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May 26, 2017

India received a significant boost to its industrial and logistics sector last week with the launch of IndoSpace Core, a joint venture between the country’s biggest developer of modern logistics park, IndoSpace, and Canada Pension Plan Investment Board (CPPIB).

IndoSpace Core marks the largest industrial and logistics deal in India to date. CPPIB is pledging approximately US$500 million to the joint venture and will acquire 13 well-located industrial and logistics parks of approximately 14 million square feet in total. The new venture also has the option to purchase additional industrial and logistics parks totalling approximately 11 million square feet, worth around US$700 million.

Stuart Crow, JLL’s Head of Capital Markets in Asia Pacific believes that India’s logistics sector is set to pique further investor interest as the country continues to modernise. “While the logistics sector was seen as underdeveloped and with limited investment opportunities, it is now being recognised as an institutionally attractive asset class, set to benefit from the growth of progressive government policies and continued foreign direct investment in India,” he explains.

Breakthrough for logistics
India’s logistics market is expected to grow to US$307 billion by 2020 according to data from The Associated Chambers of Commerce and Industry of India (ASSOCHAM).

Government initiatives such as the upcoming Goods and Service Tax (GST) will, from July 1, increase the need for integrated logistics services and improve interstate transportation of goods and services, giving the sector a boost. Prime Minister Narendra Modi’s Make-in-India policy has further fueled demand for warehouse space due to the increase in manufacturing output.

The rise in consumer spending in India’s second and third tier cities as well as the increasing popularity of e-commerce are serving as further drivers of growth.

“We can definitely expect to see a rising volume of international and domestic institutional interest in the industrial sector going forward,” says Shobhit Agarwal, a Head of JLL’s Capital Markets team in India.

“India’s logistics sector offers investors an attractive long-term income return given longer occupational leases, with fixed rental uplifts and higher yield compared to the office and retail sectors.”

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Shobhit Agarwal

Head of JLL’s Capital Markets team in India.

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