Despite the sequential moderation, the sector continued to demonstrate resilience during the first half of 2026. Total absorption reached 22.0 million sq ft in H1 2026, the highest first-half leasing volume recorded in the past year. H1 absorption was 16% higher year-on-year and 11% above H2 2025.

Mumbai drives Western India’s warehousing demand

Western India remained the key growth engine during Q2 2026, with Mumbai and Pune together accounting for 65% of pan-India warehousing absorption, compared with 33% a year earlier.

Mumbai led the country with 5.04 million sq ft of absorption, recording 6% quarterly growth and a sharp 459% increase over Q2 2025. The city has maintained an upward trajectory over the past four quarters, with the Bhiwandi micro-market playing a major role.

Nearly 69% of Mumbai’s Q2 absorption came from Bhiwandi, underlining the micro-market’s growing importance to the city’s warehousing and logistics ecosystem.

Pune ranked second with 1.78 million sq ft of absorption. However, leasing activity declined 60% from Q1 2026, when several large transactions had been concluded. Despite the quarterly decline, Pune’s Q2 absorption was 90% higher than the year-earlier period.

NCR, Bengaluru and Chennai also see healthy demand

The National Capital Region (NCR) recorded 1.24 million sq ft of absorption in Q2 2026, registering 70% growth over the previous quarter and 75% year-on-year growth.

Bengaluru also witnessed a significant recovery. Absorption reached 0.97 million sq ft, up sharply from 0.17 million sq ft in Q1 2026, although it remained 52% below Q2 2025.

Chennai recorded 0.69 million sq ft of leasing, increasing 17% sequentially and 52% annually. Hyderabad, meanwhile, registered 0.46 million sq ft, down 34% from the previous quarter but broadly stable compared with Q2 2025.

Kolkata saw a strong rebound, with absorption rising to 0.38 million sq ft from just 0.01 million sq ft in Q1. This represented a 212% year-on-year increase.

3PL companies lead warehousing demand

Third-party logistics (3PL) companies remained the biggest source of occupier demand during Q2 2026, accounting for 41% of total absorption.

Consumer Goods & Services followed with a 12% share, while Engineering & Manufacturing accounted for 11%. Together, these three segments contributed 64% of overall leasing activity.

Energy, Automobiles & Auto Components, and Chemicals & Petrochemicals collectively accounted for another 22% of absorption.

The data indicates that demand continues to be driven primarily by industries with significant supply-chain and distribution requirements.

Institutional investment remains selective

Despite sustained occupier demand, institutional investors remained cautious amid global uncertainty.

Institutional investment in the sector stood at US$27 million in Q2 2026, accounting for only 1% of total quarterly real estate investment. Investment volumes were 25% higher than in Q1 2026 but remained below the level recorded in Q2 2025.

Vestian expects continued government spending on infrastructure to support the warehousing and logistics sector. Higher capital expenditure under the Union Budget 2026–27, along with investments in multimodal connectivity, freight corridors, logistics parks and cold-chain infrastructure, is expected to improve supply-chain efficiency and support the expansion of modern warehousing facilities.

Green warehouses emerge as a key differentiator

The sector is also witnessing a shift in occupier priorities, with sustainability becoming increasingly important in warehouse selection.

Shrinivas Rao, FRICS, CEO, Vestian, said the warehousing industry is undergoing a structural transformation, moving beyond traditional considerations such as supply-chain optimisation, operational efficiency and proximity to demand centres.

According to Rao, occupiers are increasingly looking for Grade-A green warehouses that align with their ESG commitments and longer-term business objectives.

With government support, infrastructure development and supply-chain modernisation continuing, the sector is expected to see sustained demand from 3PL, Engineering & Manufacturing, and Consumer Goods & Services companies.

Technology-enabled warehousing and multimodal infrastructure are also expected to support future leasing activity and gradually improve institutional investor confidence.

City-wise Warehousing Absorption — Q2 2026

Also Read: Indian Logistics & Warehousing: 6 Key Trends to Watch in 2025

The post India’s Warehousing Absorption Falls 7% to 10.6 Mn Sq Ft in Q2 2026 appeared first on Square Feat India.

The moderation comes after four years of aggressive capacity expansion by key occupier segments such as e-commerce, manufacturing, and third-party logistics (3PL) players. In the post-COVID phase, companies rapidly scaled up warehouse footprints to strengthen supply chains, support rising consumption, and meet faster delivery timelines. By 2025, much of this capacity had already been created, prompting occupiers to temporarily pause large-scale expansion and focus on consolidating and optimising existing networks.

Industry experts view the decline as a natural correction following an intense growth cycle rather than a sign of weakening demand. Shrinivas Rao, FRICS, CEO of Vestian, noted that the slowdown was driven by a high base effect and cautious occupier sentiment amid global uncertainty. Despite softer absorption, demand from core sectors such as e-commerce, manufacturing, and logistics remained resilient, with occupiers increasingly prioritising Grade A assets in established markets.

Mumbai continued to dominate the warehousing landscape in 2025, recording the highest absorption among the top seven cities at 15.2 million sq ft, even as leasing activity declined 18% year-on-year. The city’s share in pan-India absorption slipped marginally from 41% in 2024 to 39% in 2025. Notably, tight supply conditions pushed average rentals up by 16% to ₹21 per sq ft per month.

Pune retained its position as the second-largest warehousing market, with absorption of 6.4 million sq ft. However, this represented a sharp 51% decline from the exceptional 13.0 million sq ft recorded in 2024, indicating market normalisation. Despite lower leasing volumes, Pune emerged as the most expensive warehousing market in India, with rentals rising 22% to ₹28 per sq ft per month.

The National Capital Region (NCR) stood out with a strong rebound, as absorption jumped 38% year-on-year to 5.5 million sq ft. Its share in total absorption increased from 9% to 14%, supported by steady demand and a 4% annual rise in rentals to ₹23 per sq ft per month.

Southern markets delivered mixed performance. Hyderabad saw absorption decline 31% in 2025, with its share slipping slightly to 6%. Nevertheless, rentals increased 10% to ₹20.8 per sq ft per month, reflecting continued occupier preference for quality assets. In contrast, Bengaluru and Chennai recorded healthy growth, with absorption rising 30% and 39%, respectively, although rental values in both markets remained largely stable.

Kolkata emerged as a surprise performer, with its share in pan-India absorption tripling to 6%. Leasing volumes surged 175% year-on-year, supported by improving infrastructure and growing occupier interest, leading to a moderate 6% rise in rentals to ₹22 per sq ft per month.

Looking ahead, industry fundamentals remain favourable. Strengthening domestic consumption, improving macroeconomic stability, and easing financing conditions are expected to support demand in 2026. As per industry estimates, annual warehousing absorption is projected to rebound to 40–45 million sq ft, indicating renewed momentum for the sector after a phase of consolidation.

Also Read: Robust Investments Bolster Warehousing & Logistics Sector in 2024

The post India’s Warehousing Market Cools in 2025 After Record Highs, Signals Healthy Reset Rather Than Slowdown appeared first on Square Feat India.

Mumbai Powers National Growth With 47% Share

Mumbai emerged as the largest contributor, accounting for nearly half (47%) of India’s total absorption in Q3 2025. The city recorded 4.29 million sq ft, marking a 377% QoQ and 10% YoY increase.

Much of the demand centered around micro-markets such as:

• Bhiwandi
• Panvel

These two locations alone accounted for 96% of Mumbai’s absorption, signaling renewed confidence from occupiers in India’s most active logistics hub.

City-Wise Absorption Snapshot (Key Pointers)

• Mumbai: 4.29 mn sq ft | +377% QoQ | +10% YoY
• Kolkata: 1.26 mn sq ft | +950% QoQ | +186% YoY (highest ever for the city)
• NCR: 1.28 mn sq ft | +83% QoQ | -40% YoY
• Chennai: 1.13 mn sq ft | +151% QoQ | +38% YoY (best performance in 7 quarters)
• Hyderabad: 0.47 mn sq ft | +7% QoQ | -14% YoY
• Pune: 0.64 mn sq ft | -31% QoQ | -87% YoY (continued decline for 4th quarter)
• Bengaluru: 0.13 mn sq ft | -94% QoQ | -90% YoY (lowest among top cities)

Kolkata Records Its Highest-Ever Quarterly Absorption

Kolkata surprised the market with an extraordinary 950% QoQ surge, touching 1.26 million sq ft — its best performance on record. The spike reflects pent-up demand and large-scale commitments by occupiers.

Southern Markets Show Mixed Trends

• Chennai posted a strong comeback with its highest absorption in nearly two years.
• Hyderabad remained steady but saw a slight YoY decline.
• Bengaluru recorded an unusually weak quarter, marking the lowest absorption among major markets.

Pune’s Four-Quarter Decline Continues

Once a consistent performer, Pune saw absorption slide for the fourth consecutive quarter, driven by weakening occupier interest and delayed expansions.

Sector Outlook: E-commerce and 3PLs Driving Revival

Shrinivas Rao, FRICS, CEO of Vestian, said renewed demand from E-commerce and 3PL (third-party logistics) players is driving the turnaround:

“Mumbai, Kolkata, and NCR are leading the revival. The resurgence in occupier demand, coupled with momentum in e-commerce and 3PL, shows the sector’s strengthening fundamentals. Network optimisation and Grade-A warehouse preferences will reshape the market in coming quarters.”

Also Read: Industrial and Warehousing real estate industry

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New Delhi, 17 July 2025 — India’s industrial and warehousing sector has witnessed a historic first half of the year, with Grade A space leasing touching 19.5 million sq ft across top eight cities — marking a 33% year-on-year (YoY) growth, according to Colliers India.

Key Highlights: H1 2025 Industrial & Warehousing Trends

City-Wise Performance in Grade A Leasing – H1 2025

Bhiwandi (Mumbai) was the most active micro market with 3.1 mn sq ft space take-up, followed by Oragadam (Chennai) at 1.5 mn sq ft.

Demand Drivers: 3PL Still Dominates, Engineering & E-commerce Catch Up

Third Party Logistics (3PL) companies led leasing activity with 32% share.
Engineering, E-commerce, and Auto sectors also saw robust leasing, each contributing 10–20% of total demand.

“This heterogeneity of demand reflects the sector’s resilience and aligns with India’s broad-based economic growth,”
– Vimal Nadar, National Director & Head of Research, Colliers India

Larger Deals (200,000+ sq ft) Account for Half of All Leasing

About 51% of all leases in H1 2025 came from large format deals.
Delhi NCR and Mumbai led in big-ticket transactions.
Most large deals came from 3PL, e-commerce, and engineering occupiers.

New Supply Keeps Pace with Demand

India added 19.4 mn sq ft of Grade A warehousing in H1 2025 — a strong 11% annual rise, matching leasing levels and reflecting developer confidence.

Grade A Supply by City – H1 2025

“Q2 2025 alone saw 10 mn sq ft of completions — the highest quarterly addition in recent years,”
– Vijay Ganesh, Managing Director, Industrial & Logistics Services, Colliers India

Outlook for 2025: 35–40 Mn Sq Ft of New Supply Expected

With rising absorption and high-quality Grade A developments underway, total new supply for 2025 is expected to reach 35–40 mn sq ft. The sector is well positioned for continued expansion in H2 2025, especially in key logistics hubs.

Also Read: Warehousing & Logistics sector shows resilience amidst Investment drought 

The post Industrial & Warehousing Demand Hits Record High in H1 2025 appeared first on Square Feat India.