Retail, warehousing to be on private equity radar

APART FROM the favourite asset classes of office and residential, private equity (PE) has been taking increased interest in warehousing, logistics and retail real estate. PE investors and overseas developers are already looking at opportunities to enter India’s industrial and warehousing sector by investing in various development projects.

Investors from other nations, in general, and Asian countries such as China, Japan and Korea, in particular, have shown a lot of interest industrial development projects. A few key announcements that show their increasing interest are:

■ Wanda Industrial New City: Dalian Wanda Group ■ Industrial Parks by China Fortune Land Development Company Private ■ Development of smart cities by ZTE Corporation ■ Neemrana Japanese investment zone ■ Mandal Becharaji, Japanese investment zone ■ SUPA, Japanese investment zone ■ Chinese industrial zone in Vadodara

With the implementation of Goods and Service Tax (GST), warehousing and logistics spaces will start to see a consolidation of assets. Developers will focus on the development of large-scale, technologically advanced warehouses.

Such assets will attract PE investors, since they can deploy a larger amount in fewer assets, making monitoring easier. If they perform well, such assets can even fetch a better valuation when monetising through REITS or other ways.

Retail assets gaining attention

In the past few months, key leasehold retail assets have come on the PE radar. A few reasons include well-managed Grade-a malls starting to enjoy better occupancy with rent escalation on the cards, after a lull of six to seven years. Such well-managed assets/ entities will attract investor focus.

Leasehold retail property usually has a higher probability of success as the developer is actively involved in the key functions of mall management. Various new regulations like easing foreign investment for single-brand retailers, longer shopping hours and an updated framework for Real Estate Investment Trusts (REITS) have attracted the attention of various PE funds like Blackstone, Xander, GIC, Morgan Stanley. Various retail mall developers are also looking to raise funds for expansion.