Why Warehousing of Goods is a Growing Business for the Foreseeable Future
The services sector is the largest contributor towards GDP in India, is followed closely by FMCG, Oil & Gas, Automotive, and Manufacturing, among others. Do you see any commonality in the others?
All the highest grossing contributors towards the GDP, including e-commerce and retail industries, depend heavily on warehousing. The industries of pharmaceuticals, FMCG, chemicals and petrochemicals, automobiles, and auto components have the most number of billionaires in them . Growth is synonymous with such industries, even including agriculture and food & beverages. The pivotal function at the core of all these industries is warehousing. Stocking up helps address demand in a much better way.
Just because a lot of industries depend on warehousing, would it be apt to say that the future of this sector is going to improve by leaps and bounds? If you look at 2019, the warehousing market in India was valued at INR 1501.2 billion, while by 2024, it is expected to reach INR 2821.1 billion with an estimated CAGR of 13.57%. Around 25% of the total logistics cost is accounted for by the warehousing market in India. Currently, the total warehousing capacity in India is around 160 million tons. From this around 30% is handled by the private sector, while the remaining 70% is divided between Food Corporation of India, Central Warehousing Corporation, State Warehousing Corporation, some state agencies, and the co-operative sector.
Let us now look at the way the warehousing industry is faring across major cities in India. Nearly 60% of modern warehousing capacity is focused on Ahmedabad, Bangalore, Chennai, Kolkata, Mumbai, and in the National Capital Region (NCR). Organized players have seen their warehousing spaces in India have seen a year-on-year growth rate of close to 77% in 2017 to reach 46.2 million sft in 2018.
3PL, e-Commerce, Fast Moving Consumer Durable (FMCD), Fast Moving Consumer Good (FMCG), Manufacturing, and Retail industries are the ones who are major adopters of organized warehousing. 3PL and e-commerce own the biggest chunk of adoption among these.
Supply chain and logistics have gained increased attention during the coronavirus pandemic. Businesses have understood that one large warehouse might not be always viable for the long term. That is not only the case for pharma players. In case you are interested in reading about the rising importance of warehousing in the pharmaceutical industry, please visit this article . Growth in. E-retailers are now more aggressively looking forward to opening warehouses in tier I and tier II cities as well as collaborating with well-known logistics service providers across the country to be able to maintain a minimal delivery cost.
Looking at all the above-mentioned facts, the future of warehousing is on a profitable track. So, can only the business owners be the only ones that profit from this growth? With the prospect of growing warehouse opportunities, the aspect of investment in commercial real estate such as these also gains traction.
Sure, if you have been in the real estate business for a sizable time and have money to spare, setting up a warehouse can be profitable. But as with most businesses, you will have to take care of the warehouse. Including hiring people for maintenance, security measures, accounting, and inventory management. The other brighter move would be to invest in a warehouse and reap the returns. With any kind of investment, there comes a set number of risks. That is why a diversified portfolio is always advised for a well-rounded investment plan. Strata’s unique approach of fractional ownership in commercial real estate is a way to achieve that. Speaking of commercial real estate investment in India, keep a tab on our blogs, articles, and social media to know exactly how you can reap the benefits of investing in real estate.