India’s industrial and logistics real estate sector saw strong growth in Q1 2025, with absorption reaching 16.0 million sq. ft., an 18.5% Y-o-Y increase from 13.5 million sq. ft. in Q1 2024, according to Savills India, a leading global real estate advisory firm. Tier-I cities accounted for 79% of this absorption, while Tier-II and Tier-III cities contributed 21%.
On the supply front, the sector delivered 15.9 million sq. ft. in Q1 2025, with 23.3% Y-o-Y growth. Tier-I cities contributed a substantial 12.4 million sq. ft. (78%) and Tier-II and Tier-III cities added 3.6 million sq. ft. (22%). This robust delivery across cities reflects the market’s alignment with growing demand.
Tier- I cities include Ahmedabad, Bengaluru, Chennai, Hyderabad, Kolkata, Mumbai, Delhi-NCR, and Pune. Tier- II and Tier-III cities include Guwahati, Bhubaneshwar, Patna, Hosur, Coimbatore, Rajpura, Lucknow, Jaipur, Nagpur, Surat, Indore, Kochi, Hubli, Vizag, Belgaum and Anantapur.
The demand for compliant Grade-A spaces has surged over the past few years, driven by occupier preferences aligning with ESG standards. As a result, Grade-A supply rose to 60% in Q1 2025, compared to 45% in Q1 2024.
Srinivas N, Managing Director, Industrial and Logistics, Savills India said 2025 has begun on a strong note for Indian real estate, with early momentum especially visible in the industrial and logistics sector.
“The sector continues to show robust growth, supported by a favorable demand environment, proactive government policies, and major infrastructure investments. We expect both new supply and absorption to exceed 70 million sq. ft. this year, which predominantly will be driven by the 3PL sector and manufacturing activity, followed by strong interest from retail, FMCG, and FMCD players. Tier-II and Tier-III cities are gaining prominence as key hubs for sourcing, consumption, and distribution, as companies increasingly look beyond metro markets. At the same time, demand for Grade-A facilities is set to surge due to growing emphasis on quality and compliance. With strong fundamentals, diverse demand drivers, and growing investor interest, 2025 is well-positioned to be a defining year for India’s industrial and logistics real estate.”
The absorption was primarily driven by demand from the manufacturing segment, which accounted for 30% of the total absorption, followed by the 3PL segment at 26%, while the retail segment contributed 12%. The e-commerce segment is gaining traction, with contribution to overall absorption at 10%, followed by the FMCG & FMCD segment at 9%.
In Q1 2025, in terms of absorption, Delhi-NCR led with 3.4 mn sq. ft. (22%), followed by Mumbai at 2.5 mn sq. ft. (16%), and Pune at 2.3 mn sq. ft. (14%). On the supply front, Mumbai emerged as the top contributor with 3.1 mn sq. ft. (19%), followed by Bengaluru at 2.1 mn sq. ft. (13%), Chennai at 2.0 mn sq. ft. (13%) and Delhi-NCR at 2.0 mn sq. ft. (12%).
Tier-II and Tier-III cities are witnessing significant growth both in terms of supply and absorption as prominent hubs for sourcing, consumption, and distribution, contributing 21% of overall absorption and 22% of overall supply in Q1 2025.
