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India's Logistics Real Estate Sector Booms: Record Leasing Activity Expected

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  //automotive-transportation.news-articles.net/co .. ctor-booms-record-leasing-activity-expected.html
  Published in Automotive and Transportation on Tuesday, December 30th 2025 at 3:00 GMT by moneycontrol.com

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Logistics Real Estate Booms: Manufacturing & E-Commerce Drive Record Leasing Activity

India’s logistics real estate sector is experiencing an unprecedented boom, fueled by robust demand from both manufacturing and e-commerce industries. A recent report highlights that leasing activity is projected to reach a staggering 60 million square feet (msf) by 2025, marking a new record for the sector and signaling strong underlying economic growth. This surge isn't just about online shopping; it’s a broader reflection of India’s increasing integration into global supply chains and its ambition to become a manufacturing hub.

The Moneycontrol article, drawing on insights from Knight Frank India, details this dynamic landscape. Historically, the logistics sector has been driven primarily by the rise of e-commerce giants like Amazon and Flipkart. While that influence remains significant, the current growth is being increasingly propelled by traditional manufacturers seeking to optimize their supply chains and cater to a growing domestic market. This diversification in demand is what’s making the boom particularly sustainable.

Key Drivers Behind the Surge:

Several factors are converging to create this favorable environment for logistics real estate:

• Manufacturing Push: The Indian government's "Make in India" initiative, coupled with global companies diversifying their sourcing away from China (the “China+1” strategy), is leading to a significant increase in manufacturing activity. These manufacturers require warehousing and distribution facilities to manage raw materials, finished goods, and inventory. The Production Linked Incentive (PLI) schemes across various sectors – including automotive, electronics, pharmaceuticals, and textiles – are directly stimulating investment and creating demand for logistics space. The article specifically mentions the PLI scheme as a crucial catalyst.
• E-Commerce Evolution: While e-commerce growth has matured somewhat from its explosive early days, it continues to be a significant driver. The rise of quick commerce (q-commerce) – services like Blinkit and Zepto offering ultra-fast delivery – is creating demand for smaller, strategically located fulfillment centers closer to urban consumers. This necessitates a more granular network of logistics facilities.
• Supply Chain Optimization: Companies across various sectors are reevaluating their supply chains in response to disruptions experienced during the pandemic and geopolitical instability. This often involves bringing inventory closer to customers (nearshoring) and adopting just-in-time inventory management, both of which require strategically located warehousing space.
• Infrastructure Development: Government investments in infrastructure projects like road construction, port modernization, and railway upgrades are improving connectivity and reducing logistics costs, making it more attractive for businesses to expand their operations and utilize warehouse facilities. The National Logistics Policy (NLP) is also playing a role by aiming to streamline processes and improve efficiency within the sector.
• Technological Advancements: The adoption of technologies like automation, robotics, and data analytics in warehouses is increasing operational efficiency and driving demand for modern, technologically equipped logistics facilities.

Regional Hotspots & Trends:

The leasing activity isn't evenly distributed across India. Certain regions are experiencing particularly strong growth:

• National Capital Region (NCR): NCR remains a key market, benefiting from its proximity to major consumption centers and industrial hubs.
• Mumbai Metropolitan Region (MMR): MMR continues to be a significant logistics hub due to its port connectivity and established industrial base.
• Bengaluru: The city's thriving technology sector and growing e-commerce presence are driving demand for warehousing space.
• Chennai, Coimbatore & Madurai (Southern India): The southern region is witnessing robust growth driven by the automotive and manufacturing sectors.
• Pune: A major industrial hub, Pune is seeing increased demand for logistics facilities to support its manufacturing base.

The article also notes a shift towards Grade A warehousing space – modern, well-equipped facilities with features like higher ceilings, better loading docks, and advanced technology integration. Tenants are increasingly willing to pay a premium for these superior facilities due to the operational efficiencies they offer. This trend is pushing developers to focus on building high-quality logistics parks.

Challenges & Outlook:

While the outlook remains overwhelmingly positive, some challenges exist:

• Land Availability: Finding suitable land for large-scale warehousing developments can be difficult in certain areas, particularly near major cities.
• Construction Costs: Rising construction material costs and labor shortages are putting pressure on developers' margins.
• Interest Rate Hikes: Increased interest rates could potentially dampen investment activity, although the strong underlying demand is expected to mitigate this impact.

Despite these challenges, Knight Frank India predicts that the momentum in the logistics real estate sector will continue through 2025 and beyond. The projected 60 msf of leasing by 2025 represents a significant increase compared to previous years, and the diversification of demand sources suggests that this growth is sustainable. The ongoing government initiatives, coupled with the evolving needs of manufacturers and e-commerce companies, are expected to keep the sector vibrant and attractive for investors. The article concludes that India's logistics real estate market is poised to remain a key beneficiary of the country’s economic transformation.

This summary aims to capture the core information from the Moneycontrol article while providing context and explaining the underlying trends driving this significant growth in the Indian logistics real estate sector.