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Global giants look to expand into India warehousing

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India manufacturing growth, infrastructure prove a lure

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But number of modern warehouses lags China, United States

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U.S.-based Prologis ( PLD ) returns, citing economic boom

By Dhwani Pandya and Praveen Paramasivam

ORAGADAM, India, March 18 (Reuters) - Land is getting

hard to find in a sprawling industrial park in southern India

where workers are scrambling to build modern new warehouses and

factories for companies betting on the country's economic boom

or diversifying their supply chains beyond China.

"It is one of the most wanted places in India for European

and American companies," said S. Raghuraman, an official of the

Greenbase industrial park, near plants run by Apple ( AAPL ) supplier

Foxconn and truckmaker Daimler.

Inquiries for leasing space in the park, run by Blackstone

and real estate tycoon Niranjan Hiranandani, have gone

through the roof, he added.

"We are in talks with at least three clients looking to

shift their base from China."

To meet the burgeoning demand, Greenbase aims to invest $800

million to quadruple its industrial park space to 20 million sq

ft (1.9 million sq m), a target it revealed for the first time.

That is just the latest sign of a rush for leased warehouse

space that peaked in the last quarter of 2023 at its highest in

two years, says real estate firm Colliers, as India's economic

growth of more than 8% outstrips advanced nations.

Businesses in India have traditionally relied on dingy,

stuffy low-rise sheds known as godowns for their storage needs,

but these are unsuited to the needs of foreign industrial giants

whose investment Prime Minister Narendra Modi wants to lure.

So developers such as Greenbase are scouting for land

nationwide, grappling with thorny acquisition issues, as they

line up millions of dollars in new investment.

Prime targets are firms looking to expand manufacturing

facilities beyond China as tension with the United States and

other countries takes off some of its shine.

Companies in the booming e-commerce and manufacturing

industries also see India as a hub for exports while looking to

boost sales to industries and domestic consumers amid a

population of 1.4 billion.

"We thought this is the right moment to enter India as there

is a huge potential runway for growth over the next 15 to 20

years," said Sandeep Chanda, the India managing director of one

of the world's biggest developers, U.S.-based Panattoni.

One lure has been spanking new facilities, from ports to

highways, added in an $808-billion infrastructure splurge over

the last seven years, boosting connectivity and putting the

spotlight on previously overlooked plots of land.

In a 100-million-euro ($109-million) plan, Panattoni is

building its first warehouse complex near the capital, New

Delhi, playing up its access to expressways and a rail freight

corridor.

It plans to strike land deals for four more parks within a

year. And Chanda sees room to grow, saying India leases just 45

million sq ft (4 million sq m) of new warehouses a year, a

fraction of the 200 million sq ft (19 million sq m) in China.

Avendus Capital estimates China has three times more than

India's 412 million sq ft (38 million sq m) of the "Grade A"

warehouses, fitted with automated storage and retrieval systems,

that industries from e-commerce to engineering favour.

By comparison, Blackstone says the United States has 13

billion square feet (1.2 billion sq m) of warehousing stock.

CHINA ALTERNATIVE

Colliers says the 7.7 million square ft (715,000 sq. m.) of

warehouse space leased in the last quarter of 2023 in the top

five Indian cities it tracks was the highest in the last two

years.

During that period, the supply of "Grade A" warehouses rose

336% in Tamil Nadu's capital of Chennai, near the Greenbase

park, for the highest growth among the five cities and

outperforming the group's average of 55%.

Colliers expects automobile, engineering, retail and

e-commerce companies to drive further growth.

Danish wind turbine maker Vestas just added 20%

more space to its assembly and warehouse operations at

Greenbase, said Raghuraman, adding that though China is the

firm's main hub, "They want to make India an alternative."

Vestas "continuously matures and evolves our global supply

chain network and manufacturing footprint," it said.

Prologis ( PLD ), the world's largest warehouse owner, has

returned to India after ending an initial foray in 2007, when it

found the market "too challenging".

Now the company is focusing on "high-growth,

high-consumption" areas, said Joseph Ghazal, its chief

investment officer. "India has seen strong economic growth, and

we believe there is a high level of demand."

While developers zero in on big cities and warehouses,

Bahrain-based Investcorp is taking the opposite tack by betting

on smaller warehouses, said Gaurav Sharma, its India investment

head.

Investcorp plans to raise about $120 million for a fund to

partner with developers and build up to eight warehouses in

India, a strategy that Reuters is the first to report.

But developers often find they first have to resolve complex

land issues.

India's infrastructure drive fuels high demand for land,

leaving few plots in good locations, so that surging prices hit

developers' returns as rentals fall behind, executives said.

Real estate consultants CBRE say land prices around the

Greenbase park rose a fifth in 2023 to $3.6 million for 10 acres

(4 hectares), or an area half the size of Buckingham Palace,

with increases of more than 50% for some plots near New Delhi.

Sometimes a single piece of land can have as many as 50

owners.

Panattoni needed eight months to complete acquisition

formalities for its complex near the capital.

"Land takes its own sweet time," Chanda said, referring to

the period spent untangling ownership concerns.