Manufacturing Drive Spurs Record Leasing in India’s Industrial Real Estate Market in 2025.

Manufacturing Drive Spurs Record Leasing in India’s Industrial Real Estate Market in 2025

The first half of 2025 has marked an unprecedented milestone in India’s industrial real estate landscape, driven by a surge in manufacturing space leasing. Leasing volumes have soared to 9.0 million square feet during H1 2025, up 38% from 6.5 million square feet recorded in the same period last year. This remarkable growth is nearly six times the leasing activity seen before the pandemic in H1 2019, highlighting a significant shift in how manufacturing companies approach their real estate needs.

A Shift Towards Agile and Asset-Light Real Estate Models

One of the most striking trends in this transformation is manufacturers’ move away from costly land acquisition towards leasing high-quality, Grade A industrial spaces and build-to-suit (BTS) developments. This shift enables companies to accelerate their operational deployment and maintain the flexibility required to adapt to changing demand cycles. Unlike traditional land purchases, leasing modern facilities allows manufacturers to bypass complex ownership hurdles and focus on rapid scaling.

Grade A Spaces Lead the Way

Grade A infrastructure is at the forefront of India’s industrial real estate evolution. Currently, these premium facilities constitute 55% of the country’s total industrial and logistics stock of 463.2 million square feet spread across the eight leading cities—Mumbai, Delhi NCR, Kolkata, Chennai, Bengaluru, Pune, Ahmedabad, and Hyderabad.

During the first half of 2025, net absorption—a key measure of space take-up—reached 24.6 million square feet, with Grade A spaces commanding an overwhelming 81% share. This dominance is expected to continue, with full-year absorption projected to be between 55 and 57 million square feet, marking a 12-15% increase over the 50 million square feet absorbed in 2024.

Geographic Concentration of Demand

The demand for industrial space is concentrated heavily in five key cities: Bengaluru, Pune, Delhi NCR, Chennai, and Mumbai. Together, these cities represent 90% of India’s net industrial real estate demand. Bengaluru leads this charge, reflecting its status as a major industrial and logistics hub.

Diversified Sectoral Drivers

The growth in leasing transactions spans diverse sectors. Third-party logistics (3PL) firms contribute 28% of the leasing activity, closely followed by light manufacturing at 24%. Within manufacturing, the automotive, engineering, electronics, and white goods segments are particularly active, demonstrating the broad-based nature of demand.

The Rising Popularity of Build-To-Suit Developments

An interesting development is the growing traction of BTS projects. These custom-built facilities tailored to tenant specifications command a rental premium of 20-25% over conventional warehousing. Pune and Chennai, with their mature industrial ecosystems and abundant Grade A stock, are at the forefront of this trend, highlighting a focus on premiumization and fine-tuned operational capabilities.

Conclusion

India’s industrial real estate market is undergoing a fundamental transformation powered by increased manufacturing investment and changing supply chain dynamics. The surge in leasing activity—especially in Grade A and build-to-suit spaces—reflects a strategic shift towards asset-light models that support faster and more flexible operations. As manufacturing continues to flex its muscle, the demand for modern industrial spaces in leading cities is set to keep growing, fostering further evolution in India’s real estate ecosystem.

This trend signals strong confidence in the future of Indian manufacturing and paves the way for continued growth in industrial infrastructure supporting the country’s economic ambitions.