India's industrial and logistics leasing market is booming, with projections estimating leasing volumes to exceed 50 million square feet for the third consecutive year. According to real estate consultancy Cushman & Wakefield, the sustained demand observed over the past few years shows no signs of slowing down, with the volume already surpassing 41 million square feet across the top eight real estate markets by October 2024.
The surge can be largely attributed to the introduction of the Production-Linked Incentive (PLI) scheme initiated by the government in 2020, serving as a catalyst for growth. Alongside this, the rising retail and e-commerce sectors are significantly contributing to the increase in demand for logistics and industrial spaces, leading to intense activity particularly within the warehousing industry. Abhishek Bhutani, the Managing Director of Logistics and Industrial at Cushman & Wakefield, noted, "India's logistics and industrial sector continues to showcase remarkable growth potential, with leasing volumes set to surpass 50 million square feet for the third year in a row."
Looking forward, the uphill demand is expected to persist, with estimates outputting 50 to 53 million square feet to be leased by 2024. The markets of Delhi-NCR, Mumbai, Bengaluru, Pune, Chennai, Kolkata, Hyderabad, and Ahmedabad are set to play pivotal roles. Bhutani emphasized, "We anticipate the demand for logistics and industrial spaces to remain strong, supported by India’s growing retail consumption and continued manufacturing growth." This increased activity is not only helping meet domestic consumption needs but also positioning India as a beneficiary of the global China+1 strategy, where companies are diversifying their supply chains away from China.
Major cities like Pune, Chennai, and Bengaluru have been particularly active, recording healthy leasing volumes year-on-year. The commercial real estate sector is responding to the vibrant economic activities spurred by sectors such as engineering and manufacturing, alongside the burgeoning third-party logistics (3PL) operations. According to market reports, about 800-1000 acres of land across key regions are under development for Grade-A warehouses, which collectively translates to approximately 25 million square feet of leasable area likely hitting the market over the next two to three years.
The report from Cushman & Wakefield asserted, "Ever since the Production-Linked Incentive (PLI) scheme was introduced by the government, the industrial leasing volume witnessed healthy growth." This growth is underscored by the performance of the engineering and manufacturing sector, fostering demand from both new and existing businesses seeking logistical support.
While the outlook for leasing remains positive, challenges such as rising land prices and steady increases in construction costs may divert activity to new corridors and alternate markets. Real estate experts suggest this diversification is welcome as the industrial sector continues to flourish. The report indicated, "Market diversification to new alternate corridors is expected for the logistics and industrial sector owing to rising land prices and increasing construction costs."
The demand for logistics and industrial spaces will not only hinge on the performance of local markets but also how well companies can adapt to the demands created by rapid consumer base expansion and industrial growth. Market stability may remain tenuous as logistics leasing transactions are monitored for signs of moving trends.
With the expected growth solidifying India's position as a major player in the global logistics market, stakeholders are keeping a close watch on how new projects materialize and the subsequent impact on rental price trends. Although warehouse rentals have remained relatively stagnant across many regions, real estate professionals are optimistic about future growth opportunities fueled by infrastructural developments and urbanization.
Despite fluctuations, the overall picture for India's logistics and industrial leasing market remains bright, supported by strategic government initiatives, private-sector investment, and the continuous rise of the e-commerce and retail spheres. The anticipated demand for logistics and industrial spaces will likely sustain the strong momentum witnessed over the past years, yielding fruitful opportunities for both local and foreign investors.
With the 2025 horizon approaching, the integration of these elements is set to not only reshape geographical leasing trends but also contribute significantly to India's GDP through expanded industrial activity.
