Domestic Firms Drive Industrial Real Estate Growth
Indian manufacturers have emerged as the primary drivers of demand in the industrial real estate sector, surpassing foreign players in leasing growth. According to a recent report by Savills India, leasing by domestic firms recorded a compound annual growth rate (CAGR) of 34 percent between 2020 and 2025. In comparison, multinationals registered a 23 percent CAGR over the same period.
The overall scale of manufacturing leasing has expanded significantly. The sector witnessed nearly a fourfold increase, rising from 5.8 million square feet (msf) in 2020 to 21.3 msf in 2025. Savills projects this trajectory to continue, with total leasing expected to reach 32 msf by 2030.
Sectoral Breakdown and Facility Upgrades
The automotive and auto components sector remains the largest consumer of industrial space, accounting for 31 percent of the total leased area by Indian manufacturers from 2020 to 2025. The electrical and electronics sector followed with a 12 percent share, while renewable energy contributed 10 percent.
A notable trend is the shift towards larger, more sophisticated facilities. The average size of manufacturing leases increased from 71,000 square feet in 2022 to 94,000 square feet in 2025. This expansion reflects a demand for spaces capable of supporting automation, integrated operations, and future scalability. Grade-A facilities have also gained prominence, comprising 53-58 percent of leasing in 2024-25, up from 44 percent in 2020.
Geographic Shift to Tier-2 Cities
While major metropolitan areas remain key hubs, the geographic footprint of manufacturing is expanding into secondary markets. Tier-2 cities accounted for 77-93 percent of manufacturing leasing between 2020 and 2025. The share of leasing in Tier-2 and Tier-3 cities specifically rose from 7 percent to 13 percent during this period, driven by lower operating costs, availability of larger land parcels, and improving infrastructure.
Pune remains the dominant market, with 26.7 msf of cumulative leasing from 2020 to 2025. Chennai and Bengaluru follow with 9.4 msf and 7.2 msf, respectively. Emerging locations such as Hosur, Ahmedabad, Coimbatore, Indore, and Nagpur are also gaining traction as manufacturing hubs.
Strategic Shifts by Multinationals
Foreign manufacturers are adjusting their strategies in the Indian market. Rather than relying solely on pilot or assembly operations, many are moving towards full-scale manufacturing. This shift is often facilitated through joint ventures or partnerships. Leasing by foreign manufacturers grew from 2.8 msf in 2020 to 7.8 msf in 2025, indicating a calibrated but steady expansion.