What's Happening?
India's industrial real estate market is undergoing a significant transformation, with manufacturing leases accounting for 24% of all transactions in the first half of 2025. This marks a 38% increase compared to the same period in 2024, and is six times the pre-pandemic levels of 2019. The market recorded 25 million square feet of net absorption in H1 2025, with projections to reach 55-57 million square feet by year-end, a 12-15% increase from 2024. Major cities like Bengaluru, Pune, NCR Delhi, Chennai, and Mumbai are driving this demand, collectively representing 90% of India's net demand. The third-party logistics sector leads the demand at 28%, followed closely by manufacturing at 24%, which includes industries such as automotive, engineering, electronics, and white goods.
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Why It's Important?
The surge in manufacturing leases indicates a structural shift in India's industrial real estate market, highlighting the growing importance of manufacturing sectors. This trend is likely to attract more investment into the country, boosting economic growth and job creation. The asset-light approach adopted by manufacturing companies, optimizing capital deployment and leveraging turnkey facilities, suggests a strategic shift towards more efficient operations. This could lead to increased competitiveness in global markets, positioning India as a key player in the manufacturing industry.
What's Next?
As the demand for quality manufacturing spaces continues to grow, Built-to-Suit (BTS) transactions are expected to rise, commanding higher rents due to tenant-specific improvements. This trend may lead to further development of Grade A warehousing facilities, enhancing infrastructure across major cities. The focus on strategic markets like Bengaluru and Pune suggests potential for further regional development, attracting more businesses and investments.
Beyond the Headlines
The shift towards manufacturing leases reflects broader economic changes, including the rise of India as a manufacturing hub. This could have long-term implications for global supply chains, potentially reducing dependency on other manufacturing giants. The emphasis on asset-light strategies may also influence corporate governance and investment patterns, encouraging more sustainable business practices.
