Indian manufacturers race ahead of global firms in factory leasing
What's the story
According to a recent report by Savills India, domestic manufacturers are leading the charge in India's industrial real estate sector. The report shows that manufacturing-space leasing by Indian firms has grown at a whopping 34% CAGR between 2020 and 2025. In comparison, multinationals have seen a comparatively lower growth rate of 23%.
Growth trajectory
Massive growth in overall manufacturing leasing
The report also highlights a massive increase in overall manufacturing leasing. From just 5.8 million square feet (msf) in 2020, it has grown to an estimated 21.3 msf by 2025.
The trend is expected to continue with projections of the market hitting around 32 msf by 2030.
This growth shows how much demand there is for industrial real estate in India right now and in the future.
Sectoral distribution
Leasing activity by sector
The report further breaks down the leasing activity by sector.
Between 2020 and 2025, automotive and auto components accounted for 31% of the space leased by Indian manufacturers.
This was followed by electrical and electronics at 12% and renewable energy at 10%.
The report notes that foreign manufacturers are taking a more cautious approach to their expansion plans.
They have mostly opted for joint ventures or partnerships and are transitioning from pilot/assembly operations to full-scale manufacturing.
Size increase
Manufacturers opt for larger units
The report also highlights a growing trend of manufacturers opting for larger units that can accommodate automation, integrated operations, and future expansion.
From an average size of 71,000 square feet in 2022, the average manufacturing leasing size rose to 94,000 square feet by 2025.
There is a growing preference for grade-A facilities among manufacturers. These high-quality spaces accounted for 53-58% of leasing in 2024-25, up from 44% in 2020.
Regional shift
Tier-2 cities emerging as preferred locations for manufacturers
The report also highlights a major shift toward tier-2 cities for manufacturing leasing.
These regions accounted for 77-93% of manufacturing leasing between 2020 and 2025.
Their share also increased from just 7% to 13% during this period.
This trend shows how lower operating costs, larger land parcels, and better infrastructure are driving manufacturers away from traditional hubs into secondary markets.