Whalesbook
India's Logistics Sector Records Landmark Leasing in 2025
India’s logistics and industrial real estate market is set for a banner year, with leasing volumes projected to reach nearly 60 million square feet in 2025. This milestone marks the fourth consecutive year the sector has surpassed 50 million square feet in absorption, highlighting a sustained period of robust growth and demand.
Drivers of Unprecedented Demand
The surge in leasing activity is significantly fueled by strong performance in the manufacturing sector, the rapid expansion of third-party logistics (3PL) providers, and the continuous growth of the e-commerce industry. Government policies aimed at enhancing supply chain efficiency are also contributing to this upward trend, pushing the sector into what industry experts describe as a "structurally higher growth orbit." Market observers anticipate that the leasing volumes seen in 2025 may well become the new standard baseline for activity in 2026.
Sectoral Contributions to Leasing
Data reveals that the Engineering and Manufacturing segment has captured the largest share of the total leasing, accounting for 32 percent. Third-Party Logistics (3PL) followed closely with 24 percent, while the e-commerce sector represents 15 percent of the leasing volume. Other significant sectors contributing to demand include Automobile (8 percent), FMCG (7 percent), and Retail (5 percent). This broad-based momentum across various industries reinforces strong visibility for future logistics and industrial space take-up.
Performance in Key Markets
By the first half of 2025, leasing volumes across the top eight major Indian markets—Delhi-NCR, Mumbai, Bengaluru, Chennai, Hyderabad, Kolkata, Pune, and Ahmedabad—had already surpassed 30.7 million square feet. This indicates widespread activity and strong occupier interest throughout the country's primary economic hubs.
Rental Growth Projections for 2026
Cushman and Wakefield's research forecasts a Pan-India rental growth corridor ranging between 3 and 7 percent for 2026. Pune is anticipated to experience a strong year-on-year growth of approximately 7 percent, attributed to tight vacancy rates in its key micro-markets and sustained demand from manufacturing occupiers and 3PL players. Major metropolitan areas including Mumbai, Hyderabad, Chennai, Kolkata, Bengaluru, and Delhi NCR are likely to see rental increases of 4-5 percent, reflecting property owners' ability to command modest hikes while remaining competitive. Ahmedabad is projected to record relatively softer rent growth of about 3 percent.
Expert Insights on Sector Strength
Abhishek Bhutani, Managing Director for Logistics & Industrial at Cushman & Wakefield, emphasized the landmark nature of the year for the sector. He noted that the unprecedented demand has led to broad-based rental growth across key markets, underscoring the sector's inherent structural strength. Bhutani highlighted that manufacturing-led occupier momentum remains robust, supported by policy initiatives, ongoing supply-chain diversification efforts, and sustained expansion by both domestic and global players. He also pointed out the continued strong conviction from institutional investors, with significant capital flows directed towards Mumbai, Pune, Bengaluru, and Chennai.
Supply Pipeline for 2026
Looking ahead, the market anticipates a healthy development pipeline in 2026, which is expected to further support occupier requirements and reinforce the sector's long-term growth trajectory. Pune, Bengaluru, and Chennai are identified as the most expansionary markets, with projected supply additions ranging from 7.5 to 13.75 million square feet, largely driven by institutional developers. These cities are solidifying their roles as key distribution and manufacturing hubs. Mumbai and Delhi-NCR could also witness substantial new stock additions of 20 million square feet and 5 million square feet, respectively, supported by large logistics and industrial parks situated along major transit corridors. Kolkata and Hyderabad have more measured pipelines of 4 million square feet and 3 million square feet, respectively, while Ahmedabad is expected to add approximately 0.5 million square feet.
Impact
This sustained growth and development in the logistics and industrial real estate sector point towards a robust Indian economy, enhancing supply chain efficiencies and attracting significant investment. The trend is expected to create more employment opportunities, drive infrastructure development, and yield positive returns for real estate developers and investors.
- Impact Rating: 8/10
Difficult Terms Explained
- Leasing Volumes: The total amount of commercial or industrial space that companies agree to rent or occupy over a specific period.
- Absorption: The net increase in the amount of occupied space in a market, typically measured over a period.
- 3PL (Third-Party Logistics): Companies that provide outsourced logistics services, including transportation, warehousing, and distribution, for other businesses.
- Msf (Million Square Feet): A unit of measurement for area, equaling one million square feet.
- L&I Real Estate (Logistics and Industrial Real Estate): Properties used for warehousing, distribution centers, manufacturing facilities, and other industrial purposes.
- Occupier Momentum: The sustained and increasing demand from businesses looking to lease or occupy physical spaces.
- Policy Impetus: Support or momentum generated by government policies, regulations, or initiatives designed to encourage industry growth.
- Supply Chain Diversification: The strategy of spreading supply chain operations across multiple suppliers, manufacturers, or geographic locations to mitigate risks.
- Capital Flows: The movement of money for investment purposes into a particular sector, company, or market.
- Development Pipeline: The planned future construction and delivery of new real estate spaces in a market.
- Micro-markets: Specific, localized sub-regions within a larger city or metropolitan area that share distinct real estate characteristics and market dynamics.