Industrial & Warehousing Real Estate Demand Soars 24.5% in H1 2025

Industrial & Warehousing Real Estate Demand Soars 24.5% in H1 2025

India’s Logistics Sector Powers Ahead with Record Absorption

India’s industrial and warehousing real estate sector has witnessed a remarkable surge in demand in the first half of 2025, with total absorption reaching 34 million sq ft—a 24.5% increase from 27.3 million sq ft in H1 2024, according to Savills India. This robust growth is being driven by the manufacturing sector, third-party logistics (3PL) players, and strong contributions from e-commerce, FMCG/FMCD, and retail.

Tier I Cities Lead, But Tier II/III Gain Ground

• Tier I cities: 77% absorption
• Tier II/III cities: 23% absorption (up from 22%)
• Delhi-NCR: 19% absorption, 18% supply
• Pune: 15% absorption, 17% supply
• Mumbai: 15% absorption, 16% supply
• Bengaluru: 10% absorption, 9% supply
• Chennai: 9% absorption, 13% supply
• Tier II & III: 23% absorption, 18% supply

Tier I cities continued to dominate, accounting for 77% of total absorption, while Tier II and III cities increased their share to 23%. Delhi-NCR led all metro markets with a 19% share of total absorption, followed by Pune and Mumbai at 15% each, and Bengaluru at 10%. Notably, Tier II & III cities also held a solid 23% share, reflecting the growing importance of emerging markets.

Grade A Spaces Set New Standards

A significant trend in H1 2025 is the shift toward Grade A industrial spaces, which contributed 55% of total demand—up from 39% in H1 2024. On the supply side, Grade A’s share rose from 49% to 58%. This reflects rising occupier expectations for compliance and ESG standards, as well as developers’ push to deliver higher-quality facilities. By year-end, Grade A assets are expected to account for over 60% of both absorption and supply.

E-Commerce, FMCG, and Retail Drive Growth

E-commerce’s share of absorption nearly doubled year-on-year, rising from 6% in H1 2024 to 11% in H1 2025. FMCG/FMCD and retail sectors accounted for 11% and 7% of demand, respectively, highlighting the sector’s broad-based expansion.

City-Wise Performance and Market Shares

• Delhi-NCR: 19% absorption, 18% supply
• Pune: 15% absorption, 17% supply
• Mumbai: 15% absorption, 16% supply
• Bengaluru: 10% absorption, 9% supply
• Chennai: 9% absorption, 13% supply
• Tier II & III: 23% absorption, 18% supply

A Market Poised for Continued Growth

With annual supply and demand expected to remain above 10 million sq ft and vacancy rates forecasted to drop, India’s industrial and warehousing sector is set for sustained momentum. The shift toward Grade A facilities, sector diversification, and the rise of Tier II/III markets are reshaping the landscape, making India a global contender in logistics and industrial real estate.