Industrial & Warehousing Sector Records 18.5 per cent YoY Absorption Growth in Q1 2025

New Delhi, April 7, 2025: India’s industrial and logistics real estate sector saw strong growth in Q1 2025, with absorption reaching 16.0 million square feet (MSF), an 18.5 per cent Y-o-Y increase from 13.5 MSF in Q1 2024, according to Savills India, a leading global real estate advisory firm. Tier-I cities accounted for 79 per cent of this absorption, while Tier-II and Tier-III cities contributed 21 per cent.

On the supply front, the sector delivered 15.9 MSF in Q1 2025, with 23.3 per cent Y-o-Y growth. Tier-I cities contributed a substantial 12.4 MSF (78 per cent) and Tier-II and Tier-III cities added 3.6 MSF (22 per cent). This robust delivery across cities reflects the market’s alignment with growing demand.

Tier- I cities include Ahmedabad, Bengaluru, Chennai, Hyderabad, Kolkata, Mumbai, Delhi-NCR, and Pune. Tier- II and Tier-III cities include Guwahati, Bhubaneshwar, Patna, Hosur, Coimbatore, Rajpura, Lucknow, Jaipur, Nagpur, Surat, Indore, Kochi, Hubli, Vizag, Belgaum and Anantapur

Shift Towards Grade-A Spaces

The demand for compliant Grade-A spaces has surged over the past few years, driven by occupier preferences aligning with ESG standards. As a result, Grade-A supply rose to 60 per cent in Q1 2025, compared to 45 per cent in Q1 2024.

Srinivas N, Managing Director, Industrial and Logistics, Savills India, stated: “The year 2025 has begun on a strong note for Indian real estate, with early momentum especially visible in the industrial and logistics sector. The sector continues to show robust growth, supported by a favorable demand environment, proactive government policies, and major infrastructure investments. We expect both new supply and absorption to exceed 70 MSF this year, which predominantly will be driven by the 3PL sector and manufacturing activity, followed by strong interest from retail, FMCG, and FMCD players. Tier-II and Tier-III cities are gaining prominence as key hubs for sourcing, consumption, and distribution, as companies increasingly look beyond metro markets. At the same time, demand for Grade-A facilities is set to surge due to growing emphasis on quality and compliance. With strong fundamentals, diverse demand drivers, and growing investor interest, 2025 is well-positioned to be a defining year for India’s industrial and logistics real estate.”

The absorption was primarily driven by demand from the manufacturing segment, which accounted for 30 per cent of the total absorption, followed by the 3PL segment at 26 per cent, while the retail segment contributed 12 per cent. The e-commerce segment is gaining traction, with contribution to overall absorption at 10 per cent, followed by the FMCG & FMCD segment at 9 per cent.

City-wise Absorption and Supply (MSF)

In Q1 2025, in terms of absorption, Delhi-NCR led with 3.4 MSF (22 per cent), followed by Mumbai at 2.5 MSF (16 per cent), and Pune at 2.3 MSF (14 per cent). On the supply front, Mumbai emerged as the top contributor with 3.1 MSF (19 per cent), followed by Bengaluru at 2.1 MSF (13 per cent), Chennai at 2.0 MSF (13 per cent) and Delhi-NCR at 2.0 MSF (12 per cent).

Tier-II and Tier-III cities are witnessing significant growth both in terms of supply and absorption as prominent hubs for sourcing, consumption, and distribution, contributing 21 per cent of overall absorption and 22 per cent of overall supply in Q1 2025.