Bengaluru’s warehouse leasing jumped 78% in the first half of 2026, reaching 3.1 million square feet, driven largely by demand from third-party logistics firms. While this signals strong market activity and tighter vacancy levels, rising land costs and low institutional investment remain factors for stakeholders to monitor.
Bengaluru’s logistics and industrial market experienced a significant growth spurt in the first half of 2026, with warehouse leasing recording a 78% increase compared to the same period last year. Total warehouse leasing reached 3.1 million square feet (MSF) in H1 2026, cementing the city's status as a top-tier destination for logistics activity. This momentum also extended to the broader industrial market, where total gross leasing climbed to 4.4 MSF, a 63% increase compared to the second half of 2025.
Demand Drivers and Regional Activity
The surge in demand was primarily fueled by third-party logistics (3PL) providers, who accounted for 58% of the warehouse leasing activity. These firms, which handle shipping and storage for various businesses, remain the largest occupiers in the market. Other major contributors included manufacturing firms at 16% and e-commerce players at 15%. Regionally, the western corridor of Bengaluru, including areas like Nelamangala and Dabaspete, led the market by securing 52% of the leasing volume, while the eastern submarket around Hoskote contributed 46%.
Impact on Rents and Vacancy
This robust demand has helped the market absorb nearly 2 MSF of new Grade A supply that entered the city during the first half of the year. As a result, vacancy levels across the market have tightened to 11% from 13%. This tightening of available space, combined with steady interest, has put upward pressure on prices. Warehouse rentals increased by 4-5% annually, and land prices saw an appreciation of 9-10% in H1 2026, according to recent data from Cushman & Wakefield. The industrial segment showed similar resilience, with rents rising 3-4% year-on-year.
Market Risks and Investor Context
While the demand metrics appear strong, the sector faces certain headwinds. Despite the activity, the industrial and warehousing segment attracted only 1% of total institutional real estate investments in the first half of 2026, signaling that large-scale institutional interest remains cautious. Additionally, developers are navigating a challenging environment marked by rising land and construction costs. If these expenses cannot be fully passed on to tenants through rental increases, developer margins could come under pressure. Furthermore, while the current demand is high, macro-economic factors, including global trade uncertainties and geopolitical shifts, may influence how quickly companies decide to expand or sign new lease agreements in the coming months. Investors in the logistics space should monitor whether the pace of new supply additions remains balanced with demand to prevent oversupply, and whether rental growth can keep up with the increasing cost of land and construction.