Global investors are bullish on India’s logistics infrastructure sector, given the already existing shortages and the emerging new demand driven by e-commerce retailing, a report by Urban Land Institute and PwC said on Monday.
“Demand for logistics is booming in India due to the introduction of Good and Services Tax (GST) that has revolutionised how goods are delivered across the country. This is perhaps the only sector where investor opinions were uniformly bullish. Developer willingness to build new facilities without pre-commitment from tenants is testament to the strength of the market,” said the report on ‘Emerging Trends in Real Estate Asia Pacific, 2019’.”
“With the government now also according infrastructure status to warehousing projects, there is a huge pipeline of demand for large build-to-suits because there is hardly any ready-built demand. It is one of those rare sectors where the demand side is completely outstripping supply,” it added.
In terms of office space, Mumbai stands out with respect to demand for high-quality facilities. The city is also seeing a strong growth in co-working assets.
“India’s rapidly growing capital markets mean demand for high-quality offices is booming in Mumbai,” said John Fitzgerald, CEO of ULI Asia Pacific.
“India continues to remain one of the most attractive investment destinations in the Asia-Pacific region. With most of the other cities, near the top of the cycle in terms of rent and capital values, India still offers value creation opportunities,” added Bhairav Dalal, Partner - Real Estate Tax, PwC India.
“Core investments continue to remain the favourite with a few moving towards build-to-core. Demand for buying and holding retail assets is certainly moving northwards. Logistics and co-working play continues to evolve rapidly, although some investors have expressed differential opinion over their sustainability. We foresee India to remain an important investment destination for real estate investors,” he added.
Looking at the Asia-Pacific region as a whole, ongoing competition among investors to place capital is continuing to shape how investors approach the sourcing of assets, despite signs the market may now be approaching a cyclical top.
In particular, value-addition continues to be a focus, as owners look to upgrade assets by providing more flexibility, better user experience, and improvements leveraging design and technology functions. As a result, investors today say they are likely to be more site-specific, working from the ground up rather than the top down, it said.