Space: The next frontier

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With GST round the corner, smart money is flowing into the next big opportunity—warehouses.
Space: The next frontier
Stock up: India Inc. spends Rs 22,000 crore on warehouses a year.  

THEY'RE BOXY AND BORING; but they may also be the next big thing. Everstone Capital, a Mumbai-based private equity firm, has raised a $240-million fund that will invest only in industrial warehouses in India. It aims to develop around 25 million square feet of space across 10 locations in the next few years. Everstone estimates that there’s scope to build another 300 million square feet. So expect plenty of investor interest.

Prompting this surge of interest is the imminent Goods and Services Tax (GST). Big businesses are today compelled to pay for warehouses in individual states to avoid double taxation. The GST will replace such levies with one national tax and thus allow companies to rejig their supply chain. “With GST, the move will be from a large network of small-sized warehouses of about 20,000 square feet to parks featuring warehouses of up to 600,000 square feet,” says Shishir Baijal, managing partner, real estate, Everstone.

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Indeed, FMCG major Godrej Consumer Products is already planning its moves. Rakesh Sinha, COO, marketing and operations, believes that by cutting down the number of warehouses (currently 35) and reworking inventory management, Godrej could save up to Rs 1 crore on its warehousing bill of around Rs 5 crore. Oscar de Bok, DHL’s senior vice president, South Asia and Indo-China, expects business to triple in the next five years. “We set up our own warehouses, as existing facilities are not up to the mark. Standalone players setting up modern warehouses will help our business better,” he says. Watch out for those spaces now.

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