Logistics & Industrial (L&I) real estate sector leasing volume for 2024 is expected to close in the range of 50-53 million square foot (msf), according to data from Cushman &Wakefield, a global commercial realty services firm.
As of October 2024, the leasing volume surpassed 41 msf across the top-eight real estate markets in the country. Cities such as Pune, Chennai and Bengaluru continue to lead leasing demand with healthy leasing volumes in past few years.
Experts said that market diversification to new alternate corridors is expected for L&I sector in 2025 owing to rising land prices and a steady increase in construction cost. Engineering & manufacturing (E&M) and retail sectors, along with the third party logistics (3PL) operators, remain primary drivers of demand for the L&I space.
They said that ever since the Production-Linked Incentive (PLI) scheme was introduced by the central government in 2020, the industrial leasing volume reported a healthy growth. Besides, the strong emergence of retail and e-commerce has led to intense activity in the warehousing space as well.
Key growth drivers
Surge in the E&M sector growth, strengthening 3PL operators and retail industry are primary drivers of demand for L&I space in recent years. These factors will continue to remain key drivers for 2025 as well.
Abhishek Bhutani, Managing Director (MD), L&I, Cushman & Wakefield, said that India's L&I sector continues to showcase remarkable growth potential, with leasing volumes set to surpass 50 msf for the third year in a row.
The spike is driven by strong demand across quick-commerce, retail and E&M sectors.
“We anticipate the demand for logistics and industrial spaces to remain robust in 2025, supported by India’s expanding retail consumption base and continued manufacturing growth. Additionally, we anticipate 25 msf of Grade-A warehousing supply to hit the market over the next two-three years, concentrated in West and South India with major projects in Mumbai, Pune, Chennai, and Bengaluru,” Bhutani said.
Emergence of alternate corridors
The L&I leasing market is likely to diversify in 2025 as land prices have risen considerably in 2023 and 2024. For instance, land transaction for a proposed warehouse at Farukhnagar in Gurugram, Haryana, settled at Rs 5.8 crore per acre in 2024. While the rate in the same submarket was close to Rs 2.3 crore per acre in 2023.
Similarly, land prices at Chakan in Pune and Bhiwandi in Thane in the Mumbai Metropolitan Region (MMR) have risen up to 25 per cent since 2023. Most of the prime L&I submarkets across top-eight cities are experiencing land supply constraints as these locations have also become attractive for developers in the affordable housing space.
On the contrary, the warehousing and industrial rentals broadly remain stagnant. Rising land prices and consistent rise in cost of construction will force landlords in the warehousing and industrial space to look for new peripheral locations that attract competitive land prices.
The speed of development will depend upon space off-take in the coming 12 months and rentals. Warehousing rentals have remained stagnant in most submarkets across India except for only a couple of outlier clusters, according to the Cushman report.
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