India’s industrial and warehousing sector recorded a sharp rise in leasing activity in 2025, driven by the expansion of manufacturing, growing third-party logistics demand and a recovery in e-commerce, according to new data released by Knight Frank India.
Total absorption across the country’s eight primary markets reached 72.5 million sq.ft., marking a 29% year-on-year increase and the strongest annual growth recorded since the pandemic. The surge reflects a broader structural shift as global companies diversify supply chains and India strengthens its manufacturing push through initiatives such as Make in India and production-linked incentive (PLI) schemes.
Manufacturing occupiers, excluding FMCG and FMCD segments, led the demand surge, accounting for 47% of total transaction volumes. Leasing by manufacturing companies reached 34 million sq.ft., representing a 55% increase in space absorbed during the year.
Shishir Baijal, international partner and chairman and managing director at Knight Frank India, said the sector’s record performance reflected a fundamental transformation in supply chain dynamics. He stated that the scale of demand growth indicated a broadening occupier base, supported by manufacturing expansion, logistics providers and a gradually recovering e-commerce segment.
Baijal added that as global trade patterns evolve and infrastructure investment accelerates, India is increasingly positioned as a preferred manufacturing and distribution hub, a shift expected to sustain long-term demand for institutional-grade warehousing assets.
Industry operators are also witnessing a sustained rise in manufacturing-led demand. Urvish Rambhia, chief executive of Horizon Industrial Parks, said manufacturing-related leases have grown by around 50% over the past two years.
Rambhia noted that the increase was not a short-term spike but reflected a structural shift in supply chain design. He added that as manufacturing capacity expands and supply chains become more globally integrated, companies are increasingly prioritising logistics infrastructure that supports speed, resilience and sustainability, with demand shifting towards automation-ready facilities in major industrial corridors.
The e-commerce sector also recorded steady growth, with space take-up rising 56% year-on-year to 7.8 million sq.ft., the highest annual volume recorded since 2021. The sector accounted for 11% of total market activity in 2025, signalling a gradual recovery in online retail-led demand.
Meanwhile, third-party logistics (3PL) companies leased 19.6 million sq.ft., representing a 17% increase compared with the previous year, reflecting the continued outsourcing of supply chain operations by manufacturers and retailers.
Grade A warehousing facilities remained the preferred option among occupiers, accounting for 63% of total space absorbed in 2025, slightly higher than the 62% share recorded in the previous year.
Across the eight major markets, the total warehousing stock reached 549 million sq.ft., while vacancy levels remained largely stable at 11.6%, indicating balanced supply despite strong demand.
At the city level, Pune emerged as the top-performing market, recording 16 million sq.ft. of transactions, representing an 86% year-on-year increase and capturing 22% of total leasing activity. Manufacturing transactions were particularly concentrated in Pune and Chennai, which together accounted for 51% of manufacturing leasing during the year.
Meanwhile, Mumbai and the National Capital Region continued to anchor overall market activity. All major markets except Kolkata and Hyderabad recorded growth in transaction volumes during the year.
Rental growth across key logistics hubs remained moderate despite strong leasing activity. Weighted average transacted rents increased around 5% in Pune and Chennai, while Mumbai, NCR and Bengaluru registered approximately 3% growth in 2025.
