India's Industrial Real Estate Market Booms Amidst Land Acquisition Challenges

In southern India, an industrial park is experiencing a surge in demand for modern warehouses and factories. Companies are eager to capitalize on India's economic growth and diversify their supply chains beyond China. The park, managed by Blackstone and Niranjan Hiranandani, has seen a spike in inquiries for leasing space, with several clients considering relocating from China.

To meet this growing demand, the park plans to invest $800 million to expand its space to 20 million square feet. This expansion is part of a broader trend in India, where leased warehouse space has reached its highest level in two years. The growth is driven by the country's economic growth, which has outpaced advanced nations.

Traditionally, businesses in India have relied on low-rise sheds for storage, but these are inadequate for the needs of foreign industrial giants. Developers are therefore scouting for land nationwide, facing challenges in land acquisition. Prime targets include companies looking to expand manufacturing beyond China and those seeking to boost exports and domestic sales.

One major attraction for companies is India's infrastructure development, which has improved connectivity and made previously overlooked land plots more accessible. Panattoni, a global developer, is building its first warehouse complex near New Delhi, highlighting its access to expressways and a rail freight corridor. The company plans to acquire land for four more parks within a year.

India's warehouse market is still relatively small compared to China and the United States, but it is growing rapidly. Colliers estimates that the 7.7 million square feet of warehouse space leased in the last quarter of 2023 was the highest in the last two years. Automobile, engineering, retail, and e-commerce companies are expected to drive further growth.

Despite the high demand, developers face challenges in land acquisition. India's infrastructure drive has increased land prices, and some plots have multiple owners, making it difficult to complete transactions. Panattoni took eight months to acquire land for its complex near the capital.