India’s warehousing and industrial real estate sector is riding a powerful wave of growth, driven by manufacturing expansion, e-commerce resurgence, and rising demand for modern logistics infrastructure. According to Knight Frank India’s latest India Industrial and Warehousing Market Report Q3 2025, warehousing demand rose 16% year-on-year to 17.1 million sq. ft during the July–September quarter, marking one of the sector’s strongest quarters to date.
With sustained occupier interest and diversified demand, year-to-date (YTD) leasing activity touched 49.2 million sq ft—a 32% jump over last year—putting the sector firmly on course for another record-breaking year.
The report attributes this growth to structural shifts within India’s economy: a surge in domestic manufacturing, greater supply chain resilience, and policy-led industrial expansion. Demand remains broad-based, but manufacturing, third-party logistics (3PL), and e-commerce continue to lead activity across markets.
“India’s industrial and warehousing landscape continues to strengthen on the back of fundamental shifts, particularly manufacturing expansion, supply chain diversification, and improving logistics efficiency,” said Shishir Baijal, Chairman and Managing Director, Knight Frank India. “Demand remains broad-based, with leasing activity sustaining growth momentum and Grade A facilities now accounting for 61% of occupier take-up in 2025. With strong business sentiment and sustained policy support, the sector remains positioned for long-term, high-quality growth.”
Manufacturing Takes the Lead
Manufacturing firms maintained their position as the top demand drivers in Q3 2025, contributing 44% of total transactions during the quarter and 45% of all leasing activity in the first nine months of the year. Leasing by manufacturers (excluding FMCG and FMCD) grew an impressive 56% year-on-year between January and September 2025, reflecting both renewed industrial confidence and a steady shift of global supply chains toward India.
The 3PL sector also continued to play a crucial role, absorbing 27% of total leased space YTD and recording a 17% annual rise in transaction volumes. The report highlights that logistics operators are investing aggressively in large-scale, tech-enabled facilities to optimize distribution networks and meet rising demand from both retail and manufacturing clients.
After a relatively quiet 2024, the e-commerce sector staged a dramatic comeback. E-commerce firms leased 2.5 million sq ft in Q3 2025—a 137% surge from the same period last year—marking their highest quarterly volume since early 2023. With 12% of total YTD activity now accounted for by online retailers, the segment is clearly regaining traction amid steady consumer spending and the push for faster, localized fulfillment networks.
City Performance: Mumbai and NCR Lead the Charge
The report notes that leasing activity increased across all major cities, with Mumbai, Delhi-NCR, and Chennai emerging as the top performers. Each recorded their highest transaction volumes in three years.
Mumbai saw a remarkable 123% year-on-year increase in warehousing demand in Q3 2025 and 10 million sq ft of leasing YTD—accounting for a fifth of national activity. Delhi-NCR followed closely with 93% growth in the quarter and 8.8 million sq ft of leasing between January and September, supported primarily by manufacturing and 3PL occupiers.
Chennai has been another standout performer, recording a 62% year-on-year surge in YTD Q3 2025 transaction volumes—its best performance in recent years. Manufacturing occupiers alone accounted for 62% of all space transacted in Chennai during this period. Pune, Ahmedabad, and Bengaluru also posted strong leasing volumes, aided by industrial diversification and robust infrastructure.
Knight Frank observed that five markets—Chennai, Mumbai, NCR, Pune, and Ahmedabad—are currently at three-year highs for leasing volumes, underscoring how the warehousing boom is now spreading beyond the traditional metros.
Supply and Vacancy Trends
India’s total warehousing and industrial stock across the top eight markets reached 530 million sq ft by Q3 2025. In the same quarter, 17.5 million sq ft of new supply became operational, of which 84% was Grade A quality. For the year to date, Grade A developments accounted for 78% of new completions, underlining the growing occupier preference for facilities that meet global standards in compliance, automation, and sustainability.
Vacancy levels stood at 12.2% overall, slightly elevated due to the sharp influx of speculative supply. Grade A vacancy was at 13%, compared to 9.2% for Grade B, as developers fast-tracked new projects to meet surging demand for premium spaces.
Pricing and Rentals
Strong leasing momentum and limited supply of ready-to-move Grade A spaces kept rental growth steady across major markets. Average warehouse rents rose 3–4% year-on-year in Q3 2025. Cities with strong manufacturing-led demand—such as Chennai, Pune, and Mumbai—saw slightly higher rent escalations, while new supply helped stabilize prices in markets like Ahmedabad and NCR.
A Strong Outlook for India’s Logistics Future
The long-term outlook for India’s industrial and warehousing sector remains highly positive. The government’s continued focus on “Make in India,” production-linked incentives (PLI), and logistics modernization is encouraging global and domestic companies alike to expand operations.
Knight Frank expects manufacturing-led demand to remain the cornerstone of growth over the next few years, as firms diversify production bases and establish regional supply chains within India. Simultaneously, the growing participation of 3PL operators in logistics optimization, along with renewed e-commerce expansion, will add new layers of demand.
Shishir Baijal believes this convergence of factors positions India for a high-quality, sustainable growth phase. “With strong business sentiment and sustained policy support, the sector remains positioned for long-term, high-quality growth,” he said, emphasizing that the structural transformation of India’s logistics and manufacturing ecosystem is now well underway.
India’s warehousing story is shifting gears, from a fragmented, cost-sensitive industry to a large, organized, and technology-driven sector that mirrors the country’s rise as a global manufacturing and consumption hub. If the current momentum continues, 2025 may mark not just another record year, but the beginning of a decade of industrial real estate dominance.
