India’s industrial and logistics space leasing market has witnessed significant growth in the first quarter of 2025, driven by heightened demand across major cities. According to data from real estate consultancy Savills India, leasing activity surged 18.5% year-on-year, reaching 160 lakh square feet between January and March 2025. This uptick reflects broader economic trends and shifts in supply chain dynamics. With continued demand for logistics and manufacturing facilities, the market is set to experience further expansion, particularly in India’s top-tier cities, though second and third-tier cities also remain key contributors.
Leasing Activity: A Clear Sign of Market Growth
The industrial and logistics leasing market in India reported strong growth in Q1 2025, with leasing activity rising to 160 lakh square feet from 135 lakh square feet in the same period of the previous year. This 18.5% year-on-year increase highlights the growing demand for industrial spaces, driven by the need for better storage, distribution networks, and manufacturing facilities in a rapidly expanding economy.
The performance can be attributed to a combination of factors, including the growth of e-commerce, the expansion of manufacturing, and increasing investment in logistics infrastructure. As companies continue to adapt to a post-pandemic world, the demand for flexible, scalable spaces has remained robust.
Tier-I Cities Lead the Charge in Leasing Activity
As per Savills India’s report, Tier-I cities have dominated the leasing activity, accounting for 79% of the total leasing volume. Key cities such as Mumbai, Delhi-NCR, Bengaluru, Chennai, Pune, Kolkata, Hyderabad, and Ahmedabad are witnessing steady demand from both domestic and international players looking to expand their footprint in India’s industrial and logistics sectors.
These cities remain the heart of India’s economic engine, offering proximity to major transportation hubs, access to a skilled labor force, and the infrastructural support necessary for businesses to operate efficiently. The continued dominance of Tier-I cities in leasing activity underscores the importance of urban hubs in driving the demand for industrial space.
Growth in Tier-II and Tier-III Cities
While Tier-I cities remain the focal point for leasing activity, Tier-II and Tier-III cities have also experienced notable growth, with these regions accounting for 21% of the total leasing volume in Q1 2025. Cities such as Guwahati, Patna, Coimbatore, Indore, Jaipur, Nagpur, Surat, and Kochi have seen increasing interest, particularly from manufacturers and logistics players looking to establish operations outside of saturated Tier-I markets.
The trend towards regional expansion can be attributed to factors such as the availability of affordable land, improved connectivity, and government incentives for industrial development in these cities. As a result, companies are increasingly looking to diversify their supply chains by investing in emerging markets that offer growth potential.
Key Sectors Driving Leasing Demand
The leasing of industrial and logistics spaces is being driven by several key sectors. According to Savills India, the manufacturing sector accounted for 30% of total leasing absorption during the period, reflecting the sustained demand for spaces to house production facilities. The third-party logistics (3PL) industry followed closely, making up 26% of leasing activity, as the demand for efficient storage and distribution networks continues to rise.
In addition, segments such as retail (12%), e-commerce (10%), and FMCG & FMCD (9%) have also contributed to the growing demand for industrial spaces, driven by the need to optimize supply chains and enhance last-mile delivery capabilities. These sectors are becoming increasingly reliant on well-positioned warehouses and distribution centers to meet the growing expectations of consumers and maintain competitive advantage.
New Supply of Industrial and Logistics Spaces Expands
Along with the increase in leasing activity, the supply of industrial and logistics spaces has also risen. In Q1 2025, new supply surged 23%, totaling 159 lakh square feet, up from 129 lakh square feet in the corresponding period of the previous year. This rise in new supply is crucial for accommodating the growing demand across various industries.
Tier-I cities contributed 78% of the new supply, with cities like Mumbai, Delhi-NCR, and Bengaluru continuing to see the bulk of new developments. Meanwhile, Tier-II and Tier-III cities saw 22% of the new space additions, reflecting the ongoing efforts to develop infrastructure in less saturated markets.
Outlook for the Rest of 2025
Looking ahead, the industrial and logistics space market in India is expected to continue its upward trajectory. The growth of e-commerce, the expansion of manufacturing, and the increasing emphasis on supply chain optimization are all contributing to the demand for high-quality logistics and industrial spaces.
With government initiatives aimed at promoting industrial growth and improving infrastructure, India’s industrial real estate sector is well-positioned for continued expansion. As businesses look to improve operational efficiency and tap into new markets, demand for both new and upgraded industrial spaces will remain strong throughout 2025 and beyond.
Conclusion: A Positive Trend for India’s Industrial Real Estate Market
India’s industrial and logistics leasing market is demonstrating robust growth, driven by strong demand from manufacturing, logistics, retail, and e-commerce sectors. The rise in leasing activity in both Tier-I and emerging Tier-II and Tier-III cities indicates a shift toward a more geographically diversified market. As supply chains continue to evolve, and businesses seek to enhance their operations, India’s industrial real estate sector is poised for continued growth, offering substantial opportunities for investors and businesses alike in 2025.
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