The Rise & Growth of Industrial Real Estate



The Rise & Growth of Industrial Real Estate

  • 01 May 2020,
  • DInesh C Rathod

Commercial real estate is not limited to shops and retail spaces, but also includes industrial real estate. Unlike other commercial real estate investments, industrial properties are long-term investments that provide more stability. Depending on their location and use, industrial spaces can be classified as “

Manufacturing “ A major chunk of real estate land for industrial use is for manufacturing of goods. This would include heavy manufacturing like manufacturing of cars, production of edible goods etc. and light assembly units which would just be a unit where parts are assembled and stored and then shipped to different destinations.

Storage and distribution “ These spaces are mostly warehouses where goods are stored for transfer, and include distribution and general purpose warehouses. An important aspect of the distribution warehouse is location. Being situated at commercial hubs with easy access to arterial roads and major cities is a high priority. The general purpose warehouse is mostly for storage and needs to have high security and greater area.

Flex properties “ These real estate spaces are adapted to the needs of the occupants. These are generally made of 30% space and include R&D labs, showroom spaces and data centers

The Indian economy expanded 4.7% you in Q4 2019, matching market expectations. It follows an upwardly revised 5.1% expansion in Q3 (4.5% earlier reported). It is the weakest growth rate since Q1 2013 considering the upward revision for the previous quarter. On the expenditure side, faster declines were seen for gross fixed capital formation (-5.2% vs -4.1% in Q3), exports (-5.5% vs -2.1%) and imports (-11.2% vs -9.3%) while private consumption growth accelerated (5.9% vs 5.6%). On the production side, gross value added expanded 4.5%, compared to 4.8% in Q3. The output for utilities (- 0.7% vs 3.9% in Q3) and manufacturing (-0.2% vs -0.4%) contracted and construction slowed sharply (0.3% vs 2.9%). On the other hand, faster increases were seen for finance and real estate (7.3% vs 7.1%); the farm sector (3.5% vs 3.1%); trade, hotels, transport and communication (5.9% vs 5.8%); and mining and quarrying (3.2% vs 0.2%).

PM Narendra Modi says fundamentals of Indian economy is strong, Its has a capacity to bounce back

The February 1 Budget is widely expected to unveil more measures to boost growth PM Modi assured them that he would act on suggestions that can be implemented in the short-term and also consider long-term suggestions "We must all work together and start to think like a nation," an official press statement quoted him as saying at the meeting.Modi has been devoting a considerable amount of time in personally overseeing the policy matrix aimed at engineering a quick turnaround of the Indian economy, which is estimated to grow at 5 per cent in 2019-20, significantly lower than 6.8 per cent growth rate last fiscal and the lowest pace of GDP growth for a full financial year since the global financial crisis in 2008-09.

At the pre-Budget meeting at Niti Aayog, Modi called for a focussed effort from all stakeholders in order to achieve the target of USD 5 trillion economy, the statement said. The prime minister said he was happy that the two-hour open discussion has brought to the forefront the experience of people on the ground and those working in their respective fields.

Market factors influencing industrial real estate both globally and in the regional markets include:

E-commerce
The quick, unprecedented growth of e-commerce has led to a need for greater logistic facilities and organized, sophisticated networks for distribution and storage of goods. Be it the US, China or India, increased consumer need has led to greater demand for technologically advanced and commercially sustainable industrial real estate properties.

Smaller distribution centers
The trend of e-commerce companies and other logistics partners trying to intermingle networks for better efficiency and faster distribution, is picking up pace, with the need for warehousing facilities that are compact and location specific. This is likely to further spur the industrial real estate growth.