Manufacturing has firmly established itself as India’s second-largest industrial leasing segment, trailing only third-party logistics. According to a recent report by JLL, the sector is forecast to hit 46 million sq ft by 2030, a projection that signals a major shift in how companies approach their operational footprints. This growth trajectory is not a sudden spike but part of a sustained upward trend that has reshaped the industrial real estate market over the past few years.
The data reveals a robust expansion pattern. Gross manufacturing leasing has reached a cumulative 69 million sq ft, registering a 49% compound annual growth rate since 2021.
In 2025, gross absorption was 19.2 million sq ft, whilst the first half of 2026 saw 10.2 million sq ft, a 19% year-on-year increase. These figures indicate that demand is not just holding steady but accelerating, driven by both new entrants and existing players expanding their capacities.
Quality over Quantity in Tier-I Cities
A notable trend is the preference for high-specification facilities. Grade-A properties accounted for 90% of manufacturing leasing in 2025. This reflects a broader shift toward infrastructure that meets modern operational standards, moving away from older, less flexible spaces. Manufacturers are increasingly prioritizing speed-to-market and remaining capex-light, particularly due to the paucity of affordable land in major urban centers. The quality of the asset is now a primary driver of leasing decisions.
Pune and Chennai have emerged as the top manufacturing leasing hubs among eight Tier-I cities. They are followed by NCR-Delhi, Bengaluru, Mumbai, Ahmedabad, and Hyderabad. Meanwhile, fourteen emerging markets, including Lucknow, Jaipur, and Surat, are seeing manufacturers favor land transactions over leasing. This divergence highlights a clear split in strategy between major metros and developing regions. In Tier-I cities, agility is king, while in Tier-II markets, long-term control is the priority.
This bifurcation mirrors patterns seen in other maturing economies where core cities become too expensive for heavy asset ownership, pushing firms toward flexible leases, while peripheral areas offer the land for permanent factories. It’s a natural market correction rather than a strategic anomaly. The cost of land in prime locations has outpaced the ability of many mid-sized manufacturers to justify the capital expenditure required for ownership, making leasing the rational choice for those needing rapid deployment.
Incentives Fueling the Boom
JLL attributed the leasing growth primarily to India’s Production Linked Incentive scheme. The initiative has attracted 836 applications across 14 sectors and generated cumulative investments exceeding INR2.16t ($25.9b). Since 2020, the scheme has also created 14.39 lakh direct and indirect jobs. Expanded Free Trade Agreements have further bolstered this momentum, encouraging both domestic and foreign manufacturers to scale up operations within the country. The financial incentives are clearly translating into physical space requirements.
Yogesh Shevade, Managing Director, Industrial & Logistics, India, at JLL, noted that Tier-I cities are witnessing aggressive leasing of Grade-A facilities. Simultaneously, Tier-II markets are seeing manufacturers opt for land acquisition, seeking greater customisation and long-term operational control. The market is not uniform; it is responding to specific local constraints and opportunities. As 2026 progresses, the gap between leasing in the core and buying in the periphery is likely to widen, creating distinct investment opportunities for different types of industrial landlords.
