mumbai, June 9 -- For investors in India's real estate market, it isn't just office properties and residential developments that are vying for their money but also the more timid warehousing space. Warehouses emerged as a key investment segment in the past 4-5 years, driven by strong demand from logistics, e-commerce, manufacturing and retail occupiers. However, investors are becoming increasingly selective now, prioritising grade A assets in top-tier cities and favouring tech-enabled and environmentally sustainable warehouses, according to industry participants. Grade A warehouse stock across India's eight primary markets grew at a compound annual growth rate of 21% over the past five years, reaching 183 million sq.ft in 2023-24, credit rating agency Icra said in a July 2024 note. More than 50-55% of this stock is backed by global investors such as US private equity firm Blackstone, Canada Pension Plan Investment Board, Singapore's sovereign wealth fund GIC, Singapore-headquartered GLP and Hong Kong-based ESR Group. But this phase of high returns may be over as India's warehousing sector enters a period of more normalised and stable performance, according to industry experts. While the domestic warehousing sector saw exponential growth during the e-commerce boom with companies like Xander Group and Indospace expanding significantly as demand surged, the market is now more consolidated, said Shivam Bajaj, founder and chief executive officer of Avener Capital, a boutique investment bank focused on the infrastructure and energy sectors. "So the growth is going to be fairly stable," Bajaj said, adding that warehouse companies are expanding with minimal capital expenditure and he does not see another big spike coming. "(India's warehouse space) will grow at a steady 7-10% annually. That earlier jump was closely tied to the rapid rise of e-commerce, which has now matured." Even so, India's warehouse space has seen some recent big-ticket investments. In March, NDR InvIT Trust bought a 900,000 sq.ft. warehouse and industrial park in Surat from a consortium of Mumbai-based developers for an undisclosed sum. In January, the company announced a Rs.706-crore investment plan to acquire fully leased warehouse assets in Surat, Pune, Bengaluru and Hyderabad markets. In September, Macrotech Developers Ltd (Lodha Group) increased its stake in three warehouse companies by buying out Ivanhoe Warehousing India Inc.'s shareholding in those firms for Rs.239.56 crore. Private equity investments in Indian real estate hit $4.2 billion in 2024, a 32% surge from the year prior, show data from Knight Frank India, a real estate consultancy. Warehousing led the charge, accounting for 45% of these investments and surpassing the office sector, which had held the highest share of PE investments since 2017. However, due to a prolonged period of elevated interest rates in the West and the ongoing geopolitical uncertainty, "there were no private equity deals in the warehousing sector during the March quarter of 2025 (January-March)", Vivek Rathi, national director, research, Knight Frank India, told Mint. Flow of overseas capital into Indian real estate, particularly warehousing, will remain a challenge this year, he said, adding that unlike the office and residential segments, warehousing has not seen meaningful investments in 2025. A key reason is the limited availability of ready investment-grade assets that meet the standards of global investors, Rathi said, adding that risk appetite and return expectations from warehouse assets in India has diminished....