The Industrial and Warehousing real estate segment witnessed robust absorption of 34 million sq. ft. in the first half of 2025, reflecting a 24.5% year-on-year increase compared to the 27.3 million sq. ft. absorbed during the same period in 2024.
Absorption was driven by a substantial contribution from the manufacturing segment and sustained demand from the 3PL segment, followed by the e-commerce, FMCG/FMCD and retail segments. Notably, Tier I cities accounted for 77% of total absorption, while Tier II & III cities took the remaining 23%, as per Savills India.
On the supply side, the market witnessed fresh supply of 33.4 million sq. ft., of which Tier I cities accounted for 27.3 million sq. ft. (82%), while Tier II & III cities contributed 6.1 million sq. ft. (18%). The market witnessed delivery of projects across cities in tandem with the growing demand.
Tier I cities include Ahmedabad, Bengaluru, Chennai, Hyderabad, Kolkata, Mumbai, Delhi-NCR, and Pune. Tier II and III cities include Guwahati, Bhubaneshwar, Patna, Hosur, Coimbatore, Rajpura, Lucknow, Jaipur, Nagpur, Surat, Indore, Kochi, Hubli, Vizag, Belgaum and Anantapur.
The shift towards Grade A spaces is increasing, with share of demand rising from 39% in H1 2024 to 55% in H1 2025. Meanwhile, the share of Grade A supply grew from 49% to 58% during the same period. This growth is driven by a combination of demand and supply side factors, including a growing emphasis on ESG standards, quality and compliance. By the end of 2025, Grade A spaces are projected to account for over 60% of both total supply and absorption.
Other Segments include space take-up by Cold Storage, Chemicals, FTWZs, ICDs, Agriculture Warehousing, Self-Storage and Manufacturing Storage.
The manufacturing sector witnessed a significant surge in activity, with its share of total space absorption rising from 22% in H1 2024 to 32% in H1 2025. This growth has been propelled by a series of Central and State-level incentive programmes, notably the Production Linked Incentive (PLI) Scheme, which continues to drive investments and expansion. In contrast, the 3PL segment saw its contribution decline from 33% in H1 2024 to 26% in H1 2025, primarily due to reduced supply chain outsourcing by FMCG and FMCD companies aiming to optimise operational costs.
The e-commerce segment has almost doubled its contribution to overall absorption, increasing from 6% in H1 2024 to 11% in H1 2025 while the contribution of the FMCG/FMCD and retail segments stood at 11% and 7% respectively in H1 2025.
