India’s logistics and industrial real estate market reached a record 36.2 million square feet (MSF) of leasing in the first half of 2026, an 18% year-on-year rise. Delhi NCR led the country with 8.7 MSF, largely fueled by third-party logistics and manufacturing demand. While leasing volume is strong, investors should monitor rising supply levels across cities, as it may influence future vacancy rates and rental stability.
India’s logistics and industrial real estate sector set a new benchmark in the first half (H1) of 2026, with gross leasing across the top eight cities reaching 36.2 million square feet (MSF). This marks an 18% increase compared to the same period last year, highlighting the country's accelerating industrial activity. Delhi NCR emerged as the country’s leading hub, contributing 8.7 MSF of this total, which represents a 69% year-on-year growth and confirms its status as a critical center for national supply chains.
Drivers of Demand: 3PL and Manufacturing
The surge in leasing is primarily led by two sectors: third-party logistics (3PL) providers and manufacturing. 3PL firms—companies that manage transportation, warehousing, and inventory on behalf of other businesses—remain the largest consumers of space, holding a 34% share of total demand. Following them are engineering and manufacturing firms, which accounted for 28% of the leasing volume. Together, these two segments form over 60% of the market activity, signaling a strong reliance on modern warehouse facilities to support both domestic distribution and export operations.
Automotive Sector and EV Growth
One of the most notable trends in H1 2026 was the rapid expansion of the automotive sector. Leasing activity by automotive companies nearly doubled compared to H1 2025. A major factor behind this growth is the ongoing expansion of the electric vehicle (EV) value chain, which requires specialized industrial infrastructure for battery assembly and vehicle manufacturing. This sector accounted for 13% of the overall demand in the first half of the year, reflecting the wider push toward vehicle electrification in India.
Risks and Market Monitorables
While the record leasing numbers point to healthy demand, the logistics real estate market is not without challenges. In several micro-markets, the pace of new construction—or new supply—is beginning to outpace demand. This imbalance could lead to a rise in vacancy rates, making it harder for landlords to increase rents.
Furthermore, while leasing activity is high, institutional investment remains cautious. Warehousing and industrial real estate currently account for only a small fraction (approximately 1%) of total real estate institutional investment in India. This suggests that while developers are actively building, large-scale financial backers are still carefully evaluating the long-term returns in this segment. Investors looking at the sector should track the pipeline of new projects and vacancy levels in major hubs, as these will determine whether current rental growth remains sustainable or begins to face pressure.