Warehousing and logistics emerged as the most preferred real estate asset class for institutional investors, pipping the all-time favourite commercial office segment for the first time during April-June 2021. The segment attracted an all-time high of $743 million (more than Rs 5,500 crore) in investments, accounting for more than half of the $1.36 billion attracted during the second quarter.
The flurry of investments in warehousing helped attract $1.36 billion (over Rs 10,100 crore) to India’s commercial real estate market during Q2 2021, making it the most active second quarter in the last five years. Of the total, warehousing accounted for 55%, followed by 20% in retail, 17% in office and 8% in residential, JLL India said.
The consultancy attributed the rise in warehousing to the increasing shift towards online shopping from discretionary to essentials. “Major global funds have invested with warehousing developers and operators as scale and regional footprint are key differentiators in the sector,” it said.
Data suggests that between 2005-16, warehousing and logistics attracted around $100 million. There were a few other deals, which have not been reported publicly due to joint ventures or deals by investment platforms. However, after the introduction of the Goods and Service Tax (GST) in 2017, the segment grew exponentially. Between 2017 to H1 2021, it attracted a record $2.14 billion, or roughly Rs 16,000 crore.
Investments in April-June 2021 are the highest received by the segment in any quarter of a calendar year since 2005, which is mainly attributable to the $700 million Blackstone deal. In May, Blackstone announced acquisition of Embassy Industrial Parks, a JV of Warburg Pincus and Embassy that controls 22 million sq ft of Grade-A warehousing in major industrial hubs including Bangalore and Delhi.
Besides, 2021 marked the rise of defensive sectors in real estate like warehousing & logistics and data centres.
JLL India country head Radha Dhir said the first half of 2021 saw investments of $2.7 billion in real estate, which is 53% of the total investments in 2020. “Relaxing lockdowns during the first three months of 2021 also gave investors a first-hand experience of the post-pandemic world. This led to risk re-rating and asset allocations witnessed a subsequent change in Q2 2021,” she said.
Though the economic dent created by the second wave will lead to slower growth in 2021, investments in real estate are expected to stay strong through the year. Defensive sectors like warehousing and data centres are likely to gain centre stage, while office assets will gain interest with more visibility on work from office trends, JLL India said.