India and Southeast Asia are emerging as significant beneficiaries in the global manufacturing landscape, attracting multinational companies seeking to supplement or diversify their operations away from China.
This strategic shift is largely driven by the need to de-risk supply chains and minimise dependency on China. The Indian government’s emphasis on the Make in India initiative, coupled with production-linked incentive (PLI) schemes designed to bolster local manufacturing, is beginning to show tangible results. This is evident in the rising demand for leasing spaces for light manufacturing and warehousing.
Real estate consultancy JLL reports a 4.5 times increase in leasing activity for light manufacturing spaces in 2023 compared to 2020, with expectations of a further 25% rise in 2024. Light manufacturing encompasses sectors such as engineering, automotive and ancillary industries, electronics, and white goods production. “India’s demographic advantage and status as one of the world’s largest consumer markets make it a more attractive option compared to other Southeast Asian countries. Manufacturing companies are exploring innovative transaction structures to align with their timeline targets and funding strategies in India,” stated a JLL official.
The Make in India initiative, alongside the Industrial Corridor Development Program, PLI, India Semiconductor Mission, and the National Logistics Policy, has significantly bolstered India’s global manufacturing appeal. “We have observed a notable shift in demand from e-commerce, retail, and third-party logistics (3PL) to manufacturing companies within our key industrial markets in Mumbai, Pune, and Chennai during FY24. Approximately 60% of our new clients were international companies establishing or expanding their light manufacturing bases in India, signalling that India’s emergence as a manufacturing powerhouse is well underway,” noted an official from ESR India.
In a notable development, Foxconn Group’s Yuzhan Technology recently leased approximately 550,000 square feet of warehousing space in ESR’s Chennai Industrial Park for a decade. This facility stands as one of the largest in India for the Apple product manufacturer. The surge in leasing is not only driven by the need for supply chain diversification but also by India’s robust economic fundamentals, including a vast population and labour pool, favourable costs, and a plethora of incentives.
Data from JLL indicates that India attracted foreign direct investment (FDI) worth $148.9 billion between 2014 and 2023, marking a 55% increase from the $96 billion recorded between 2005 and 2014. These developments underscore India’s rising prominence as a global manufacturing hub, fuelled by strategic government initiatives and a conducive business environment. As multinational companies continue to set up and expand their operations, India’s industrial leasing market is poised for sustained growth, reinforcing the country’s position on the global manufacturing map.
