Mumbai-based property developer Phoenix Mills, known for its High Street Phoenix and Palladium malls in the city, has shelved it’s plans to foray into warehousing properties.
The company was planning to build a warehousing property in Haryana as a pilot project and bought a land parcel for the same. It was also discussing expansion in other cities such as Indore and Lucknow, where it has a presence in retail properties.
“Warehousing is a tough business and margins are thin. That’s why they have decided to focus on core business of retail and office properties as both are booming segments now” said sources aware of the matter. The company also has interests in the residential property business.
An email sent to the management of the company did not elicit any response. Last year, Phoenix Logistics and Industrial Parks, a subsidiary of the company, bought Janus Logistics and Industrial Parks, a logistics and warehousing firm, which owned a land parcel measuring 33 acres in Faridabad and Sohna district of Haryana. The company was looking to invest about Rs200 crore for the project, according to brokerage reports.
Phoenix had built a separate team for warehousing last year. It is now planning to absorb the team in other businesses, sources said. However, it is not yet clear as to what the company would do with the land, they said.
“Before Covid , many forayed into warehousing as residential and commercial was not doing so well. But now residential sales have hit a decade-high. Same goes true with office and retail segments. Hence, it makes sense to focus on both commercial and residential segments,” said a property consultant.
At Rs22-Rs23 per sq ft rent in warehousing, and high land prices that have shot up nearly 50% after the pandemic, it does not make sense to do business for corporate developers, he said. Land aggregation is also a big headache. Because of this greenfield warehousing has not become feasible for listed companies and funds, the consultant said.
Two years ago, Embassy group and private equity investor Warbug Pincus sold their industrial parks business to Blackstone group, which later set up Horizon Industrial Parks, a company focused on warehousing. Though Phoenix was upbeat about warehousing, the recent surge in office and retail property market must have changed its mind, experts said.
Last year, in an interaction with FE, Shishir Shrivastava, managing director of Phoenix Mills, had said that warehousing seems to be a logical extension.The company, last year, had said that it will be investing over Rs2,000 crore to continue their ongoing portfolio expansion plans across major cities like Kolkata, Bengaluru, Surat and Pune.
By 2027, the company will build five million sq ft of office spaces to take its office portfolio to seven million sq ft by then. As of Q2FY24, the company had an operational retail portfolio of about 11 million sq ft of retail space spread across 12 operational retail destinations in 8 major cities of India. It is further developing new retail destinations in two major cities of India and expanding two of its existing retail destinations, which will together add about 3 million sq. ft. of retail space.