India’s Logistics & Industrial (L&I) real estate sector is set to achieve over 50 million sq ft (MSF) of leasing activity for the third consecutive year in 2024, according to a report by Cushman & Wakefield. The strong momentum, driven by robust industrial activity, retail, and e-commerce growth, is expected to continue into 2025.
By October 2024, year-to-date (YTD) leasing volume had already crossed 41 MSF across the top eight real estate markets, underscoring the sector’s resilience and consistent growth. The Production-Linked Incentive (PLI) scheme, introduced in 2020, has played a key role in boosting industrial leasing volumes. Additionally, the China+1 diversification strategy adopted by global manufacturers has benefited India significantly.
Key Drivers of Growth
The engineering and manufacturing (E&M) sector, third-party logistics (3PL) operators, and the retail industry remain primary contributors to demand. Cities like Pune, Chennai, and Bengaluru have recorded healthy leasing volumes, with other markets showing promising potential.
Abhishek Bhutani, Managing Director, Logistics & Industrial and Ahmedabad, Cushman & Wakefield, noted, “India’s logistics and industrial sector continues to showcase remarkable growth potential, with leasing volumes set to surpass 50 MSF for the third year in a row. Strong demand from quick-commerce, retail, and E&M sectors, coupled with India’s expanding consumption base and manufacturing growth, will drive robust demand in 2025.”
Emergence of Alternate Corridors
Rising land costs in prime L&I micro-markets are pushing developers to explore alternative locations. For instance, land prices in Farukh Nagar, Gurugram, surged from INR 23 million per acre in 2023 to INR 58 million per acre in 2024. Similar trends were observed in Chakan, Pune, and Bhiwandi, Thane, with prices rising 20-25% since 2023.
The rising cost of land and construction is encouraging landlords to look beyond traditional hubs to peripheral locations offering competitive pricing. This shift is expected to lead to the development of alternate logistics corridors, diversifying the market in 2025.
Grade-A Warehousing Supply to Drive Growth
The report highlights the addition of 25 MSF of Grade-A warehousing space over the next 2-3 years, predominantly in West and South India. Cities like Mumbai, Pune, Chennai, and Bengaluru collectively account for 800-1,000 acres of land currently under development for warehousing.
However, despite the supply surge, warehousing rentals remain largely stagnant across most submarkets in India, with only a few clusters witnessing an uptick. The trend of stable rentals is likely to continue into 2025, even as new inventory enters the market.
Outlook for 2025
India’s L&I real estate sector is expected to maintain its growth trajectory, with leasing volumes stabilizing at the 50 MSF mark. The demand will be fueled by a widening consumption base, continued growth in manufacturing, and the expansion of e-commerce.
The addition of Grade-A supply in emerging corridors is anticipated to provide a competitive edge for developers, ensuring sustained momentum in the near to medium term. The report also suggests that Tier-II and Tier-III cities could play a larger role in meeting future demand, given the steep rise in land prices in established hubs.
With strong fundamentals and a robust demand pipeline, India’s L&I sector is well-positioned to remain a key growth driver for the real estate market in the years to come.
Also Read: Industrial & Logistics Real Estate
