Indian Logistics: Deciphering Storage Space Dynamics and more...

March 2018 Preface ’s logistics and warehousing sector is rapidly transitioning through a revolutionary phase. There have been multiple initiatives associated with large investments (both domestic & international) within this segment, clearly underscoring the upcoming trend. Of course, not to forget that India’s logistics industry was recently rewarded with Infrastructure status, thereby providing the impetus for added interest and therefore investments. As per the Fiscal Budget for 2018, there is a clear push for the logistics sector and an expected increase in investment of INR 5.97 trillion in creating and upgrading its infrastructure. With clear demarcations for cold storage and ICDs being established, other sectors are also under the scanner and their potentials are being analysed. While these are exciting times for the warehousing sector, there are other sub-sectors of storages that are undergoing a transformational change too. Through this incisive White Paper, we have tried to understand the current market dynamics of various storage spaces for different commodities across India, including -

COLD CONTAINER AGRICULTURE LIQUID SPECIALIZED STORAGE STORAGE STORAGE STORAGE STORAGES WAREHOUSING

This thought leadership piece also tries to provide an in-depth evaluation of the warehousing market across the top 8 cities. Whilst also examining the fact that the post GST era will see Tier II & III cities witness increased potential for logistics and ancillary services, this syndicated study also tries to appraise the investment proposition for each of the above sub-sectors. We hope you will find it an interesting read.

Ramesh Nair CEO & Country Head JLL, India

1 Indian Logistics: Deciphering Storage Space Dynamics 2 Indian Logistics: Deciphering Storage Space Dynamics Storage Space Dynamics across India

Agriculture Storage Total Installed capacity, Capacity in India, 2017 2017 131.8 21.0 Million MT Million TEUs

AGRICULTURE STORAGE CONTAINER STORAGE

Agriculture Storage area in Total throughput, India, 2017 2017 152.3 13.7 Million Sq Ft Million TEUs

3 Indian Logistics: Deciphering Storage Space Dynamics Throughput of liquid bulk cargo Cold Storage Capacity handled at major ports in 2017 in India, 2017 201.0 36.6 Million MT Million MT

LIQUID STORAGE COLD STORAGE WAREHOUSE

Cold Storage area in Warehousing Stock 2017 is India, 2017 139.8 42.3 Million Sq Ft Million Sq Ft for Grade A and Grade B in 8 Primary Locations in India

10% 8%

Source: Central Bank Sri Lanka Report

4 Indian Logistics: Deciphering Storage Space Dynamics AGRICULTURE STORAGE Agricultural Warehousing involves storage of agricultural products such as food grains, cereals, oil seed, sugar, pulses, spices, fruits and vegetables, etc.

SECTOR UPDATE IN INDIA

Agriculture Storage Capacity 140.0 117.8 117.5 127.0 131.8 Agriculture Storage 120.0 Agriculture Storage Capacity in India, 20171 100.0 area in India, 20171 80.0

131.8Million MT 60.0 Million150 Sq Ft 40.0 Million Tonne 20.0 0.0 2014 2015 2016 2017

Agriculture Storage capacity in India is growing at 4% CAGR (2014-17) Source: Warehousing Development & Regulation Authority (WRDA)1

Agriculture Storage Capacity split across public and private sector

27% Almost 15% Private Sector 28% The remaining of the organised73% warehouse sector is being controlled by 12% 27% Government PSUs like Food of the warehouse Corporation Of India (FCI), capacity is held by Central Warehousing Corporation private sector and (CWCs) and State Warehousing 9% co-operatives. corporations (SWCs) 1 % 36% 73Public Sector

Food Corporation of India (FCI) Central Warehouse Corporation(CWC) State Warehouse Corporation (SWC) Co-operatives Private Sector 1Source: Warehousing Development & Regulation Authority (WRDA), Annual Report 2015-16 ( http://wdra.nic.in/) and JLL Analysis

5 Indian Logistics: Deciphering Storage Space Dynamics Exports of Indian Hub of processed food agricultural products India is emerging as a sourcing Indian exports included hub for processed INR 187.91 billion worth foods thereby of agriculture products increasing the in Q1 FY17 2 requirement of agriculture storage GROWTH DRIVERS

Fair price shop are slowly Union Budget 2018 has proposed diminishing, paving way expansion of warehouse depository and for the private players to specific exports and imports related enter this sector measures in the agriculture sector

CHALLENGES

Private sector is not getting Inefficient logistic competitive rentals as the government management offers storage spaces at low prices resulting in wastage

2% With advanced and developed MAJOR PLAYERS mechanism of agri-warehouses 21% the storage and process losses which are more than 60% of the 41% Post Harvest total share, can be minimized Losses

23% Transportation Loss Processing Losses Harvesting Losses Threshing Yards Loasses 13% Storage Losses

1Source: Warehousing Development & Regulation Authority (WRDA), Annual Report 2015-16 ( http://wdra.nic.in/ ) and JLL

EXISTING DEMAND AND SUPPLY

DEMAND SUPPLY DEMAND SUPPLY

HIGH LOW STABLE

INVESTMENT DYNAMICS

INVESTMENT SHORT MEDIUM LONG TERM TERM TERM POSITIVE STABLE NEGATIVE

2 https://tradingeconomics.com/india/exports-of-agricultural-products 6 Indian Logistics: Deciphering Storage Space Dynamics COLD STORAGE Cold storages are climate controlled storages for keeping products at given temperature suiting product needs. These include commodities such as frozen food, pharma products, fruits and vegetables, etc.

SECTOR UPDATE IN INDIA

Cold Storage Capacity in India 40 31.8 32.8 34.9 36.6 35 Cold Storage Capacity in Cold Storage area in 30 India, 20173 India, 20173 25 20 36.6Million MT 15 60.0Million Sq Ft 10 5 Cold Storage Capacity MT) (Mn 0 2014 2015 2016 2017

Cold Storage capacity is growing at 5.0% CAGR (2014-17) 3Source: Ministry of Agriculture & Ministry of Food Processing Industries and JLL

Total Cold Storage Capacity 100% % of 25the storage is used for storing multiple items This 25% storage Mild Chill (10-20 degree C) 25% Sub-tropical fruits, Dairy caters to storage of products, Chocolate, Seeds high value commodity and hence it has high Chill (0-10 degree C) 100% investment potential Fresh Fruits and Vegetables, Fresh meat, Total Cold Storage for private players due to the higher rental Fish, Dairy, Pharmaceutical % Capacity Frozen (below -0 degree C) of the75 storage is yield associated with it used for storing compared to government Frozen vegetables and fruit, public storages Other items like -ice-cream, horticulture butter, fish and meat products crops including 75% 1 potatoes Storage used for storing multiple items Storing horticulture crops including potatoes

3Source: JLL and Report on Cold Chain, 2015 and 2016 by Ministry of Agriculture & Ministry of Food Processing Industries (http://nccd.gov.in/Meetings.html)

7 Indian Logistics: Deciphering Storage Space Dynamics GROWTH DRIVERS

Growth in FMCG sector of around 9.2% Growth in pharma sector India - 2nd largest producer CAGR (2011-2016) indicating higher of around 11% CAGR (2011- of Fruits and Vegetables in demand for food and grocery items 2017) also indicates increasing the world is growing at 12% which has cold storage requirement 4 demand for cold storage5 CAGR (2009-15)6

CHALLENGES

Low supply of quality cold storage has lead pharmaceutical tenants to either use temperature controlled reefer containers for temporary storage or invest additional amounts in existing cold stores for improvements MAJOR PLAYERS High Operating Cost - USD 60 in India vs USD 30 in US as the energy consumption in India is higher as well as infrastructure is inadequate7

Infrastructural challenge needs to be dealt in such a way that the operational cost decreases and efficiency increases, in order to make this sector lucrative

EXISTING DEMAND AND SUPPLY

DEMAND SUPPLY DEMAND SUPPLY

HIGH LOW STABLE

INVESTMENT DYNAMICS

INVESTMENT SHORT MEDIUM LONG TERM TERM TERM POSITIVE STABLE NEGATIVE

4 Indian FMCG Industry Analysis Report, IBEF, 2017 5 Indian Pharmaceutical Industry Analysis Report, IBEF, 2017 6 JLL; http://apeda.gov.in/apedawebsite/six_head_product/FFV.htm - APEDA ; http://www.freshfel.org/docs/FAQ/Fact_Sheet_-_world_production_2009_-_2013.pdf 7 http://indiacoldchainshow.com/retail-cold-chain-challenges-opportunities/ 8 Indian Logistics: Deciphering Storage Space Dynamics LIQUID STORAGE The liquid storage tank facilitates the storages of liquid bulk such as crude, petroleum products, chemical and edible oil.

SECTOR UPDATE IN INDIA

Ports & Refineries with liquid storage facility

The liquid bulk cargo are currently handled across 23 ports and 21 refineries

BHATINDA

NUMALIGARH DIGBOI PANIPAT BONGAIGAON MATHURA GUWAHATI GUJARAT JAMNAGAR KANDLA BINA MUNDRA SIKKA BARAUNI BEDI DAHEJ HAZIRA KOLKATA PIPAVAV VADODARA HALDIA MUMBAI JNPT PARADIP

VISAKHAPATNAM MORMUGAO TATIPAKA KAKINADA KRISHNAPATNAM KARWAR MANGALORE MAJOR PORTS ENNORE NON-MAJOR PORTS COCHIN CHENNAI REFINERY KARAIKAL VIZHINJAM TUTICORIN

9 Indian Logistics: Deciphering Storage Space Dynamics Throughput of liquid bulk cargo handled at Major Ports

250 Throughput of liquid 187 189 196 201 bulk cargo handled at CAGR is growing at 200 major ports in 2017 the rate of 201 150 3% Million MT 100

50

0 Traffic handeled Traffic tonnes)million (In 2014 2015 2016 2017 Source: JLL; Ports, IBEF Report 20171

GROWTH DRIVERS

Rise in Development of infrastructure import and like Airport, Seaports and export of Freight Lines which would liquid bulk cargo increase POL consumption MAJOR PLAYERS CHALLENGES

Constraint capacity of the existing ports - Growth rate is moderate as the ports have constraint capacity to handle liquid storage. Growth rate will increase once the ports start expanding their capacity of handling liquid bulk cargo

EXISTING DEMAND AND SUPPLY

DEMAND SUPPLY DEMAND SUPPLY

HIGH LOW STABLE

INVESTMENT DYNAMICS

INVESTMENT SHORT MEDIUM LONG TERM TERM TERM POSITIVE STABLE NEGATIVE

10 Indian Logistics: Deciphering Storage Space Dynamics CONTAINER STORAGE

CONTAINER STORAGE IS DONE ACROSS THE FOLLOWING STORAGE FACILITIES

CFS - Container Freight Station

ICD - Inland Container Depot

PFT - Private Freight Terminals

SECTOR UPDATE IN INDIA

Container Throughput in Major & Non-Major Ports 15.0 11.5 12.5 13.7 Total throughput Total Installed capacity (FY 16-17) (FY 16-17) 10.0

13.78 21.0 Mn TEUs Mn TEUs Million TEU 5.0

0.0 2015 2016 2017 Major Ports Non Major Ports

Source: JLL; Ports, IBEF Report 2017

Container traffic is growing at a pace of 9% CAGR (2015-17)8

Container handling at the Non- APM Terminals Pipavav, Adani International Major ports which is growing at 22% Container Terminal & Mundra International CAGR (2015-2017) has outpaced Container Terminal are contributing to the growth at the Major ports8 growth of non-major ports

8Source: Indian Ports Association and Indian Container Market report of 2017, 2016 & 2015, Drewry & Gateway research (http://containersindia.in/pdf/CI%20REPORT-2017-FI-FI-f.pdf) and JLL

11 Indian Logistics: Deciphering Storage Space Dynamics CFS (Container freight station): These are located near ports and offer services for handling and temporary storage of import/export laden and with customs and other agencies. They are competent to clear goods for home use, warehousing, temporary admissions, re-export, temporary storage for onward transit and outright export.

GROWTH DRIVERS

Proposition of new ports and additional capacity augmentation of existing ports will boost growth in CFS. However, the implementation of Direct Port Delivery (DPD) will still be a treat to the growth of CFS

MAJOR PLAYERS CHALLENGES

Direct Port Delivery (DPD) to cut down the dwell time and transaction cost by moving the containers direct from the port to the customer instead of routing them via CFS. With DPD coming into picture use of CFS will decrease in the near future

EXISTING DEMAND AND SUPPLY

DEMAND SUPPLY DEMAND SUPPLY

HIGH LOW STABLE

INVESTMENT DYNAMICS

INVESTMENT SHORT MEDIUM LONG TERM TERM TERM POSITIVE STABLE NEGATIVE

12 Indian Logistics: Deciphering Storage Space Dynamics CONTAINER STORAGE IS DONE ACROSS THE FOLLOWING STORAGE FACILITIES

ICD - Inland Container Depot

These are dry ports equipped for handling and temporary storage of containerized cargo, where in hinterland customers can receive port services more conveniently. It offers services related to customs department, carriers, freight forwarders, customs brokers etc. to facilitate exporters and importers for smooth handling of cargo.

GROWTH DRIVERS Despite of the over supply scenario the whole sector is bound to experience high demand in future with the completion of Dedicated Freight Corridor which will facilitate easy transport of large volume of cargo which will increase the use of ICD MAJOR PLAYERS CHALLENGES

The major challenge in this sector is the over supply scenario of ICD compared to the stagnant demand, reflected in the fact that the container market is growing at a stable growth rate of 9%

EXISTING DEMAND AND SUPPLY

DEMAND SUPPLY DEMAND SUPPLY

HIGH LOW STABLE

INVESTMENT DYNAMICS

INVESTMENT SHORT MEDIUM LONG TERM TERM TERM POSITIVE STABLE NEGATIVE

13 Indian Logistics: Deciphering Storage Space Dynamics PFT - Private Freight Terminals

ICD facilitated rail connections are PFTs. They deal with rail based cargo including container. They allow for single end user like manufacturer, consumer, etc. to own a freight terminal with private rail siding.

GROWTH DRIVERS

Going forward the The Indian Railways government approach of have given approval to modal shift from road to the scheme allowing rail is bound to boost the PFTs on railway land growth of PFTs adjacent to stations

MAJOR PLAYERS CHALLENGES

The major challenge in this segment is of getting suitable land with private rail siding

EXISTING DEMAND AND SUPPLY

DEMAND SUPPLY DEMAND SUPPLY

HIGH LOW STABLE

INVESTMENT DYNAMICS

SHORT TERM

MEDIUM TERM

INVESTMENT

LONG TERM POSITIVE STABLE NEGATIVE

14 Indian Logistics: Deciphering Storage Space Dynamics SPECIALIZED STORAGE

Free Trade & Warehousing Zones (FTWZ)

FTWZ is a special category of Special Economic Zones which is a mega-trading hub with a focus on trading and warehousing for various types of cargo like temperature controlled cargo, dry cargo, containerized and bulk cargo, etc.

GROWTH DRIVERS MAJOR PLAYERS / OPERATORS • The benefits offered by FTWZ OF FTWZ IN INDIA are like Deferred duty wherein custom duty is payable only when commodities are sold and not when they are imported and are Arshiya Northern FTWZ, Khurja, Uttar Pradesh also exempted from payment of tax, thereby reducing the logistics costs • GST implementation to reduce tax Hari Fertilizers, Ralhupur, Adani Ports and SEZ Uttar Pradesh hurdles significantly FTWZ, Mundra, Gujarat Arshiya FTWZ, Nagpur, CHALLENGES MAJOR PLAYERS Arshiya FTWZ, Panvel, Maharashtra Karanja FTWZ in JNPT SEZ • The growth of this sector Infrastructure, Fab City SPV, Ranga Uran, Maharashtra Reddy, Telangana depends on EXIM opportunity Lepakshi Knowledge and the associated norms offered Hub, Andhra Pradesh ISPRL, Karnataka by the country J. Matadee Free Trade Zone, Chennai, Tamil Nadu • Transhipment opportunity offered Notified Operational FTWZs Cochin Port Trust, Kerala Notified FTWZs by FTWZ is not fully utilised as India FTWZs with in-principal Approval has a small share and slow growth of transhipment good EXISTING DEMAND AND SUPPLY

DEMAND SUPPLY DEMAND SUPPLY

HIGH LOW STABLE

INVESTMENT DYNAMICS

INVESTMENT SHORT MEDIUM LONG TERM TERM TERM POSITIVE STABLE NEGATIVE

Source: Special Economic Zones of India website by Ministry of Commerce & Industry Department of Commerce

15 (http://www.sezindia.nic.in/asez-special-zones-notified-2005.asp) Indian Logistics: Deciphering Storage Space Dynamics Data / Document Storage

Document / Data storage is the process of handling documents in such a way that information can be created, shared, organized, stored efficiently and appropriately within a large warehouse to store possessions in hard / file format or even soft / scanned format for easy retrieval, when required. GROWTH DRIVERS

Document / Data storage As such, operators facilities are most often used are able to achieve by companies for storage of high occupancy MAJOR PLAYERS files & data. With shrinking rates and good office sizes, storage and filing returns for this is often outsourced new-entry format

With only a few brand leader in the country at present, growth opportunity exists for a brand that is well positioned and offers high quality and easily accessible facilities.

CHALLENGES

Data / Document storage Local operators are market in India is still at an fragmented and most early stage of development. of them operate from However, the potential is large informal storage space

EXISTING DEMAND AND SUPPLY

DEMAND SUPPLY DEMAND SUPPLY

HIGH LOW STABLE

INVESTMENT DYNAMICS

INVESTMENT SHORT MEDIUM LONG TERM TERM TERM POSITIVE STABLE NEGATIVE

16 Indian Logistics: Deciphering Storage Space Dynamics WAREHOUSING

17 Indian Logistics: Deciphering Storage Space Dynamics SECTOR UPDATE IN INDIA Top 8 Cities - Grade A and Grade B Warehouse Stock & Vacancy, 2017*

37.16 40 19% 20% 35 18% 16% 30 14% 28.04 16% 15.02 14% 25 30.88 14% 11% 11% 12% 20 18.63 23.34 9% 11% 10% 10% 7% 13.79 11.24 15 6% 8% 10.60 9% 11.60 6% 6.04 5% 6% 10 4% 5.24 8.70 Warehouse Space sqft) (Mn 8.00 4% 4.42 2% 5 8.03 8.98 8.55 2% 6.27 4.70 3.69 3.60 0 0.66 2.54 0% NCR DELHI BENGALURU PUNE MUMBAI CHENNAI AHMEDABAD KOLKATA HYDERABAD

Warehousing For Grade A & Grade B in Stock 2017 139.8 8 Primary Locations Million Sq Ft

TOP NATIONAL PLAYERS Grade A Grade B Vacancy (%) Grade A Vacancy (%) Grade B

Hike in the supply of Grade A Stabilisation in the Supply Stock Market Stock has substantially Grade A and Grade B Stock is increased post-GST lementation expected to stabilise in 2020-2021

Top 8 Cities - Grade A and Grade B Warehouse Stock Projections* 15% CAGR (2014-16) 21% CAGR (2017-19) 20% CAGR (2020-21)

Pre - GST Implementation Post - GST Implementation

300.0 297.0 250.0 246.5 204.0 200.0 180.2 170.3 153.9 150.0 139.8 2017 - 2019 is expected to see 113.0 131.4 98.0 112.3 substantial increase in the supply 100.0 85.7 96.6 80.2 63.3 70.9 92.5 116.7 of warehouse stock owing to the 50.0 72.7 43.3 57.9 Warehouse Space sqft) (Mn 32.8 implementation of the GST which will 0.0 22.4 27.1 have a positive effect on warehousing 2014 2015 2016 2017 2018* 2019* 2020* 2021* activities in India due to diminishing Grade A Grade B 2017 - GST is Implemented state boundaries Implementation of GST has made way for cost and operationally efficient Hub & Spoke Model of warehousing and has shifted the end user demand and developer supply from inefficient, low quality redundant warehouses to large box, good quality Grade A warehouse

*Note: It does not take into consideration Grade-C, the stock owned by government, ICD, FTWZ and captive warehousing stock by manufacturing companies that are within or beyond their premises. The warehouse stock and absorption data of the year 2017 have been estimated Note: The future projections of stock for Grade A and B space is computed taking into consideration future supply of projects and market conditions in each city. The projections are cumulative total stock 18 Indian Logistics: Deciphering Storage Space Dynamics NCR DELHI Population (MN) Stock (MN Sq. ft.)* Absorption (MN Sq. ft.)# WAREHOUSING CORRIDOR - MARKET 27.2 37.1 4.7 DEMAND SCENARIO *Cumulative stock till 2017; # Stock absorbed in 2017 WAREHOUSING CORRIDOR - NCR DELHI MAJOR LOCATIONS MARKET DEMAND MONTHLY RENTS (INR/ SQ. FT. / MONTH) GRADE HIGH / STAGNANT / LOW A B Delhi LOW NA 15 - 30 Gurgaon HIGH 19 - 21 10 - 18 Faridabad / Palwal STAGNANT 18 - 19 15 -18 Ghaziabad HIGH 17 - 19 14 - 18 Noida & Greater Noida HIGH NA 15 - 21 Sonipat HIGH 17 - 19 10 - 17 Panipat LOW NA 15 - 18 Bhadurgarh LOW NA 10 - 12

Rohtak LOW NA 12 - 18 *NA - Not available

Panipat

Sonipat

Rohtak

Bahadurgarh New Delhi Ghaziabad

Greater Noida

Noida Gurgaon Faridabad Pataudi

Daruhera Palwal Note: National Capital Territory of Delhi is considered as the geographic boundary population for as the geographic of Delhi is considered Territory National Capital Note: Note: Rental range is indicative only. Actual rents may vary as per specifications, location, size of the land and property as well as target use. Rentals are on BUA. Source: Delhi Population (20-10-2017). Retrieved 20-10-2017, from http://worldpopulationreview.com// *It does not take into consideration Grade-C, the stock owned by government, ICD, FTWZ and captive warehousing stock by manufacturing compa- nies that are within or beyond their premises. The warehouse stock and absorption data of the year 2017 have been estimated 19 Indian Logistics: Deciphering Storage Space Dynamics BENGALURU Population (MN) Stock (MN Sq. ft.)* Absorption (MN Sq. ft.)# WAREHOUSING 10.8 18.6 1.8 CORRIDOR - MARKET *Cumulative stock till 2017; # Stock absorbed in 2017 DEMAND SCENARIO WAREHOUSING CORRIDOR - BENGALURU MAJOR LOCATIONS MARKET DEMAND MONTHLY RENTS (INR/ SQ. FT. / MONTH) GRADE HIGH / STAGNANT / LOW A B Tumkur Road HIGH 14 - 16 11 - 16 Hosur Road HIGH 18 - 22 15 - 18 Mysore Road STAGNANT 17 - 19 13 -17 Hoskote LOW 17 - 20 13 - 19 *NA - Not available

Tumkur

Dabaspet

Hoskote Peenya Narsapura

Kumbalgodu Bommasandra

Attibele

Mysore Road Note: Urban agglomeration of Bengaluru, including Bengaluru city and adjacent suburban areas, is considered as the geographic boundary population for as the geographic is considered areas, suburban city and adjacent including Bengaluru of Bengaluru, agglomeration Urban Note:

Note: Rental range is indicative only. Actual rents may vary as per specifications, location, size of the land and property as well as target use. Rentals are on BUA.

Source: Bengaluru Population (20-10-2017). Retrieved 20-10-2017, from http://worldpopulationreview.com// *It does not take into consideration Grade-C, the stock owned by government, ICD, FTWZ and captive warehousing stock by manufacturing compa- nies that are within or beyond their premises. The warehouse stock and absorption data of the year 2017 have been estimated 20 Indian Logistics: Deciphering Storage Space Dynamics PUNE Population (MN) Stock (MN Sq. ft.)* Absorption (MN Sq. ft.)# WAREHOUSING CORRIDOR - MARKET 6.03 15.0 3.1 DEMAND SCENARIO *Cumulative stock till 2017; # Stock absorbed in 2017

WAREHOUSING CORRIDOR - PUNE MAJOR LOCATIONS MARKET DEMAND MONTHLY RENTS (INR/ SQ. FT. / MONTH) GRADE HIGH / STAGNANT / LOW A B Chakan - Talegaon HIGH 24 - 30 18 - 22 Hinjewadi LOW 30 - 35 24 - 28 PCMC-Bhosari STAGNANT 24 - 30 20 - 25 Nagar Road HIGH 23 - 28 15 - 20 *NA - Not available

Chakan Talegaon Ranjangaon Phulgaon Tathwade

PCMC-Bhosari Koregaon Bhima

Hinjewadi Lonikand

Pune City

Shirwal Note: Urban agglomeration of Pune, including Pune city and adjacent suburban areas, is considered as the geographic boundary population for as the geographic is considered areas, suburban of Pune, including Pune city and adjacent agglomeration Urban Note:

Note: Rental range is indicative only. Actual rents may vary as per specifications, location, size of the land and property as well as target use. Rentals are on BUA.

Source: Pune Population (20-10-2017). Retrieved 20-10-2017, from http://worldpopulationreview.com// *It does not take into consideration Grade-C, the stock owned by government, ICD, FTWZ and captive warehousing stock by manufacturing compa- nies that are within or beyond their premises. The warehouse stock and absorption data of the year 2017 have been estimated 21 Indian Logistics: Deciphering Storage Space Dynamics MUMBAI Population (MN) Stock (MN Sq. ft.)* Absorption (MN Sq. ft.)# WAREHOUSING 21.7 28.0 2.0 CORRIDOR - MARKET *Cumulative stock till 2017; # Stock absorbed in 2017 DEMAND SCENARIO

WAREHOUSING CORRIDOR - MUMBAI MAJOR LOCATIONS MARKET DEMAND MONTHLY RENTS (INR/ SQ. FT. / MONTH) GRADE HIGH / STAGNANT / LOW A B HIGH 18 - 22 14 - 17 JNPT Vicinity / Panvel STAGNANT 22 - 25 15 - 25

*NA - Not available

Padgha

Vashere

Sawad

Bhiwandi

Mankoli

Taloja

Panvel

Rasayani JNPT

Uran Khopoli Note: Urban agglomeration of Pune, including Pune city and adjacent suburban areas, is considered as the geographic boundary population for as the geographic is considered areas, suburban of Pune, including Pune city and adjacent agglomeration Urban Note:

Note: Rental range is indicative only. Actual rents may vary as per specifications, location, size of the land and property as well as target use. Rentals are on BUA.

Source: Mumbai Population (20-10-2017). Retrieved 20-10-2017, from http://worldpopulationreview.com// *It does not take into consideration Grade-C, the stock owned by government, ICD, FTWZ and captive warehousing stock by manufacturing compa- nies that are within or beyond their premises. The warehouse stock and absorption data of the year 2017 have been estimated 22 Indian Logistics: Deciphering Storage Space Dynamics CHENNAI Population (MN) Stock (MN Sq. ft.)* Absorption (MN Sq. ft.)# WAREHOUSING CORRIDOR - MARKET 10.4 13.8 2.1 DEMAND SCENARIO *Cumulative stock till 2017; # Stock absorbed in 2017

WAREHOUSING CORRIDOR - CHENNAI MAJOR LOCATIONS MARKET DEMAND MONTHLY RENTS (INR/ SQ. FT. / MONTH) GRADE HIGH / STAGNANT / LOW A B Poonamalle HIGH 25 - 28 20 - 22 Irungattukottai LOW 22 - 25 20 - 22 Sriperumbudur LOW 22 - 25 20 - 22 Oragadam HIGH 25 - 28 22 - 24 Marai Malai Nagar HIGH 25 - 28 22 - 26 Cholavaram - Redhills HIGH 15 - 20 13 - 15 Madhavaram- Puzal HIGH 18 - 22 16 - 20 Ennore - Manali LOW 18 - 20 15 - 18 Periyapalayam Road - Puduvoyal HIGH 13 - 18 12 - 15 *NA - Not available

Puduvoyal Periyapalayam Cholavaram Redhills Ennore Puzhal Manali

Madhavaram Poonamalle

Irungattukottai

Sriperumbudur

Oragadam

Maraimalai Nagar Note: Urban agglomeration of Chennai, including Chennai city and adjacent suburban areas, is considered as the geographic boundary population for as the geographic is considered areas, suburban of Chennai, including Chennai city and adjacent agglomeration Urban Note:

Note: Rental range is indicative only. Actual rents may vary as per specifications, location, size of the land and property as well as target use. Rentals are on BUA. Source: Chennai Population (20-10-2017). Retrieved 20-10-2017, from http://worldpopulationreview.com// *It does not take into consideration Grade-C, the stock owned by government, ICD, FTWZ and captive warehousing stock by manufacturing compa- nies that are within or beyond their premises. The warehouse stock and absorption data of the year 2017 have been estimated 23 Indian Logistics: Deciphering Storage Space Dynamics AHMEDABAD Population (MN) Stock (MN Sq. ft.)* Absorption (MN Sq. ft.)# WAREHOUSING 7.8 4.3 0.7 CORRIDOR - MARKET *Cumulative stock till 2017; # Stock absorbed in 2017 DEMAND SCENARIO

WAREHOUSING CORRIDOR - AHMEDABAD MAJOR LOCATIONS MARKET DEMAND MONTHLY RENTS (INR/ SQ. FT. / MONTH) GRADE HIGH / STAGNANT / LOW A B Changodar - Bhayla HIGH 16 - 20 12 - 17 Aslali - Kheda HIGH NA 12 - 20 Sanand STAGNANT 17 - 19 14 -17 *NA - Not available

Chhatral Kadi Kalol

Sanand

Aslali Changodar

Bavla Goblej

Bhayala Kheda Note: Urban agglomeration of Ahmedabad, including Ahmedabad city and adjacent suburban areas, is considered as the geographic boundary population for as the geographic is considered areas, suburban city and adjacent including Ahmedabad of Ahmedabad, agglomeration Urban Note:

Note: Rental range is indicative only. Actual rents may vary as per specifications, location, size of the land and property as well as target use. Rentals are on BUA. Source: Ahmedabad Population (20-10-2017). Retrieved 20-10-2017, from http://worldpopulationreview.com// *It does not take into consideration Grade-C, the stock owned by government, ICD, FTWZ and captive warehousing stock by manufacturing compa- nies that are within or beyond their premises. The warehouse stock and absorption data of the year 2017 have been estimated 24 Indian Logistics: Deciphering Storage Space Dynamics KOLKATA Population (MN) Stock (MN Sq. ft.)* Absorption (MN Sq. ft.)# WAREHOUSING CORRIDOR - MARKET 14.3 11.6 2.0 DEMAND SCENARIO *Cumulative stock till 2017; # Stock absorbed in 2017

WAREHOUSING CORRIDOR - KOLKATA MAJOR LOCATIONS MARKET DEMAND MONTHLY RENTS (INR/ SQ. FT. / MONTH) GRADE HIGH / STAGNANT / LOW A B Dankuni HIGH 20 - 24 18 - 22 Kalyani STAGNANT NA 9 - 12 Sirakol STAGNANT 11 - 14 9 - 12 Uluberia STAGNANT 12 - 16 10 - 14

Alampur / Dhulagarh HIGH 16 - 20 14 - 18 *NA - Not available

Kalyani

GT Road

Dankuni

Dhulagarh

Alampur

BT Road

Uluberia

Sirakol Diamond Harbour Note: Urban agglomeration of Kolkata, including Kolkata city and adjacent suburban areas, is considered as the geographic boundary population for as the geographic is considered areas, suburban city and adjacent including Kolkata of Kolkata, agglomeration Urban Note: Note: Rental range is indicative only. Actual rents may vary as per specifications, location, size of the land and property as well as target use. Rentals are on BUA. Source: Kolkata Population (20-10-2017). Retrieved 20-10-2017, from http://worldpopulationreview.com// *It does not take into consideration Grade-C, the stock owned by government, ICD, FTWZ and captive warehousing stock by manufacturing compa- nies that are within or beyond their premises. The warehouse stock and absorption data of the year 2017 have been estimated 25 Indian Logistics: Deciphering Storage Space Dynamics HYDERABAD Population (MN) Stock (MN Sq. ft.)* Absorption (MN Sq. ft.)# WAREHOUSING 9.5 11.2 1.8 CORRIDOR - MARKET *Cumulative stock till 2017; # Stock absorbed in 2017 DEMAND SCENARIO

WAREHOUSING CORRIDOR - HYDERABAD MAJOR LOCATIONS MARKET DEMAND MONTHLY RENTS (INR/ SQ. FT. / MONTH) GRADE HIGH / STAGNANT / LOW A B Kompally / Medal HIGH 15 - 17 11 - 14 Shamshadabad HIGH 16 - 20 12 - 14 Cherlapally STAGNANT 15 - 17 11 - 14 Uppal / Negole STAGNANT 17 - 20 14 - 16 Patancheru STAGNANT 12 - 15 10 - 13 Balanagar LOW 17 - 20 14 - 16 *NA - Not available

Medchal Kompally Patancheru Balanagar Cherlapally Secunderabad Uppal

Shamshabad Note: Urban agglomeration of Hyderabad, including Hyderabad city and adjacent suburban areas, is considered as the geographic boundary population for as the geographic is considered areas, suburban city and adjacent including Hyderabad of Hyderabad, agglomeration Urban Note: Note: Rental range is indicative only. Actual rents may vary as per specifications, location, size of the land and property as well as target use. Rentals are on BUA. Source: Hyderabad Population (20-10-2017). Retrieved 20-10-2017, from http://worldpopulationreview.com// *It does not take into consideration Grade-C, the stock owned by government, ICD, FTWZ and captive warehousing stock by manufacturing compa- nies that are within or beyond their premises. The warehouse stock and absorption data of the year 2017 have been estimated 26 Indian Logistics: Deciphering Storage Space Dynamics EMERGING WAREHOUSING LOCATIONS

While the top eight cities are witnessing fabulous growth; GST implementation has taken away the state barrier in storage. Going forward, location would be a major selection criteria irrespective of the state. And as a result, tier - II cities are coming into focus. JLL has identified select cites other than the top eight and evaluated their potential to become the next growth centre of logistics LUDHIANA & AMBALA 8 PRIMARY CITIES CHANDIGARH DEHRADUN AND 30 MAJOR NCR DELHI EMERGING CITIES

JAIPUR SILIGURI JODHPUR LUCKNOW & KANPUR GUWAHATI GWALIOR PATNA

AHMEDABAD BHOPAL KOLKATA INDORE RANCHI SURAT RAIPUR NASIK NAGPUR BHUBANESWAR AURANGABAD MUMBAI HYDERABAD PUNE VISAKHAPATNAM

VIJAYAWADA

BELGAUM GOA

TIRUPATI BENGALURU CHENNAI 8 PRIMARY CITIES 30 MAJOR EMERGING CITIES MANGALORE COIMBATORE KOCHI TIRUCHIRAPPALLI MADURAI TUTICORIN Source: JLL Internal Research

27 Indian Logistics: Deciphering Storage Space Dynamics METHODOLOGY ADOPTED

Parameters taken into consideration

Population of Road Road Distance the city Connectivity from Port

Presence of Airport Manufacturing Number of Consumer Price Index (CPI) in the City Potential IEMs filed for Industrial Workers

Human Development Ease of Doing 6 Hours Distribution Index (HDI) Business Potential

6 Hours Distribution Potential and Composite Logistics Score Index

3.05

Surat Favorable Locations 2.85

2.65

2.45 Nasik Tirupati Coimbatore Jaipur 2.25 Vijayawada Goa Indore Madurai Ranchi Bhopal Jodhpur Raipur Vapi Ludhiana & Ambala Indore Kochi 2.05 Visakhapatnam Tiruchirappalli Kanpur & Lucknow Mangalore Gwalior Composite Score IndexComposite 1.85 Bhubaneswar Chandigarh

Better Warehouse - Conducive Belgaum Aurangabad 1.65 Guwahati Patna Dehradun 1.45 Siliguri

1.25 0 20 40 60 80 100 120 140 160 180 6 Hours Distribution Potential (Million Persons) Increasing population catered Source: JLL Internal Research Disclaimer: Composite Score index is based on various qualitative and quantitative parameters and Distribution Coverage potential is based on the derivation of population catered / serviced for distribution is arrived from a software based om distances from respective city center covered by existing road network with an assumption of avg. achievable travel speed depending upon the different types of road (40kms/hrs for NH and Expressways and 30 km/h SH and other district roads).

28 Indian Logistics: Deciphering Storage Space Dynamics IMPACT OF GST ON WAREHOUSING

Impact: Organizations will now be able to explore a HUB AND different distribution model instead of the traditional SPOKE TO carrying and forwarding (C&F) distributor-based models. Growing demand for Larger Hubs / Regional Distribution RULE Centre as well as Smaller ‘Spoke’ warehouses

Impact: Post GST, the focus would shift on efficiency rather than tax saving through smaller warehouses. Companies CONSOLIDATION to re-structure their warehousing portfolio to bring in larger ‘supply - chain’ efficient warehouses, typically built to their specific warehouse requirements

Impact: State-border check points for scrutiny and QUICKER location based tax compliance, which accounts SUPPLY for almost 60% of a truck’s transit time, can hugely reduce, thus facilitating quicker supply

EFFICIENT Impact: Efficient warehouse management is expected to boost the sector as the warehouses are expected to have AND LARGER that ‘economics of scale’ thus increasing Per Cubic Metre WAREHOUSES storage efficiency of warehouses.

MORE Impact: Existing organized warehousing developers ORGANIZED can expect significant increase in demand. More LOGISTICS organized players are expected to enter the sector. PLAYERS

Impact: Warehousing developers are LARGER investing in larger logistic parks and INVESTMENTS buying land at strategic locations

REDUCED Impact: Reduction in tax cascading may lead to COST TO lower cost of production and distribution which CUSTOMERS can be eventually passed on to consumers.

29 Indian Logistics: Deciphering Storage Space Dynamics Access to long tenure Borrow from India funds from insurance Infrastructure Financing and pension funds Company Ltd (IIFCL) IMPACT OF INFRASTRUCTURE Logistics sector to get Access to funds as credit on long term basis STATUS OF External Commercial at competitive rates LOGISTICS Borrowings (ECB) Indian logistics sector being granted infrastructure status

Warehousing Facilities: minimum investment of INR 25 crores and Cold Chain Facility: minimum minimum area of 100,000 sq.ft. investment of INR 15 crores and minimum area of 20,000 sq.ft.

Multi-modal Logistics Park: minimum investment of INR 50 crores and minimum area of 10 acres

Consolidation of warehousing space near to consumption centers

Demand for better Last mile distribution infrastructure and centers for in-city compliant properties distribution

Higher emphasis TOP Customized on EHS solutions for easy compliance TENANT operations TRENDS

Demand from Data centers Buy vs Lease decision - in industrial areas due to critical factor considering high power requirements the new IFRS rules in USA

Emphasis on labor, automation and socio- economic development around locations

30 Indian Logistics: Deciphering Storage Space Dynamics INVESTMENT PROPOSITION Select Foreign & PE Investments in Indian Logistics Sector

INVESTOR INVESTEE INVESTMENT YEAR INVESTOR INVESTEE INVESTMENT (INR CRORES) (INR CRORES)

KKR TVS Logistics 242 2012 New Silk Route VRL Logistics 206

Everstone Transpole Everstone AS Cargo Capital Logistics 220 2014 Capital 277

Warburg Embassy Warburg Ecom Express Pincus Group 1750 2015 Pincus 850

Warburg Stellar Value Everstone Shree Kailash Pincus Chain 850 2016 Capital Logistics 200

IndoSpac Macquire + Logos + Assetz CPPIB 3,200* Ivanhoe’ 2,800

Ascendas Arshiya 534 Turnit Capital FWS Undisclosed 2017 Mahindra Life Ascendas FirstSpace 3,800 IFC Space 600

More than 10,000 Crore invested in 2017 Alibaba XPRESSBEES 224

Disclaimer: Information provided above is collated by JLL from *3 stage deals totalling $ 1.3 Bn with $500 Mn. (Rs. 3,200) invested in JV various sources. JLL has not verified the investments proposed IndoSpace Core, $700 million for buying additional industrial and logistics herein and do not take any responsibility on its authenticity. parks and an additional $100 Mn. Investment in IndoSpace Fund III

Sector-wise Private Equity Investments across Asset Classes (2014-YTD 2017) 100% 5% 5% 4% 4% 5% 9% Logistics sector 90% 16% 10% 2% accounts for Total investment flows 80% 11% INR 17% 30% 1% 70% of private9% equity invested , 60% 40% 20% 125crores000 40% across the real estate from 2014 till date; 42% 50% market in 2017 in India in the form of equity 40% 30% 59% 47% 20% 38% 35% 10% 0.0 2014 2015 2016 2017YTD Residential & Township IT & Commericial Entity Retail Warehousing & Infra Others Source: JLL Analysis 31 Indian Logistics: Deciphering Storage Space Dynamics SUMMARY FINDINGS

SECTOR DYNAMICS INVESTMENT DYNAMICS SHORT TERM MEDIUM TERM LONG TERM AGRICULTURE Majority of supply is controlled by government. High demand for quality storage of high valued commodities storage that minimizes loss. Invest with caution for specific high rent paying commodities in the short term.

COLD STORAGE Dearth of quality space and good infrastructure in cold storages definitely calls for investments in the sector. However, given the inconsistency of power and high tariff for the same, also calls for investment with caution only after diligence on basis of infrastructure.

LIQUID STORAGE Constrained / limited growth of liquid traffic in Indian ports in the recent past have had an impact on demand for liquid storage. Additionally, captive storage facilities and direct pipelines access have further reduced demand for private developers, except for near ports which handles good volume of liquid cargo.

CONTAINER STORAGE Container Freight Station (CFS): Implementation of DPD will be a threat to the growth of CFS in the medium to long term. Inland Container Depot (ICD): Growing container handling capacity for Indian port and gradual modal shift from road to rail is expected to boost the sector in the medium to long term. Private Freight Terminals (PFT): Going forward the government approach of modal shift from road to rail is bound to boost the growth of PFTs.

FREE TRADE & WAREHOUSING ZONES (FTWZ) Implementation of GST and much needed clarity on FTWZ norms is expected to bring back the occupier’s interest in the sector in the medium to long term.

DATA & DOCUMENT STORAGE Nascent and growing market in the country making it a potential investment domain in short to medium term.

WAREHOUSING Implementation of GST has made way for cost and operationally efficient Hub & Spoke Model of warehousing and has shifted the end user demand and developer supply from inefficient, low quality redundant warehouses to large box, good quality Grade A warehouses. Strong demand and investment foreseen in short to medium term. Investment Positive Stable Negative

32 Indian Logistics: Deciphering Storage Space Dynamics WAY FORWARD Promising and futuristic Policy and Infrastructure environment for the Logistic sector exists in India today, and is creating the most encouraging impact in revolutionizing the logistics sector and taking it to the next level of evolutionary phase.

POLICY LEVEL CHANGES MULTI-MODAL CONNECTIVITY EMBRACE TECHNOLOGY Infrastructure Status: Logistics Sector Road, Rail & Waterways

Logistics sector to get credit on long Post the completion and commission A number of start-ups are coming term basis at competitive rates from of DFC, large volume of cargo can easily up to support and fill the gaps financial institution and access to funds be transported via rail. This is going in the existing fragmented and as External Commercial Borrowings to be time and cost efficient and the unorganised Indian logistics (ECB), as well as access long tenure logistics sector is bound to experience industry. These start-ups cater to funds from insurance and pension funds high demand in future across storage the demands of the specialised and borrow from India Infrastructure spaces connected to railway facilities deliveries including last mile Financing Company Ltd (IIFCL) Sagarmala initiative is going to distribution or reverse logistics and GST Implementation promote port led development use technology to provide services The implementation of GST has made involving modernization of existing like tracking and fleet visualisation, way for cost and operationally efficient port and construction of new ports route optimization, real-time driver Hub & Spoke Model ofwarehouses. It to enhance transportation through tracking, etc. Examples of logistics is also shifting them industry model coastal shipping. Additionally, the start-ups: LEAP, 4tigo, ElasticRun, from inefficient, low quality redundant Inland waterways has a vision to Locus, Loginext, Shadowfax, FarEye warehouses to big box, good quality connect major logistic nodes through and many more Grade A warehouse transportation through rivers

Indian Government’s increasing thrust on core infrastructure sector is eminent from the all-time high allocation of funds (INR 5.97 trillion) in Budget 2018. This is poised to improve the transport and logistics sector (e.g. railways, roads & highways, maritime, civil aviation etc.). The country is gradually improving its logistics positioning as seen in the Logistics Performance Index (LPI), wherein India’s rank has jumped by impressive 19 position to reach 35th rank. The sector indeed has a potential to embrace lot more positive changes and has a long way to go.

33 Indian Logistics: Deciphering Storage Space Dynamics JLL 27.60+ INDUSTRIAL Services nearly million sq ft built 43 up area transacted SERVICES: Cities in India SNAPSHOTS 351 Team of transactions 38 concluded personnel in 8 cities

1,487 118 acres of land transacted consulting work delivered

*Numbers as on Jan, 2018

Feasibility & Project / Equity Market Study partner Search Land Acquisition/ Business Disposal Location Advisory JLL INDUSTRIAL SERVICES: SERVICE OFFERINGS Supply Chain Consulting Business Plan & Entry Strategy Formulation Individual Asset & Portfolio Acquisition / Disposal Lease Acquisitions - Ready Built & BTS

34 Indian Logistics: Deciphering Storage Space Dynamics About JLL JLL (NYSE: JLL) is a leading professional services firm that specializes in real estate and investment management. A Fortune 500 company, JLL helps real estate owners, occupiers and investors achieve their business ambitions. In 2017, JLL had revenue of $7.9 billion and fee revenue of $6.7 billion; managed 4.6 billion square feet, or 423 million square meters; and completed investment sales, acquisitions and finance transactions of approximately $170 billion. At the end of 2017, JLL had nearly 300 corporate offices, operations in over 80 countries and a global workforce of 82,000. As of December 31, 2017, LaSalle had $58.1 billion of real estate assets under management. JLL is the brand name, and a registered trademark, of Jones Lang LaSalle Incorporated. For further information, visit www.jll.com JLL has over 50 years of experience in Asia Pacific, with over 37,000 employees operating in 96 offices in 16 countries across the region. The firm won the ‘World’s Best’ and ‘Best in Asia Pacific’ International Property Consultancy at the International Property Awards in 2016 and was named number one real estate investment advisory firm in Asia Pacific for the sixth consecutive year by Real Capital Analytics and ranked among Fortune Magazine’s World’s Most Admired Companies list third year in a row. www.ap.jll.com

About JLL India JLL is India’s premier and largest professional services firm specializing in real estate. With an extensive geographic footprint across 10 cities (Ahmedabad, Delhi, Mumbai, Bangalore, Pune, Chennai, Hyderabad, Kolkata, Kochi and Coimbatore) and a staff strength of 9,300 the firm provides investors, developers, local corporates and multinational companies with a comprehensive range of services including research, analytics, consultancy, transactions, project and development services, integrated facility management, property and asset management, sustainability, industrial, capital markets, residential, hotels, health care, senior living, education and retail advisory. The firm was awarded the Property Consultant of the Decade at the 10th CNBC-Awaaz Real Estate Awards 2015 and the Best Property Consultancy in India at the International Property Awards Asia Pacific 2016-17. For further information, please visit www.jll.co.in

Industrial Services Business Enquiries N Srinivas Yogesh Shevade Chandranath Dey Managing Director Senior Vice President Senior Vice President & Industrial Services Head of Industrial Transaction Head Industrial Consulting [email protected] [email protected] [email protected] +91 98454 45495 +91 96197 11280 +91 90999 71598

Author Co-Author Strategic Inputs Ishita Kachru Shristy Singh Sujash Bera Senior Executive Executive Manager Industrial Services Industrial Services Industrial Services [email protected] [email protected] [email protected] +91 98305 43922

Acknowledgement: Charmy Shah & Arjun Malkani - Intern, Industrial Consulting and all the members of Industrial Services team

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Indian Logistics: Deciphering Storage Space Dynamics