indian warehousing

According to a report by international real estate adviser Knight Frank, private equity investment in Indian warehousing rose 45% year-on-year to $1.9 billion in 2022, as funding for all other property classes fell amid a global economic slowdown.

This momentum is expected to continue in 2023.

“We expect record investments in warehousing this year,” said Vivek Rathi, Research Director at Knight Frank India. “So many global investors are asking about these assets.”

Joining the push is US-based Panattoni Development Co. LLC, the largest logistics developer in Europe. The company is banking on India for its entry into Asia and plans to invest US$200 million in four logistics parks in the South Asian country.

According to Sandeep Chanda, Panattoni’s managing director for India, sentiment is shifting globally from office space to warehouses with lower occupancy due to the work-from-home culture and pressure on rents.

With recession fears mounting in some developed economies, India is still expected to grow 7% this fiscal year, making it one of the fastest growing economies in the world. That makes India a “ray of hope,” said Chanda.

manufacturing center

India is benefiting from a so-called China-plus-one strategy that has prompted companies around the world to diversify their supply chains away from the Asian superpower amid geopolitical concerns.

This coincides with Prime Minister Narendra Modi’s ambitious plan to turn India into a manufacturing export hub for products ranging from mobile phones to defense equipment, with the likes of Apple Inc. and Samsung Electronics Co. ramping up production there.

An online shopping boom in one of the world’s fastest-growing e-commerce markets has also fueled demand for logistics space as companies seek to slash delivery times.

For example, Blackstone Inc. is building a bonded warehouse for Amazon in New Delhi, The Hindu newspaper reported last month. Blackstone currently owns up to 42 million square feet of warehousing space, said Tuhin Parikh, the company’s property manager in India. Before Covid-19 there was no investment in these assets.

“Our focus is to build scale quickly – whatever it takes to do that,” Parikh said in an interview.

investment challenges

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