India's Industrial and Warehousing Sector Surges to 72.5 Million Sq Ft in 2025, Up 29% YoY

India’s industrial and warehousing real estate market reached a new milestone in 2025, recording 72.5 million square feet of leasing transactions across eight primary cities, marking a 29% year-on-year increase, according to a report released by Knight Frank.

The strong growth marks the highest annual transaction volume recorded in the post-pandemic period, reflecting robust demand from manufacturing companies, logistics operators, and a rebound in e-commerce-driven warehousing demand.

The report noted that 2025 also saw the strongest quarterly performance toward the end of the year, with 23.4 million sq ft transacted in the October–December quarter alone, underscoring sustained momentum in the sector.

India’s broader economic backdrop has also supported the expansion of industrial real estate. The country continues to remain one of the fastest-growing major economies, with the Reserve Bank of India projecting GDP growth of around 7.4% for FY2026, providing a stable foundation for industrial expansion and supply chain investments.

Manufacturing Drives Warehouse Demand

Manufacturing emerged as the largest demand driver in 2025, accounting for 47% of total warehousing transactions, with 34.2 million sq ft leased during the year. The segment recorded a 55% year-on-year increase in space absorption. This category includes sectors such as automobiles, electronics, and pharmaceuticals, excluding fast-moving consumer goods (FMCG) and consumer durables.

According to Shishir Baijal, International Partner, Chairman, and Managing Director at Knight Frank India, the sector’s strong performance reflects a deeper structural shift in global supply chains. “The Indian warehousing sector’s record performance in 2025 underscores the structural transformation underway in our supply chains. With demand scaling a new peak driven by manufacturing, 3PL players, and a steadily recovering e-commerce segment, the market is witnessing the rise of a broader and increasingly diversified occupier base,” Baijal said.

E-commerce Demand Rebounds

The report also pointed to a sharp revival in e-commerce warehousing demand, after a period of moderation following the pandemic-driven boom. E-commerce companies leased 7.8 million sq ft of space in 2025, registering a 56% year-on-year increase. The sector accounted for 11% of the total market activity, marking the highest annual leasing volume by e-commerce firms since 2021.

The revival indicates renewed investments in logistics infrastructure as online retail expands into smaller cities and deeper distribution networks. Third-party logistics (3PL) providers remained another key occupier group, leasing 19.6 million sq ft in 2025, reflecting a 17% annual increase.

Pune Leads City-Wise Performance

Among major cities, Pune emerged as the top-performing warehousing market in 2025, recording 16 million sq ft of transactions, an 86% jump compared to the previous year. The city accounted for 22% of the overall transaction volumes, driven largely by strong manufacturing demand from automobile and auto-ancillary companies.

Manufacturing transactions were particularly concentrated in Pune and Chennai, which together accounted for over half of the manufacturing leasing activity during the year. Meanwhile, established logistics hubs such as Mumbai and the National Capital Region continued to remain critical markets for warehousing demand. Mumbai recorded 13.5 million sq ft of transactions in 2025, while NCR saw 12.2 million sq ft of leasing activity. Other key markets witnessing growth included Chennai, Bengaluru, and Ahmedabad.

However, Kolkata and Hyderabad recorded a marginal decline in overall transactions during the year.

Secondary Markets Remain Active

Beyond the eight primary markets, secondary cities also maintained healthy activity levels. These markets collectively recorded 11.2 million sq ft of leasing in 2025, only slightly lower than the record levels seen in 2024. Among them, Lucknow led with 1.9 million sq ft of absorption, while Nagpur posted the highest growth, with leasing rising 204% year-on-year to 0.9 million sq ft.

Warehousing Stock Rises to 549 Mn Sq Ft

India’s eight primary warehousing markets together held 549 million sq ft of industrial and logistics stock in 2025, the report said. Mumbai accounted for the largest share at 169.7 million sq ft, followed by the National Capital Region with 115.4 million sq ft. Despite strong leasing activity, vacancy levels remained stable at 11.6%, suggesting a balanced market where supply continues to keep pace with demand.

The report also highlighted significant development potential within existing warehousing parks. The eight primary markets together hold over 256 million sq ft of potential development space, providing ample capacity to support future demand growth.

Grade A Warehouses Dominate Occupier Preference

Modern Grade A warehouses continued to dominate occupier preferences, accounting for 63% of total space absorbed in 2025, compared with 62% a year earlier. The share of Grade A assets in overall stock also rose to 45% in 2025, up from 41% in the previous year. Cities such as Chennai and Pune have among the highest proportions of Grade A warehousing facilities, supported by sustained demand from the automobile manufacturing ecosystem.

Rent Growth Remains Measured

Warehouse rentals increased across most markets in 2025, though the pace of growth remained relatively moderate. Rents rose between 1% and 5% across major cities, with Pune and Chennai recording the highest increases at 5% each. Developers have also increasingly adopted longer lease tenures, offering competitive pricing to minimize vacancy risk and ensure steady cash flows.

Outlook Remains Strong

Looking ahead, the report expects manufacturing-led demand, logistics optimization by 3PL firms, and the continued expansion of e-commerce to drive the next phase of growth in India’s warehousing sector. With global supply chains gradually shifting and infrastructure investments accelerating, India is expected to strengthen its position as a key manufacturing and distribution hub, sustaining long-term demand for modern warehousing infrastructure.