Mumbai: India’s industrial and logistics (I&L) real estate sector maintained steady momentum during the first half of 2026, with total absorption reaching 34.8 million sq. ft., reflecting a 2.4% year-on-year increase, according to the latest market data released by Savills India. While demand growth remained measured, the sector continued to demonstrate resilience, supported by manufacturing, third-party logistics (3PL) and sustained occupier activity across major markets.
Manufacturing companies accounted for 30% of total absorption during H1 2026, followed by 3PL operators at 23%, reaffirming their position as the primary demand drivers. Additional leasing activity came from the FMCG & FMCD segment (18%) and e-commerce (10%), indicating broad-based demand across multiple occupier categories.
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Tier-I markets continued to dominate the industrial and warehousing landscape, contributing 78% of overall absorption, while Tier-II and Tier-III cities accounted for the remaining 22%, highlighting continued expansion beyond India’s established logistics hubs.
Commenting on the sector’s performance, Srinivas N, Managing Director, Industrial and Logistics, Savills India, said:
“India’s manufacturing ecosystem is rapidly evolving into a globally integrated ‘Made for India and the World’ platform. Supported by proactive trade agreements and rising investments, this shift is driving strong demand for industrial and logistics real estate. As supply chains diversify and manufacturing expands, growth will be led by scale and new industrial clusters, creating long-term opportunities and strengthening India’s position in global value chains.”
On the supply side, developers delivered 42.7 million sq. ft. during the first six months of 2026, marking a significant increase over the previous year. Tier-I cities contributed 36.7 million sq. ft., representing 86% of the total supply, while Tier-II and Tier-III markets added 6.0 million sq. ft., accounting for the remaining 14%. According to Savills India, project completions remained broadly aligned with occupier demand across key industrial markets.
Industrial & Warehousing Absorption Remains Led by Tier-I Cities
Overall industrial and warehousing absorption increased from 34.0 million sq. ft. in H1 2025 to 34.8 million sq. ft. in H1 2026, registering 2.4% year-on-year growth.
Within Tier-I cities, absorption rose to 27.3 million sq. ft. from 26.2 million sq. ft., reflecting 4.2% growth. In contrast, Tier-II and Tier-III cities recorded 7.5 million sq. ft. of absorption, compared with 7.8 million sq. ft. in the corresponding period last year, representing a 3.8% decline.
Tier-I markets increased their share of total absorption to 78%, up from 77% a year earlier, while Tier-II and Tier-III cities accounted for 22%, compared with 23% in H1 2025.
Supply Expands Sharply Across Major Logistics Markets
Fresh industrial and logistics supply rose from 33.4 million sq. ft. in H1 2025 to 42.7 million sq. ft. in H1 2026, recording 27.8% year-on-year growth.
Supply across Tier-I cities expanded by 34.4%, increasing from 27.3 million sq. ft. to 36.7 million sq. ft. Meanwhile, Tier-II and Tier-III cities witnessed a marginal decline, with supply easing from 6.1 million sq. ft. to 6.0 million sq. ft., a 1.6% decrease.
Tier-I markets contributed 86% of the total new supply during H1 2026, compared with 82% during the same period last year, while the share of Tier-II and Tier-III cities declined from 18% to 14%.
According to Savills India, Tier-I cities include Ahmedabad, Bengaluru, Chennai, Hyderabad, Kolkata, Mumbai, Delhi-NCR and Pune, while Tier-II and Tier-III markets comprise Guwahati, Bhubaneshwar, Patna, Hosur, Coimbatore, Rajpura, Lucknow, Jaipur, Nagpur, Surat, Indore, Kochi, Hubli, Vizag, Belgaum and Anantapur.
Manufacturing and 3PL Continue to Drive Leasing Activity
Manufacturing remained the largest occupier segment with a 30% share of total absorption in H1 2026, followed by 3PL at 23%.
The FMCG & FMCD sector accounted for 18% of leasing activity, while e-commerce contributed 10%. Retail represented 4% of overall absorption, and other occupier categories collectively accounted for 15%.
Savills India noted that the “Other Segments” category includes warehousing demand from cold storage, chemicals, FTWZs, ICDs, agriculture warehousing, self-storage and manufacturing storage.
Demand for Grade-A Industrial Assets Continues to Strengthen
The report highlights a continued shift towards high-quality industrial and warehousing assets. Grade-A properties accounted for 59% of total absorption in H1 2026, compared with 55% during H1 2025, while Grade-B assets represented 41%.
On the supply side, Grade-A developments contributed 55% of new stock during H1 2026, compared with 58% a year earlier, while Grade-B assets accounted for 45%.
According to Savills India, occupiers are increasingly prioritising quality, regulatory compliance and evolving ESG requirements, resulting in stronger demand for Grade-A industrial facilities.
Delhi-NCR Leads Absorption; Pune and Mumbai Follow
Among individual markets, Delhi-NCR recorded the highest industrial and warehousing absorption with 6.8 million sq. ft., accounting for 20% of total demand.
Pune followed with 6.1 million sq. ft. (17%), while Mumbai registered 5.5 million sq. ft. (16%).
Other major markets included Bengaluru (3.6 million sq. ft., 10%), Chennai (3.1 million sq. ft., 9%), Ahmedabad (1.2 million sq. ft., 3%), Hyderabad (0.6 million sq. ft., 2%), and Kolkata (0.3 million sq. ft., 1%). Tier-II and Tier-III cities together contributed 7.5 million sq. ft., representing 22% of total absorption.
On the supply front, Delhi-NCR also led with 8.5 million sq. ft., contributing 20% of total new supply. Mumbai and Chennai each accounted for 17%, delivering 7.2 million sq. ft. and 7.3 million sq. ft., respectively. Pune added 6.4 million sq. ft. (15%), while Tier-II and Tier-III cities contributed 6.0 million sq. ft., representing 14% of total supply.
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Outlook for 2026
Savills India expects India’s industrial and logistics sector to maintain stable, demand-led growth through the remainder of 2026, supported by continued manufacturing expansion and sustained occupier demand from the 3PL, FMCG/FMCD and retail sectors.
The report also notes that supply chain diversification and strong domestic consumption are expected to strengthen market fundamentals, supported by policy initiatives, infrastructure development and continued interest from both domestic and international occupiers.
E-commerce is projected to account for a larger share of overall demand, particularly across Tier-II and Tier-III markets, as improving last-mile connectivity and expanding delivery networks continue to support logistics growth. The rapid expansion of quick commerce (Q-commerce) and dark stores is also expected to drive additional demand, supported by faster delivery models, urbanisation, organised retail expansion and time-sensitive logistics requirements.
Looking ahead, rental values are expected to witness modest upward movement for compliant Grade-A industrial assets across major markets. Although supply currently exceeds demand, resulting in elevated vacancy levels in the near term, rising land prices and construction costs are expected to support rental value appreciation. The report adds that yields are likely to remain stable, reinforcing the attractiveness of industrial and logistics real estate for both domestic and global investors in 2026.
