Whalesbook
Strong Demand Drives Record Leasing
India's industrial and warehousing sector began 2026 with its strongest first quarter in four years, as robust demand pushed leasing activity to 11 million square feet. This figure represents a significant 22% year-on-year increase, signaling a sustained expansion in the logistics and manufacturing ecosystem. Delhi NCR led market activity, accounting for 28% of total leasing, followed closely by Chennai with 21%. Hyderabad and Bengaluru also saw substantial growth, with Grade A industrial and warehousing space uptake multiplying two to three times compared to the same period last year.
Third-party logistics (3PL) providers were the main drivers of this demand, taking up nearly 3.5 million square feet – about a third of the total leased space. This marked an 80% surge in 3PL leasing compared to the first quarter of 2025, fueled by growing logistics needs and efforts to modernize supply chains. The e-commerce and automobile sectors collectively contributed significantly, leasing approximately 32% of the quarter's demand. E-commerce alone leased 4.7 million square feet, doubling its market share year-on-year. This broad-based demand reflects a wider economic recovery and increasing occupier diversification, reinforced by manufacturing expansion supported by initiatives like Production Linked Incentive (PLI) schemes.
Evolving Demand and Policy Support
Looking at the full year 2025, India's industrial and warehousing sector leasing reached a record 72.5 million square feet, a 29% year-on-year increase. Manufacturing companies were the largest occupiers, accounting for 47% of the total space leased. This manufacturing-led demand, bolstered by government policies like 'Make in India' and PLI schemes, is increasingly focused on strategically located industrial parks to reduce logistics costs and enhance supply chain efficiency.
A significant structural shift is the rapid growth of quick commerce. This trend is reshaping warehousing needs, requiring hyperlocal fulfillment centers and 'dark stores' within urban areas, moving away from solely relying on large, peripheral warehouses. The quick commerce market was valued at USD 5.3 billion in 2025 and is projected to surge to USD 134.1 billion by 2034, underscoring its evolving consumer appeal. This divergence in demand—from large logistics hubs to small, urban fulfillment points—creates a complex dynamic, as the existing supply of traditional large-format warehouses may not optimally serve this new wave of demand. Despite these shifts, occupier preference continues to trend towards Grade A spaces, which accounted for 63% of total leased space in 2025, reflecting a growing emphasis on quality, compliance, and operational efficiency.
India's macroeconomic stability further supports the sector's resilience, with robust GDP growth forecasts and government policies like the National Logistics Policy (NLP) aiming to reduce logistics costs significantly. The NLP targets reducing logistics costs from around 16% of GDP to a global average of 8% by 2030, providing crucial policy support for market stability amidst global uncertainties.
Developer Caution and Market Uncertainties
Despite strong leasing figures, developers are adopting a cautious approach to adding new supply. They cite global geopolitical crises and ongoing supply chain disruptions as key concerns. This hesitant stance, contrasted with sustained occupier demand, could potentially lead to a future imbalance between supply and demand or price increases for available space. Additionally, rising land costs in prime locations and global interest rate hikes pose challenges, potentially impacting development feasibility and increasing financing costs for new projects. The sector's continued growth also relies heavily on ongoing government policy support and infrastructure development, making it susceptible to policy shifts or implementation delays.
Outlook for Continued Growth
The industrial and logistics real estate sector is poised for continued expansion. Analysts project sustained momentum through 2025 and beyond, underpinned by manufacturing growth, export-oriented policies, and rising domestic consumption. Warehousing rentals are anticipated to maintain an upward trajectory in 2026, driven by a 'flight to quality' and increasing development costs. Projections indicate the market will grow at a compound annual growth rate (CAGR) of approximately 15% from 2022 to 2027, with the Indian warehouse market size expected to reach INR 3.37 trillion by 2034. Further growth will likely be fueled by e-commerce penetration into Tier-II and Tier-III cities and continued adoption of technology in supply chain management.