The warehouse industry is in a growth mode with the introduction of new technologies and online retail stores. According to a report by Ernst & Young and the CII Institute of Logistics, the size of the Indian warehousing industry, across verticals, is estimated to be around `560 billion. The sector is growing at an average 10% per annum. While warehouses dealing with agricultural and horticulture products account for about 15% of the total warehousing industry, cold storages have a share of about 16%. It’s the warehouses catering to the industrial and retail players that hold the maximum share commanding around 55% of the market. BE’s Ayantika Halder spoke to Anshul Singhal, CEO, Embassy Industrial Parks, about how the sector is evolving in India.
Q. How has been the warehousing industry performing in India? What has been the contribution of Embassy Industrial Parks to the sector in recent years?
A. The warehousing industry in India has evolved from just brick and mortar shelters/go-downs for the purpose of storing goods to highly sophisticated stockrooms. Warehouses play a vital role in the entire value chain; from raw materials to customer satisfaction. We formed Embassy Industrial Parks to address the challenges of companies grappling with building and managing industrial and warehousing spaces.
Our industry has brought high quality industrial, light manufacturing and warehousing spaces in close proximity to leading consumer and industrial centres across the country. Over the last two and half years, we have made significant inroads. We aim to build 15 to 20 million sq ft of industrial and warehousing space over the next five years. We have already initiated acquisitions in Chennai, Delhi, Pune, and Mumbai & NCR and are actively working to acquire land in Gujarat and Kolkata. We have invested around `350 crore to build a 1.1-million square feet industrial park at Chakan, Pune. The group is planning to invest about `1,600 crore as equity to build seven-eight industrial parks over the next six years.
Q. With the popularity of e-commerce and online retail stores in the country, there is an increase in demand to deliver goods to remote parts of the country. How is the sector dealing with this?
A. Today, last mile delivery is the key focus of the e-commerce and the FMCG (fast moving consumer goods) industry. For decades, consumer products have been distributed to retail stores in bulk, through loaded transportation. Now, online ordering is pushing brick-and-mortar retailers beyond this traditional supply chain infrastructure. Warehouses and distribution centres were planted in remote locations where costs for land, labour and taxes were low. Warehouses are beginning to assume some of the characteristics of stores with significant retailing activities. They are highly varied in size and shape, purpose and intent, and deploy technology to meet rising customer service expectations. In e-commerce, the distribution centre provides much of the customer experience which has introduced the emergence of multi-level centres also called fulfilment centres.
Q. What are the key differentiators if we compare Indian warehouses with those in the western countries?
A. For starters, each state in India poses unique challenges, land laws, approvals, conversion processes, title related diligence and cultural challenges. There is no doubt that warehousing in the west is a fairly established concept. Their warehouses are highly automated and quite advanced. Infrastructure is another key area where India and the West stand poles apart. Our counterparts in the developed hemisphere are equipped with modern equipment for various tasks such as material handling, loading and unloading of goods.
Our Indian warehousing industry is still at a nascent stage. However, it seems to be evolving rapidly.
Q. What are the challenges to the sector in India? What kind of interventions can boost the sector?
A. The main challenges the companies face are poor quality warehouse supply, bad flooring, leaking buildings and poor amenities and almost no infrastructure. These lead to inventory inaccuracy, pilferage, fire hazards, redundant process, delays, and wastage. Embassy Industrial Parks helps its clients with top-class infrastructure.
Q. What has been the impact of the GST bill on this sector? What are the solutions to resolve the problems?
A. Post the Goods and Services Tax (GST), warehousing activity in the region has moved towards a more systematic mode of operation leading to an inflow of more institutional funding and formal sources of capital. A recent survey conducted by CBRE among leading warehousing occupiers in the country, revealed that consolidation and expansion will be the key theme driving warehousing demand in the region. This will result in increased demand for larger and better quality warehouses. The survey also revealed that 30% of respondents said that they will further expand their footprint in the warehousing market of Delhi-NCR in the post GST scenario.
Q. You have recently announced the construction of a Grade A quality industrial and warehousing facility in Gurugram. What is the advantage of this project?
A. The Gurugram project is a well-positioned property that has 6lakh sq.ft. of leasable space containing a logistics park concept with a host of other amenities. The land parcel approximately costs `38 crore. The area is developing at a fast pace and turning into a global manufacturing hub with the presence of various international giants. Companies from 3PL, e-commerce and FMCG sector account for almost 70% of the total demand in the Delhi-NCR. This warehouse is being constructed by Embassy Industrial Parks to meet the ever growing demand of logistics requirements of industry verticals such as e-commerce, FMCG, retail, consumer durables, apparel and fashion, automotive, pharmaceutical and healthcare, high tech and telecom.