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India's industrial and logistics sector recorded gross absorption of 34.8 million sq ft during the first half of 2026, registering a modest 2.4% year-on-year increase, according to Savills India. Manufacturing and third-party logistics (3PL) occupiers remained the largest demand drivers, accounting for 53% of total leasing activity, while Delhi-NCR, Pune and Mumbai emerged as the leading markets. The report also highlighted a growing preference for Grade-A industrial assets, with their share of absorption increasing to 59%. Meanwhile, fresh supply rose 27.8% year-on-year to 42.7 million sq ft, reflecting continued developer confidence despite demand growth moderating.
India's industrial and logistics (I&L) sector recorded gross absorption of 34.8 million sq ft during the first half of 2026, representing a 2.4% year-on-year increase, according to the latest market data released by international real estate advisory firm Savills India.
The report found that manufacturing companies remained the largest occupier segment, accounting for 30% of total leasing activity, followed by third-party logistics (3PL) operators at 23%. Fast-moving consumer goods and fast-moving consumer durables (FMCG & FMCD) contributed 18% of demand, while e-commerce companies accounted for 10%, reflecting broad-based occupier activity across key industrial sectors.
Tier-I cities continued to dominate the market, contributing 27.3 million sq ft or 78% of total absorption, compared with 26.2 million sq ft in the corresponding period last year, representing 4.2% annual growth. Tier-II and Tier-III cities collectively accounted for 7.5 million sq ft, or 22% of leasing activity, although absorption in these markets declined by 3.8% year-on-year.
Srinivas N, Managing Director – Industrial and Logistics, Savills India, said India's manufacturing ecosystem is evolving into a globally integrated production platform supported by trade agreements and rising investments. He noted that expanding manufacturing activity and supply chain diversification are expected to generate sustained demand for industrial and logistics real estate while strengthening India's position within global value chains.
On the supply side, developers completed 42.7 million sq ft of new industrial and warehousing space during H1 2026, representing a 27.8% increase over the 33.4 million sq ft delivered during the same period last year. Tier-I cities accounted for 36.7 million sq ft, or 86% of total new supply, while Tier-II and Tier-III cities contributed 6 million sq ft, equivalent to 14%.
The report also highlighted a growing preference for Grade-A industrial assets. Grade-A developments accounted for 59% of total absorption during the first half of 2026, up from 55% a year earlier, reflecting occupiers' increasing focus on building quality, operational efficiency, regulatory compliance and environmental, social and governance (ESG) standards. Grade-A projects represented 55% of total new supply, compared with 58% during H1 2025.
Among individual markets, Delhi-NCR emerged as the country's largest industrial leasing destination, recording 6.8 million sq ft of absorption and contributing 20% of total demand. Pune followed with 6.1 million sq ft (17%), while Mumbai recorded 5.5 million sq ft, accounting for 16% of total absorption. Bengaluru contributed 3.6 million sq ft, Chennai 3.1 million sq ft and Ahmedabad 1.2 million sq ft.
Delhi-NCR also led new supply with 8.5 million sq ft, representing 20% of total completions, followed by Mumbai and Chennai, each contributing 17%, while Pune accounted for 15%.
Looking ahead, Savills India expects the industrial and logistics sector to maintain stable, demand-led growth supported by manufacturing expansion, sustained demand from 3PL, FMCG/FMCD and retail occupiers, and ongoing supply chain diversification. The report also noted that e-commerce demand is increasingly expanding into Tier-II and Tier-III cities, supported by improving last-mile connectivity and the rapid growth of quick-commerce operations. Although supply currently exceeds demand in several markets, rental values for compliant Grade-A assets are expected to witness modest appreciation due to rising land and construction costs, while yields are projected to remain stable, supporting continued investor interest in the sector.
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