Singapore-based logistics company Ascendas-Singbridge has collaborated with Bengaluru-based Firstspace Reality to form a joint venture (JV) – Ascendas-Firstspace. The firms will together create 14 Mn-15 Mn sq. ft. of industrial and logistical warehouse space, infusing around $500 Mn-$600 Mn in the next five to six years. Ascendas will hold the majority stake in the venture.
Ascendas has been rooted in India for the past 23 years and has primarily been engaged in creating space for the IT sector. It operates from six offices in the country in Hyderabad, Bengaluru, Chennai, Gurugram, and Pune. It currently has over 10 Mn sq. ft. of space leased out and another 4 Mn sq. ft. under construction. Globally, it reportedly has over 50 Mn sq. ft. of space, with 25 Mn sq. ft. focussed on logistics alone.
Firstspace, on the other hand, was started in 2015. It claims to have developed around 50,000 sq. ft. of logistics and warehousing space in Bengaluru and Chennai.
Ascendas-Firstspace JV: Key Highlights
As part of the deal, Firstspace will manage land acquisition and project execution. On the other hand, Ascendas will work on building client relationships with over 2,600 customers in the APAC region alone.
“The investment involves both debt and equity, where equity base will depend on the projects and the quantum of leverage possible on each project,” said Aloke Bhuniya, the Chief Executive of the JV.
The investment will be primarily in six locations – Delhi NCR, Ahmedabad, Pune, Bengaluru, Mumbai, and Pune. “Every single location measuring 5 to 30 lakh sq. ft. each — will be a special purpose vehicle (SPV). The JV will exit an SPV either partly or fully based on the interest it generates from buyers,” added Aloke.
The Warehouse Space In India: Future Prospects
Ascendas and Firstspace find GST, Make-In-India and growing online retail segments a positive prospect for logistics in the country. As stated by Aloke, around 80 Mn sq. ft. space is needed in the country at the moment. They further expect the demand for warehouse space from sectors such as logistics, FMCG, electronics, and auto.
A recent study by Colliers International India supports the suggested prospects by Ascendas and Firstspace. The report considers growth in ecommerce, retail, FMCG, auto and auto ancillary, chemical and pharmaceutical industries as the driving factors for the demand in warehouse space.
As stated by Shyam Arumugam, Associate Director, Office Services, Colliers International India, “The organised warehousing sector is poised for an interesting time ahead in the short to medium term, as the envisaged spurt in demand for organised top quality warehousing is expected to exceed available quality supply in major cities across India. The dearth in quality supply and escalating land prices have always remained the woes of large manufacturing companies and ecommerce companies that are constantly expanding their footprint.”
While the foremost challenge is “the acquisition of a feasible land parcel,” several global players are also eyeing the warehouse space in India. Apart from the recent Ascendas-Firstspace deal, in May 2017, Canada Pension Plan Investment Board also formed a JV with IndoSpace for $500 Mn. Other global players in warehouse space who have already entered India majorly through the merger and acquisition route are FedEx, Kintesu World Express, DHL, and TNT. DHL India also announced to invest $100 Mn to expand warehouse facility in the country.
(The development was reported by Business Standard)