Manufacturing has solidified its position as the second-largest occupier segment in India’s industrial leasing market, trailing only third-party logistics. The sector has accumulated 69 million square feet of gross leasing, a figure that reflects a 49% compound annual growth rate since 2021. This rapid expansion marks a significant shift in how companies are securing their operational footprints across the country.
Shifting to High-Spec Facilities
In 2025, gross absorption reached 19.2 million square feet. The first half of 2026 saw an additional 10.2 million square feet absorbed, representing a 19% year-on-year increase. A notable trend emerged regarding property quality: Grade-A facilities accounted for 90% of manufacturing leasing in 2025. This indicates a clear preference for high-specification infrastructure over older, lower-grade options.
The data suggests a broader strategic pivot. When manufacturers prioritize speed-to-market and aim to remain capital-light, the appeal of ready-built, high-quality assets becomes difficult to ignore. This stands in contrast to the traditional model of building custom facilities from the ground up, a process that often entails longer lead times and higher upfront financial risks.
Regional Hubs and Market Trends
Among the eight Tier-I cities, Pune and Chennai have emerged as the top hubs for manufacturing leasing. They are followed by NCR-Delhi, Bengaluru, Mumbai, Ahmedabad, and Hyderabad. However, the pattern changes significantly in emerging markets. Fourteen such markets, including Lucknow, Jaipur, and Surat, show manufacturers favoring land transactions over leasing arrangements.
Yogesh Shevade, Managing Director of Industrial & Logistics in India at JLL, explained the divergence. “Tier-I cities are witnessing aggressive leasing of Grade-A facilities as manufacturers prioritise speed-to-market and be capex-light due to paucity of affordable land,” Shevade said. “Simultaneously, Tier-II markets are seeing manufacturers opt for land acquisition, seeking greater customisation and long-term operational control.”
This split reflects a pragmatic response to local land availability and cost structures. In dense urban centers where affordable land is scarce, leasing offers a faster route to production. In less saturated markets, the ability to customize land usage provides a different set of long-term advantages that leasing cannot match.
Policy Drivers and Future Forecasts
Several factors are driving this growth. JLL attributes the surge to India’s Production Linked Incentive (PLI) scheme. Since 2020, the scheme has attracted 836 applications across 14 sectors. It has generated cumulative investments exceeding INR2.16 trillion ($25.9 billion) and created 14.39 lakh direct and indirect jobs. Expanded Free Trade Agreements have also played a role in boosting sectoral activity.
Looking ahead, the outlook remains strong. JLL forecasts that manufacturing leasing absorption will reach 46 million square feet by 2030. This volume is expected to account for 40% of India’s total industrial and warehousing absorption. The trajectory suggests that manufacturing will continue to drive significant demand in the industrial real estate market for the next decade.
