India's Property Market Shifts: Warehouses Emerge as Top Real Estate Investment

India’s property market is experiencing a significant structural shift, with warehouses emerging as the top real estate investment, surpassing traditional office spaces. According to recent reports, warehouses are now outperforming office and retail segments in terms of investor interest and deal flow. This trend is not a temporary blip but a culmination of several long-term factors converging to reshape the real estate landscape.

Capital that once flowed into Grade-A office parks and retail malls is now increasingly directed towards logistics parks and industrial sheds. Institutional investors, sovereign funds, and private equity players are revising their portfolios in favor of warehousing, drawn by the stronger leasing momentum, resilient occupier demand, and comparatively stable yields.

This shift is not just a tactical reallocation but a fundamental redefinition of the real estate market. Platform-based investments are now the dominant strategy, with global investors such as Blackstone, GIC, Canada Pension Plan Investment Board, and Abu Dhabi Investment Authority, alongside domestic capital providers like HDFC Capital and Kotak Investment Advisors, backing scaled logistics platforms.

Warehousing and logistics real estate are no longer niche asset classes. According to a recent study by Grant Thornton Bharat, institutional interest has decisively moved from exploratory to conviction-led. Shabala Shinde, partner and Real Estate industry leader at Grant Thornton Bharat, noted, “India's real estate landscape is being structurally redefined. Warehousing has transitioned from a peripheral asset class into strategic economic infrastructure, offering long-term stability, institutional-grade income, and scalability.”

Office real estate, once the undisputed leader of India’s institutional property market, has faced structural uncertainty in the post-pandemic era due to hybrid work models and shifting occupier strategies. Retail, meanwhile, remains vulnerable to consumption cycles and evolving shopping patterns. In contrast, warehousing is directly linked to supply chains, manufacturing output, and e-commerce consumption—sectors that are expanding, formalizing, and becoming more technology-driven.

Investors are recognizing that logistics assets offer longer leases, sticky tenants, and rising demand driven by economic transformation rather than discretionary corporate expansion. This makes them an attractive proposition in an uncertain market.

Industrial and warehousing leasing hit a record high in 2025. Leasing activity surged to unprecedented levels, driven by robust demand from third-party logistics (3PL) companies, engineering firms, and e-commerce players. According to an ET report, industrial and warehousing leasing across India’s top eight cities remained resilient in 2025, with absorption touching 36.9 million sq ft, reflecting a 16% year-on-year growth. Delhi NCR led annual absorption with a 24% share, closely followed by Chennai at 22%, reinforcing their positions as the country’s most active industrial hubs.

After a relatively muted third quarter, leasing momentum strengthened sharply towards the end of the year. Q4 2025 recorded 10.4 million sq ft of absorption, driven by a pick-up in large transactions and expansion-led demand. Chennai and Pune together accounted for 56% of quarterly leasing, highlighting a high degree of regional concentration. Bhiwandi in Mumbai emerged as the most active micro-market during the year with around 4.9 million sq ft of Grade A space uptake, followed by Chakan–Talegaon in Pune and Oragadam in Chennai, each clocking more than 2.5 million sq ft of annual demand.

Large-format transactions during the year underscored occupier confidence and the growing scale of operations. ScootsyLogistics (Swiggy) leased 580,700 sq ft at One K Square in Kurund, Bhiwandi, strengthening Mumbai’s role as a key third-party logistics (3PL) hub. Amazon took up 500,000 sq ft at Welspun One Logistics Park in Luhari, contributing significantly to Delhi NCR’s annual absorption. Manufacturing-led demand was also visible as Honda leased 500,000 sq ft at Ascendas, Hoskote in Bengaluru, while engineering major Jabil Inc. occupied 385,000 sq ft at Ecobox Industrial Park in Ranjangaon–Wagholi, Pune. Another notable 3PL deal included DB Schenker’s 384,800 sq ft lease at BGR Logistics Park in Bhiwandi. Overall, 3PL players remained the primary demand drivers in 2025, accounting for about 32% of total leasing. Engineering and e-commerce occupiers also scaled up requirements during the year, together contributing a sizeable share of absorption.

On the supply side, developers added 41.7 million sq ft of new Grade A space during 2025, marking a 15% year-on-year increase and signaling improved confidence. Delhi NCR alone accounted for nearly 30% of total completions. Supply additions accelerated in the final quarter, with Q4 2025 seeing around 13 million sq ft of new completions, translating into a sharp 40% year-on-year growth.

The record leasing numbers are significant because they demonstrate that investor enthusiasm is supported by real occupier demand. This is not speculative construction but absorption-led growth. When 3PL operators expand, it shows that supply chains are becoming more complex and outsourced. When engineering and manufacturing firms lease large warehouse spaces, it reflects production growth and inventory consolidation. And when e-commerce players scale up fulfillment centers, it indicates deeper digital penetration across geographies.

India’s rapid digital transformation has altered consumption and distribution models. E-commerce penetration has expanded beyond metros into Tier-II and Tier-III cities. Faster delivery expectations have forced companies to decentralize storage and move closer to consumption centers. The result is a shift from a few large regional warehouses to a network of strategically located facilities.

Digitalization has also improved inventory management, supply-chain visibility, and warehouse automation. Companies now require modern facilities with higher ceilings, better flooring standards, integrated technology systems, and proximity to transport corridors. This has created a sharp distinction between unorganized, legacy godowns and institutional-grade logistics parks, with the latter attracting both tenants and capital.

While the forces driving warehousing have been evolving for years, several factors have converged recently to accelerate growth. The pandemic reshaped supply-chain thinking. Companies realized the risks of lean inventories and global disruptions, prompting a shift toward resilient, India-focused supply chains and higher inventory buffers, increasing storage requirements. Government policy initiatives, from infrastructure upgrades to logistics corridor development, have improved connectivity and reduced transportation bottlenecks. Better highways, dedicated freight corridors, and multimodal logistics parks have made modern warehousing more viable and efficient.

The formalization of the economy has boosted organized logistics players at the expense of informal operators. With GST rationalizing interstate trade and encouraging warehouse consolidation, companies now prefer large, compliant facilities rather than fragmented storage units across states.

Institutional capital is more comfortable with the risk-return profile of logistics assets. Warehouses offer relatively stable cash flows, long-term leases, and lower volatility compared to office assets in an uncertain work environment. So, warehousing has moved from being a tactical allocation to a strategic one. Investors are betting not merely on current demand but on structural transformation.

India’s manufacturing ambitions, including efforts to strengthen domestic production and integrate into global supply chains, require modern logistics infrastructure. E-commerce growth is far from saturated, especially in smaller cities and rural markets. Consumption patterns are shifting toward faster delivery cycles, which demand denser warehouse networks. Moreover, as supply chains become data-driven, warehouses will increasingly integrate automation, robotics, and analytics. This enhances productivity and allows operators to scale efficiently. Institutional investors see this as a scalable platform play rather than isolated real estate transactions.

Despite the optimism, challenges remain. Land acquisition complexities, regulatory approvals, and infrastructure gaps in certain regions can slow project execution. Rental growth may moderate if supply outpaces demand in specific micro-markets. Additionally, as more developers enter the segment, competition could compress yields over time.