With 9 million sq ft of leasing in Q1 2025 at a 15% YoY growth, industrial & warehousing demand across the top eight cities remained robust. Delhi NCR and Chennai led the demand, cumulatively accounting for around 57% of the overall leasing in Q1 2025. The demand for Grade A industrial & warehousing space was particularly impressive in Delhi NCR; the city has already witnessed about half of the leasing activity of 2024 in the first quarter of 2025 alone.
Interestingly, across the top eight cities, the engineering sector drove demand this quarter, contributing to about 25% of the overall industrial and warehousing space uptake, followed by e-commerce with a 21% share. Both these sectors have surpassed the demand from Third-Party Logistics (3PL) players, the usual frontrunners. While Chennai and Bengaluru saw strong traction from occupiers in the engineering space, demand from e-commerce players remained significant in Delhi NCR and Mumbai.
At a micro market level, Bhiwandi in Mumbai led leasing activity in the first quarter with about 1.0 million sq ft of demand, followed by Luhari (0.9 mn sq ft) in Delhi NCR and NH-16 (0.7 mn sq ft) in Chennai. These three micro markets accounted for significant leasing share in their respective cities during the quarter.
In Q1 2025, Grade A gross absorption across India’s major cities reached 9.0 million sq ft, reflecting a 15% year-on-year (YoY) increase and a 13% quarter-on-quarter (QoQ) rise. Delhi NCR emerged as the standout performer with a massive 121% YoY and 182% QoQ growth, recording 3.1 million sq ft of absorption. Chennai also showed strong momentum, rising 5% YoY and an impressive 186% QoQ. Ahmedabad maintained steady demand with no QoQ change but doubled its absorption YoY.
Bengaluru experienced a solid 60% YoY growth but declined 43% from the previous quarter. In contrast, Mumbai and Pune saw significant YoY drops of 47% and 46%, respectively, with Pune also facing the steepest QoQ decline at 53%. Kolkata's absorption dropped sharply by 69% QoQ despite a 67% YoY gain. Hyderabad remained stable, with a 50% YoY increase but no QoQ movement. Overall, the market displayed a positive absorption trend, driven by strong rebounds in select cities despite fluctuations in others.
Engineering and e-commerce players drove the bulk of the quarter's leasing, accounting for about 46% of the demand. With about 2.2 million sq ft of leasing, engineering firms alone accounted for about one-fourth of the Grade A industrial & warehousing demand in Q1 2025.
The sector saw over 2X the growth in leasing activity on an annual basis, led by robust demand in Chennai and Bengaluru. E-commerce also saw nearly 2 million sq ft of leasing, led by Delhi NCR and Mumbai. Bolstered by institutional capital deployment, improved last-mile delivery, and increasing consumer trust, e-commerce in India is expected to maintain a strong upward trajectory in the coming years. This would further fuel demand for warehousing spaces across the country's Tier I and II markets.
During Q1 2025, large deals (>200,000 sq ft) accounted for 48% of the demand at 4.3 million sq ft. These larger deals were driven by e-commerce companies, followed by engineering and automobile firms. At the city level, Delhi NCR (1.9 mn sq ft) followed by Chennai (1.0 mn sq ft) dominated the proportion of large-sized deals.
The first quarter of 2025 saw a new supply of 9.4 million sq ft, a 16% YoY rise. This was almost in line with the strong leasing activity during the quarter, indicating improved developer confidence in the industrial and warehousing market. Moreover, in line with demand trends, Delhi NCR and Chennai accounted for the bulk of new supply during the quarter. These two cities cumulatively contributed close to half of the new supply across the country's top eight cities.
Vacancy levels, however, increased by 250 basis points due to churns and exits and stood at around 13% at the end of Q1 2025. Average rentals, meanwhile, rose in most cities, fueled by strong space uptake in prominent industrial clusters.
In Q1 2025, Grade A supply across India’s key office markets reached 9.4 million sq ft, reflecting a 16% year-on-year (YoY) growth and a modest 3% quarter-on-quarter (QoQ) increase. Chennai led the supply surge with a remarkable 233% QoQ increase and 54% YoY growth, delivering 2.0 million sq ft, its highest in recent quarters. Mumbai also showed strong momentum, growing 90% YoY and 73% QoQ, reaching 1.9 million sq ft in new supply.
Delhi NCR maintained consistent expansion, recording a 9% YoY and 19% QoQ rise. In contrast, Bengaluru saw a significant drop, with supply falling 36% YoY and 53% QoQ to 0.9 million sq ft. Ahmedabad and Hyderabad also posted notable declines in supply quarterly, by 67% and 33%, respectively. Pune remained flat YoY, while Kolkata showed stable supply with no QoQ change. The trend indicates a continued but cautious expansion in India’s commercial real estate market, with sharp variations across cities.
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