Leasing activity in India’s industrial and logistics real estate sector witnessed a substantial surge in the first quarter of 2025, registering an 18.5% increase to reach 160 lakh square feet across 24 cities.
This growth, compared to 135 lakh square feet in the same period of the previous year, underscores the continued recovery and demand for industrial infrastructure in India. While the industrial real estate market has been growing steadily in recent years, this uptick signals a robust demand across various sectors, including manufacturing, third-party logistics (3PL), retail, e-commerce, and FMCG. Experts point to the resurgence of domestic manufacturing and the rapid growth of e-commerce as primary drivers for this demand.
The leasing activity is predominantly concentrated in India’s Tier I cities, which accounted for approximately 79% of the total leasing. These cities—comprising Ahmedabad, Bengaluru, Chennai, Hyderabad, Kolkata, Mumbai, Delhi-NCR, and Pune—remain the focal points of industrial activity. While Tier I cities continue to attract the bulk of investments, there has been notable traction in Tier II and Tier III cities, which together contributed to 21% of the overall leasing activity. These cities include emerging industrial hubs such as Lucknow, Jaipur, Coimbatore, and Patna, which are experiencing rapid urbanisation and infrastructure improvements.
Despite the overall dominance of Tier I cities in leasing, experts highlight the increasing importance of Tier II and Tier III cities as alternatives for both new industrial developments and logistics hubs. With infrastructure development and government support driving regional growth, these cities are positioned to benefit from decentralisation trends in the manufacturing and logistics sectors. A significant contributor to the growth in industrial leasing is the resurgence in the manufacturing sector. According to data, manufacturing accounted for 30% of total absorption during the first quarter of 2025. India’s expanding manufacturing capabilities, supported by government initiatives like “Make in India,” have provided an impetus to industrial space demand. This trend is expected to continue as companies increasingly look for well-located spaces to streamline production and supply chain processes.
Meanwhile, third-party logistics players (3PL) contributed 26% to the leasing demand. The growth of the logistics industry, which is aligned with the rise of e-commerce and retail, reflects an increasingly complex supply chain that requires state-of-the-art warehousing and distribution facilities. The e-commerce and retail sectors have also contributed significantly to industrial space demand. E-commerce companies, particularly those expanding their last-mile delivery capabilities, are driving the need for larger warehouses and distribution centres. This segment alone accounted for 10% of the total leasing during the first quarter. Retailers, who are increasingly focusing on omnichannel strategies, added to the overall leasing activity, with 12% of the space absorbed by this segment.
Experts note that the rapid adoption of online shopping, combined with increased consumer spending, has led retailers to adopt more flexible warehouse models. This has paved the way for greater demand in both urban and semi-urban markets, as logistics networks must adapt to meet the growing consumer expectations for quick delivery. The supply of industrial and logistics space also saw a significant uptick, with new supply increasing by 23% to reach 159 lakh square feet in Q1 2025, compared to 129 lakh square feet in the same period last year. This influx of new space has been crucial in accommodating the growing leasing demand across key markets.
Most of the new supply—78%, or approximately 12.4 million square feet—has been concentrated in Tier I cities. However, Tier II and Tier III cities, which added 3.6 million square feet of new space, are also seeing a steady increase in supply, driven by government policies designed to spur industrial development in smaller cities and towns. These new developments are also seeing greater attention to sustainability and green building certifications. With India’s growing commitment to reducing carbon emissions and promoting eco-friendly practices, many new logistics facilities are designed to meet green building standards, integrating energy-efficient systems and renewable energy sources into their design. As India continues its trajectory towards becoming a major manufacturing hub in the global economy, the demand for industrial and logistics space is expected to remain strong. The integration of technology into supply chains, along with evolving consumer behaviours, will further shape the requirements for modern industrial real estate.
Moreover, the government’s push for decentralised industrial growth through initiatives such as the National Logistics Policy is likely to further stimulate demand across emerging urban centres. With logistics and industrial spaces now seen as essential to India’s economic recovery and growth, the sector’s future looks optimistic. However, sustainability will need to remain at the forefront of future developments. As the real estate sector grows, the environmental impact of these new facilities must be closely managed. As more companies recognise the need for carbon-neutral buildings, the transition towards green, sustainable logistics and industrial spaces will be crucial for the long-term success of this booming market.
India’s industrial and logistics real estate market has seen remarkable growth in the first quarter of 2025, driven by a combination of demand from key sectors such as manufacturing, retail, e-commerce, and 3PL. While Tier I cities continue to dominate leasing activities, there is an emerging shift towards smaller cities, which are gaining traction as new industrial hubs. The rise in leasing demand also coincides with a surge in new supply, with increasing attention to sustainability and green building practices. As India’s economy continues to recover and expand, the industrial real estate market is expected to remain a critical pillar in supporting the nation’s development goals.
Industrial and Logistics Leasing Growth Hits 18 Percent Across 24 Cities
