India’s warehousing and industrial real estate market has moved from being a support function to becoming a core pillar of the country’s consumption and manufacturing economy. The expansion of e-commerce, growth of organised retail, and increasing sophistication of supply chains have fundamentally altered demand dynamics across logistics parks, fulfilment centres, and industrial hubs.
What stands out in the current cycle is not just volume growth but sustained demand outpacing supply, leading to tightening vacancy and rising rentals.
Demand Momentum: Structural, Not Cyclical
Warehousing absorption in India has entered a phase of structurally strong growth.
- Q1 CY’25 recorded 10.1 million sq ft of Grade A/A+ leasing, exceeding new supply of 9.0 million sq ft
- Vacancy levels declined to ~7%, reflecting healthy absorption across major markets
This imbalance is not short-lived. It is being reinforced by persistent demand from e-commerce-led fulfilment models and third-party logistics operators.
H1 CY’25: Demand Continues to Outrun Supply
The trend strengthened further over the first half of the year.
- H1 CY’25 demand reached 33.1 million sq ft
- New supply stood at 27.9 million sq ft, again falling short of absorption
This sustained demand–supply gap highlights a market transitioning into a landlord-favourable phase, particularly for well-located Grade A assets.
Who Is Driving Warehouse Demand?
1. Third-Party Logistics (3PL): The E-Commerce Engine
3PL operators remain the single largest demand driver.
- Accounted for 34% of total demand in Q1 CY’25
- Represented ~29% of national demand in H1 CY’25
This growth is directly linked to e-commerce platforms outsourcing storage, sorting, and last-mile operations to scalable logistics partners.
2. Manufacturing: Supply Chains Localising
Manufacturing contributed ~28% of warehousing demand in H1 CY’25, reflecting:
- Increasing domestic production
- Just-in-time inventory models
- Integration of warehousing with industrial clusters
3. Automotive: High-Spec Storage Requirements
Automotive and auto-ancillary players formed ~17% of H1 CY’25 demand, driven by the need for high-quality, compliant storage close to consumption and export nodes.
Collectively, 3PL, Manufacturing, and Automotive accounted for ~75% of national warehousing demand, underscoring the deepening backbone of India’s digital and industrial economy.
Geographic Concentration: NCR and Pune Lead
Demand remains concentrated in established logistics hubs:
- NCR and Pune together accounted for ~45% of leasing demand in H1 CY’25
- These markets also contributed ~48% of new supply
Their dominance is driven by:
- Proximity to large consumption centres
- Strong expressway and freight connectivity
- Established industrial ecosystems
However, sustained absorption suggests these markets continue to have headroom particularly for institutional-grade developments.
Rental Movement: Early Signs of Tightening
Rental trends are now reflecting tightening market conditions.
- Pan-India passing rents rose ~4% YoY in Q1 CY’25
- By Q2 CY’25, market rents increased ~13% YoY, indicating accelerating momentum
Rental growth is most pronounced in markets with:
- Limited land availability
- High compliance-grade assets
- Proximity to urban consumption clusters
What Is Structurally Changing in Warehousing
1. Shift Toward Grade A/A+ Assets
Occupiers increasingly prefer facilities with:
- Higher floor load capacity
- Better clear heights
- ESG compliance
- Automated handling compatibility
2. Speed-to-Market Matters
Fulfilment timelines are shrinking, making location and access more critical than ever.
3. Long-Term Occupier Commitment
E-commerce and 3PL leases are increasingly longer-tenured, improving income visibility for investors.
Opportunity Landscape
For Developers
- Focus on scalable logistics parks
- Emphasise compliance, safety, and expansion flexibility
- Land banking near expressways and consumption clusters is critical
For Investors
- Falling vacancy and rising rents improve yield stability
- Grade A warehousing is emerging as a core institutional asset class
For Occupiers
- Early positioning in high-demand corridors can secure cost advantages
- Competition for quality space is increasing
Outlook: A Long-Term Growth Engine
India’s warehousing and industrial real estate sector is no longer cyclical or opportunistic. It is structurally aligned with consumption growth, digital commerce expansion, and industrial scaling.
With:
- Demand consistently exceeding supply
- Vacancy tightening
- Rents showing upward momentum
Warehousing is fast becoming one of the most resilient and institutionally relevant real estate asset classes in India.
1. What is driving the growth of warehousing and industrial real estate in India?
The growth is primarily driven by e-commerce expansion, organised retail, third-party logistics (3PL) operators, and manufacturing localisation. These sectors require large, compliant, and well-located warehousing facilities, leading to sustained demand.
2. Is India’s warehousing demand cyclical or structural?
Warehousing demand in India is structural rather than cyclical. Persistent absorption exceeding supply, tightening vacancy levels, and longer lease tenures indicate long-term alignment with consumption and supply-chain evolution.
3. Which sectors are the biggest contributors to warehousing demand?
Third-party logistics (3PL), manufacturing, and automotive sectors collectively account for around three-fourths of national warehousing demand, reflecting the deepening backbone of India’s digital and industrial economy.
4. Which cities are leading warehousing and logistics demand in India?
NCR and Pune are currently the leading warehousing markets, driven by strong consumption bases, expressway connectivity, and established industrial ecosystems. These hubs continue to see healthy absorption despite significant new supply.
5. Are warehouse rentals increasing in India?
Yes. Warehouse rentals have begun to rise as vacancy tightens. Pan-India rents have shown year-on-year growth, especially in markets with limited land availability, strong compliance standards, and proximity to urban consumption clusters.
6. Why is Grade A warehousing gaining importance?
Occupiers increasingly prefer Grade A and A+ facilities due to higher floor loads, better clear heights, ESG compliance, automation readiness, and operational efficiency, making these assets more resilient and institutionally attractive.
7. Is warehousing becoming a core asset class for investors in India?
Yes. With falling vacancy, improving rental visibility, and long-term occupier commitments, Grade A warehousing is emerging as a core institutional real estate asset class alongside offices and residential assets.