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With a sustained demand from 3PL, e-commerce and manufacturing businesses, industrial and warehousing space absorption increased 35% YoY across Tier-I Indian cities last year.
To match this demand surge, warehousing supply in Tier-I cities also shot up by 64%, per this report.
Fast Forward To 2022
And you will find that many of the forces that drove the economy in 2021 are still in the driver's seat and the long-term upward trend of e-commerce is stronger than ever.What's Making Industrial Real Estate Hot?
🍕 Ecommerce: Every time you buy a book from Flipkart or fashion from Ajio, the order has to be fulfilled somewhere. So, the more revenue e-commerce companies earn, the more money they pump into new warehouses and fulfillment centres. This means more industrial real estate please.
🍕 Immune To Interest Rate: There's an interest rate hike coming in FY23 and that spells bad news for real estate investors. But analysts believe warehousing is interest-rate-immune. That's because industrial real estate is often purchased by seasoned businesses with solid finances, newer e-commerce businesses, and REITs, all mostly unaffected by a rise in interest rate.
🍕 Moonshot Ventures: There are some explosive growth industries that are looking for industrial real estate, for example, Cryptocurrency. Crypto needs large facilities for growing (mining new coins). While it's true that crypto is getting more eco-friendly, requiring lesser space than it once did, it still needs a lot. That translates into an increasing demand for industrial real estate.
Looking Ahead
With NHAI’s upcoming warehousing policy and a push towards Multi-Modal Logistics Parks, industrial real estate investors will be spotted chilling in the green.