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Amazon India inks pact for 1-million-sq-ft warehousing space in Hyderabad

Ecommerce major Amazon’s India unit has entered into an agreement with Warburg Pincus-backed logistics development platform ESR to lease 1 million sq ft of warehousing space at the Shamshabad locality in South Hyderabad in one of the largest logistics deals in the country, said people with direct knowledge of the development.

This facility is part of a 66-acre logistics park development at the Hyderabad Airport City. The park is being developed by GMR Logistics Park, a joint venture in which ESR holds a 70% equity interest and the GMR Group owns 30%.

This is the third long-term lease, totalling over 2.6 million sq ft warehousing space, inked by Amazon India in the last few weeks.

The Shamshabad warehousing facility will be developed in two phases. The first phase with 600,000 sq ft space will be delivered by May 2022 and the remaining 400,000 sq ft by the end of 2022.

“Registration of the agreement for this built-to-suit facility has already been concluded. To begin with, the rental for the space has been set around Rs 22 per sq ft,” said one of the people.

Amazon India has leased the space for nine years. The lease will start in 2022 with the agreement providing for a rental escalation of 15% every three years.

ET’s email query to Amazon India and ESR remained unanswered until the time of going to press. Transaction advisor JLL India declined to comment for the story.

Amazon India recently leased a 1 million sq ft warehousing facility at Devanahalli Industrial & Logistics Park in Bengaluru from Logos, a logistics and warehousing development fund. It has also entered into a pact with ESR to lease 606,000 sq ft in India’s biggest logistics cluster, Bhiwandi, in the Mumbai Metropolitan Region.

Following the Bengaluru transaction, Amazon India’s storage capacity stands at more than 43 million cubic feet across 15 states, supporting around 850,000 sellers. It is planning to expand its fulfilment network with close to a 40% increase in storage capacity over last year.

Demand for warehousing space has stood out in the last few quarters, led by the expansion of ecommerce and growth of third-party logistics in the middle of the ongoing pandemic scenario.

Accelerated adoption of ecommerce, same-day or next-day delivery commitments fulfilled by third-party logistics companies, and the need to diversify supply chains are pushing demand for warehousing and logistics services.

A favourable regulatory environment, along with the government’s support through policy and reforms, is further expected to boost the spending in infrastructure and in turn the overall demand for modern warehousing.

According to industry estimates, almost one-fourth of the total warehousing space in India has been leased by ecommerce firms such as Flipkart and Amazon in the past two years.

This is expected to accelerate further due to the change in the way consumers shop following the outbreak of Covid-19. The growth in demand for warehousing is also likely to attract investments in this space.

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