Indian Transport & Logistics

Warehouster targets 10 mn sq ft warehousing space in 3 years

Sandeep Chadha, Founder and CEO, Warehouster talks about growth plans, value propositions and strategies for navigating complexities of India's warehousing sector.

Warehouster targets 10 mn sq ft warehousing space in 3 years

Sandeep Chadha, CEO and Founder, Warehouster

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Warehouster, an integrated solution provider for warehousing in India, is emerging as a significant player in the rapidly evolving landscape. The Indian warehouse market is projected to reach $34.99 billion by 2027, growing at a CAGR of 15.64 percent from 2022, according to Invest India. The country's Grade-A warehousing stock surged to 177 million sq. ft. in Q 2023 with 140 million sq. ft. added since 2016, demonstrating the industry's capacity to adapt and expand to meet the increasing demands across various sectors.

Warehouster's approach, which includes owning properties, offering comprehensive development services and forming partnerships with institutions, also aligns with the growing interest of global investors.

Sandeep Chadha, CEO and Founder, Warehouster, in an interaction with The STAT Trade Times, provides insights into the company's ambitious growth plans, unique value propositions and strategies for navigating the complexities of India's warehousing sector as the company has set a target of developing 10 million sq. ft. of Grade A warehousing space within the next three years.

Edited Excerpts:

How much have you invested so far and how do you plan to achieve the 10 million square feet target?
Our investment so far is nearly Rs 260 crore, with a major focus on acquiring land. We've already transferred a portion of this land (around 200 acres) to Blackstone for their upcoming development project of 4.5-5 million sq. ft. In this project, we'll be working alongside them as their development partner.

We've built strong partnerships to achieve our 10 million square foot warehousing target. We've collaborated with land development companies like Sameera to secure the necessary land at scale. For warehouse construction, we've utilised a combination of bank funding and institutional partnerships.

How do you plan to leverage the surge in warehousing investments in India, particularly in terms of new developments and service offerings?
We are currently concentrating on the South Indian markets, specifically Hosur, Bangalore, Chennai, Coimbatore and Hyderabad. We aim to develop about six to seven million sq.ft. in these areas over the next one-and-a-half to two years. Later, we will shift our focus towards NCR and Maharashtra where we already have some investors who have invested in land.

We are working with ESR Group, Logos and other institutions, and we are leveraging an institutional investor as a JV partner in the warehousing sector. We aim to finalise this partnership in the next six months and will make an announcement soon. We will be a minority partner while the institutional partner will be the majority shareholder, allowing us to develop on a pan-India level. The partnership is similar to the Firstspace-Ascendas JV where Ascendas provides substantial capital for warehouse development.

Additionally, we have established tenant relationships, which we exploit on these lands by offering build-to-suit options. This makes it easier for institutions to invest as the land comes with defined tenancies, reducing perceived risks.

The growth in warehousing demand in India is driven not only by e-commerce but also by retail and manufacturing sectors. We are focusing on cities experiencing growth and high demand, aligning our strategy with market needs. This approach, coupled with our tenant relationships and institutional partnerships, makes it attractive for institutions to invest in these areas.

What sets Warehouster apart from other warehousing companies in India? Do you focus on specific types of warehousing solutions or target a particular clientele?
Warehouster differentiates itself by providing a fully integrated solution that addresses these gaps. We handle land acquisition, all necessary approvals, and offer leasing opportunities, often even before land acquisition. This full-service approach, combined with our willingness to take ownership stakes in the assets, sets us apart.

Unlike companies like JLL and CBRE, which can only offer services without owning the assets, we create opportunities and bring them to a platform where we can co-own the assets alongside our clients. This makes us unique in the market, as we serve the specific needs of institutions by creating and managing large-scale opportunities.

Which industries or sectors are you primarily catering to with your facilities?
We are building only Grade A warehousing facilities as demand is shifting from Grade B and Grade C spaces, driven by several factors. First, occupying Grade A warehouses is more cost-effective because they allow for better utilisation of volume space. Additionally, there is a growing demand for more compliant warehouses, which Grade B and Grade C facilities often lack. Furthermore, logistics is now seen more as a strategic asset rather than just a cost centre, prompting businesses to seek quality logistics spaces and manufacturing sites.

For instance, when catering to a manufacturing client, we provide customised solutions such as a one million sq.ft. or 1.25 lakh sq.ft. building with one MW power supply, meeting specifications that were previously unavailable. We aim to service these needs by creating niche spaces within larger projects, effectively providing a gated community. This setup offers clients security, safety, efficient stormwater drainage, and sewage treatment plants, along with the flexibility to customise the warehouse according to their specific requirements.

Do you have confirmed customers and land for your target of 10 million?
In Chennai, we've already acquired about 250 acres, which will help us build about six million sq.ft. of warehousing space over the next three years. In Bangalore, we are in the process of acquiring about 100 acres, allowing us to build approximately 2.2 to 2.4 million sq.ft. In Hosur, we have secured 60 acres and are looking to acquire more to develop a park there, targeting around two to 2.5 million sq.ft. Therefore, between Hosur, Bangalore and Chennai, we plan to develop around 10 million sq.ft.

In Chennai, we are negotiating with three build-to-suit clients with similar discussions on-going for other projects. We anticipate signing one agreement this month, and are in talks with a large client needing up to two million sq.ft. across Bangalore, Hosur and Chennai. The development process, from land acquisition to a completed warehouse, typically takes 12 to 15 months for the first unit and 2 to 2.5 years for full completion.

We are confident of reaching our goal, given the build-to-suit discussions and strong interest from institutions and banks willing to fund these developments. Even if we fall short, achieving around seven million sq.ft. in three to four years is still a significant milestone.

The Indian warehousing market is expanding, from 40 million sq.ft. annually to an anticipated 70-80 million sq.ft. in the next few years, further boosting our confidence in meeting the growing demand.

Are your existing warehouses strategically located in proximity to industrial clusters or transportation hubs? Which industries or sectors are you serving through these facilities?

In Chennai, we are catering to three distinct micro-markets with our strategically located warehouses. In North Chennai, we serve a market driven primarily by the port and 3PL operations. In South Chennai, we focus on the manufacturing hub, which is closer to automobile and white goods manufacturing plants. Additionally, we cover the southern side, which connects to Bangalore and other markets. We have acquired land in all these areas to ensure we can cater to the entire city from different corners.

When selecting land, we conduct a thorough analysis to determine the suitability and consult with our existing relationships to ensure the locations are favourable for expansion. Our land acquisitions are chosen to be close to either the manufacturing side of the business or the consumption side, focusing on these two categories to a larger extent.

How do you plan to integrate sustainability into your future warehousing developments? What specific initiatives or technologies are you exploring in this regard?
Sustainability is a crucial consideration in our warehousing developments. We ensure the creation of ample green spaces and focus on reusing and recycling water extensively. Additionally, we integrate solar power and other renewable energy sources and are also planning some warehouses that would potentially rely solely on solar energy. We prioritise LEED certifications, aiming for gold or platinum standards, to ensure our buildings meet high sustainability criteria. The commitment to sustainability aligns with our clients' desires and requirements.

How technologically advanced are your warehouses?
Inside the warehouses, technology adoption such as AI, robotics and more are driven largely by tenant requirements and operational needs. Our approach ensures that our facilities are equipped to anticipate and respond to operational challenges effectively, maintaining a proactive and secure environment for our tenants.

What are the key challenges and opportunities you foresee associated with land acquisition and development for industrial and warehousing projects in India?
Several key challenges and opportunities emerge in land acquisition and development for industrial and warehousing projects in India. Infrastructure development has significantly improved accessibility but has also driven up land prices in suburban areas, making it challenging to deliver warehouses at competitive rental rates. Land scarcity and the complexity of consolidating fragmented ownership further complicate acquisition processes. Government regulations add another layer of complexity with multiple approvals required from various authorities at state and central levels.

Navigating these regulatory frameworks remains intricate as there is no streamlined, centralised clearance process and policies vary by state. Establishing a consistent presence across cities to build tenant trust and accommodate their expansion needs is crucial. Only a few developers have achieved nationwide presence.

Looking ahead, addressing these challenges will require continued emphasis on fostering partnerships between developers and institutions to meet the growing demand for large-scale warehousing.

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