India’s industrial real estate market is undergoing a major structural shift, with manufacturing emerging as one of the fastest-growing occupier segments and increasingly competing with traditional logistics demand.
According to JLL’s latest report, “Great Places of Manufacturing in India (GPMI) 2.0: Advanced Manufacturing Clusters”, gross manufacturing leasing has recorded a cumulative 69 million sq. ft. since 2021, growing at an impressive 49% CAGR.
Manufacturing has now become the second-largest occupier segment in India’s industrial and warehousing market after third-party logistics (3PL), signalling a significant change in the country’s industrial real estate landscape.
Manufacturing Leasing Demand Accelerates
Manufacturing leasing absorption reached 19.2 million sq. ft. in 2025, while the first half of 2026 recorded 10.2 million sq. ft., representing a 19% year-on-year increase.
JLL estimates that manufacturing leasing absorption could reach around 24 million sq. ft. in 2026. The segment is then projected to almost double to approximately 46 million sq. ft. by 2030.
By then, manufacturing could account for around 40% of India’s overall industrial and warehousing absorption.
The rapid increase reflects the expansion of domestic manufacturing, global supply-chain diversification, infrastructure improvements and government initiatives aimed at strengthening India’s position as a global production base.
Pune and Chennai Lead Manufacturing Leasing
Pune and Chennai have emerged as the leading manufacturing leasing markets among India’s Tier-I cities.
They are followed by NCR-Delhi, Bengaluru, Mumbai, Ahmedabad and Hyderabad, which together form the country’s major Grade-A manufacturing infrastructure network.
These markets benefit from established industrial ecosystems, access to skilled labour, connectivity, supplier networks and proximity to major consumption centres and ports.
For manufacturers, leasing Grade-A facilities in these established markets can also provide faster operational timelines compared with acquiring land and developing a facility from scratch.
Grade-A Facilities Dominate the Market
A major feature of the current manufacturing real estate cycle is the strong preference for high-quality industrial facilities.
Grade-A properties accounted for approximately 90% of manufacturing leasing in 2025.
The preference reflects manufacturers’ increasing focus on modern infrastructure, higher building standards, safety requirements, hygiene protocols and operational efficiency.
For industrial developers, this creates an opportunity to develop specialised, high-specification facilities designed around the requirements of advanced manufacturing occupiers.
Tier-II Markets Take a Different Route
While leasing is gaining momentum in India’s major industrial markets, manufacturers in emerging and Tier-II locations are showing a stronger preference for land acquisition.
JLL identifies markets including Lucknow, Jaipur, Chandigarh tri-city, Bhubaneswar, Guwahati, Surat, Nagpur, Nashik, Goa, Indore, Chhatrapati Sambhajinagar, Tuticorin, Coimbatore and Visakhapatnam as locations where land transactions are becoming an important part of manufacturers’ expansion strategies.
The difference reflects the availability and relative affordability of land in emerging markets.
Manufacturers that acquire land can customise facilities according to their production requirements and retain greater long-term control over their industrial assets.
In contrast, companies operating in expensive Tier-I markets may prefer leasing to remain capital-light and achieve faster time-to-market.
Two Manufacturing Strategies Are Emerging
JLL sees these two trends — leasing in Tier-I markets and land acquisition in emerging markets — as complementary rather than contradictory.
In major cities, manufacturers are increasingly opting for Grade-A leased facilities because of land scarcity, high land costs and the need to commence operations quickly.
In Tier-II locations, comparatively lower land costs make ownership more attractive, particularly for manufacturers requiring specialised facilities or long-term operational control.
Yogesh Shevade, Managing Director, Industrial & Logistics, India, JLL, said the growth of the manufacturing real estate asset class reflects these two strategies.
According to him, Tier-I cities are witnessing aggressive leasing of Grade-A facilities as manufacturers prioritise speed-to-market and capex-light strategies, while Tier-II markets are seeing greater land acquisition.
PLI and Free Trade Agreements Support Expansion
The growth in manufacturing real estate is being supported by government policy as well as India’s expanding global trade relationships.
The Production Linked Incentive (PLI) scheme has become an important driver of manufacturing investment since its launch in 2020.
According to JLL, the scheme has attracted 836 applications across 14 sectors, with cumulative investments exceeding Rs 2.16 lakh crore and generating 14.39 lakh direct and indirect jobs.
The expansion of India’s network of Free Trade Agreements (FTAs) is also improving access to international markets.
Together, these factors are encouraging manufacturers to establish or expand production capacity in India, creating additional demand for industrial land, factories and Grade-A manufacturing facilities.
Infrastructure and Sustainability Become Key Differentiators
The evolution of India’s manufacturing ecosystem is also increasing the importance of infrastructure beyond the physical factory.
Connectivity to highways, ports, airports and logistics networks, availability of utilities, skilled labour and proximity to suppliers are becoming critical factors when manufacturers select locations.
Sustainability is also becoming an increasingly important consideration.
As global manufacturers expand their Indian operations, industrial facilities are expected to face greater requirements around energy efficiency, environmental performance and sustainable operations.
This could further strengthen demand for modern Grade-A industrial properties capable of meeting global manufacturing standards.
Manufacturing Could Reshape India’s Industrial Real Estate
The projected rise from around 24 million sq. ft. of manufacturing leasing absorption in 2026 to approximately 46 million sq. ft. by 2030 represents a significant expansion of the sector’s footprint.
For India’s industrial real estate market, the implications extend beyond leasing volumes.
More manufacturing activity can generate demand for ancillary warehouses, logistics facilities, worker housing, commercial establishments and supporting services around industrial clusters.
It could also strengthen emerging industrial corridors and Tier-II cities as manufacturers look beyond India’s established metropolitan markets.
The growing role of manufacturing therefore marks a broader shift in India’s industrial real estate market — from a sector traditionally dominated by logistics and warehousing towards a more diversified ecosystem driven by production, supply chains and advanced manufacturing.
Also Read: Retail Real Estate Booms in India: 169% YoY Growth in Q1 2025 Leasing Activity
