By Peter Grant

Blackstone Group Inc., already the largest owner of office buildings in India, is about to become one of that country's biggest owners of warehouses, too.

The investment firm is on the verge of buying 3.5 million square feet of industrial warehouses as well as development sites that could house another 18 million square feet of logistics properties, according to people familiar with the matter. The firm plans to spend about $720 million to acquire the existing buildings and develop the sites, the people said.

Blackstone and other big U.S. real estate owners such as Prologis Inc. and Nuveen Real Estate have been gobbling up U.S. industrial properties for many years, leasing these buildings as fulfillment centers to capitalize on the explosion in e-commerce.

Online retail growth, which has also supercharged the value of industrial property in Europe and China, has been more modest in India. Online shopping accounts for only 4% of retail sales in that country, compared with 12% in the U.S. and 24% in China, according to Prahlad Tanwar, logistics sector leader of KPMG in India.

But the pandemic is now accelerating Indian e-commerce because people prefer the safety of shopping from home during Covid-19. A new outbreak of the coronavirus in India has sent cases soaring, forcing the government to order new lockdowns.

The Indian industrial market became more attractive to international investors in 2017, after Prime Minister Narendra Modi implemented a tax overhaul. Government investment in roads, railways and other infrastructure has also helped modernize the country's logistics business.

Industrial property is also gathering strength in India because global online retailers are ramping up in the country. The two largest competitors are Amazon.com Inc. and Flipkart Group, which was acquired in 2018 by a group led by Walmart Inc.

Other global players in the India industrial market include the Canada Pension Plan Investment Board and Everstone Group, a Singapore private-equity firm, which in 2017 formed a new venture with IndoSpace, a local company focused on logistics.

Blackstone, which already owns 18 million square feet of Indian industrial property, typically buys property and rarely develops from the ground up. But development is a big part of its India strategy because the country offers few large modern warehouses and distribution facilities for sale, according to Christopher Heady, the head of Blackstone's Asian real estate group.

"You're talking about a country with one billion plus people with hardly any modern warehouses," he said. Mr. Heady declined to comment on the pending deal.

Some global investors have run into problems in previous cycles when forming ventures with local Indian partners that turned into feuds.

Mr. Heady noted that Blackstone has successfully worked with Indian companies in the past on office developments. "Although it has some of the risk you typically experience with development, the growth justifies that," he said.

Blackstone is planning to purchase the portfolio from a venture of Warburg Pincus LLC and Embassy Group, according to people familiar with the matter. Embassy is one of India's largest property companies and a partner of Blackstone's in previous deals.

Blackstone has been both a buyer and a seller of logistics properties in the Pacific Rim region. On Sunday, a venture of Hong Kong-listed ESR Cayman Ltd. and Singapore sovereign-wealth fund GIC Pte. Ltd. said it had purchased a Blackstone industrial portfolio in Australia for $2.95 billion (reported as 3.8 billion Australian dollars). The portfolio, named Milestone, has 45 assets.

Write to Peter Grant at peter.grant@wsj.com

(END) Dow Jones Newswires

04-20-21 0814ET