2025 Round-Up: Robust Demand, Steady Supply Reinforce Vitality in Industrial & Warehousing

New Delhi, December 16, 2025: India’s industrial & warehousing market remained resilient, with cumulative demand across the top eight markets reaching 26.5 million square feet (msf) in first 9 months of the year, reflecting an 11 per cent YoY increase. Grade A space uptake stayed at an all-time high, even as global occupiers remained cautious amid ongoing trade uncertainties. Third-party logistics (3PL) players have continued to dominate leasing activity, accounting for nearly one-third of the warehousing demand. Simultaneously, e-commerce and engineering players have seen a surge in demand during this period, and this can potentially result in an annual demand of 30-40 msf. New supply is also likely to remain elevated at 35–40 msf in 2025.

2026 Outlook: Policy Push, Modernization to Drive Growth in Emerging Markets

India’s industrial & warehousing segment is poised for another year of strong expansionary growth in 2026, as 3PL players accelerate Grade A space demand across Tier I cities and emerging hubs. The continued rise of e-commerce and q-commerce will fuel the proliferation of hyperlocal facilities such as micro-fulfilment centers, dark stores, and in-city warehouses, enabling faster and agile deliveries. Additionally, rising traction in Tier II & III cities will be supported by enhanced regional connectivity through expressways, dedicated freight corridors, industrial corridors, and upcoming Multi-Modal Logistics Parks (MMLPs), that would further expand the country’s logistics capabilities. Overall, the industrial & warehousing segment is likely to see about 30–40 msf of average annual demand over the next few years.

• Rise of plug-and-play parks to fast-track occupier expansion: Plug-and-play industrial hubs are becoming the go-to option for occupiers seeking faster setup and minimal groundwork. With utilities, core infrastructure and compliance-ready units already in place, these parks enable businesses to ramp up operations rapidly. Additionally flexible layouts, integrated support services and ability to reduce time-to-market will continue to make these facilities a strategic fit for scalable growth in 2026.

• Policy led manufacturing push to catalyze large space uptake: Strong policy push and better implementation of flagship programs such as Make in India, the Production-Linked Incentives (PLI) scheme, and Gati Shakti masterplan, are likely to accelerate India’s transformation into a competitive manufacturing hub. This policy momentum stands to benefit occupiers, enabling them to expand at scale —Warehousing deals of 200,000 sq ft or more will drive around 40-50 per cent of the Grade A space uptake in 2026. Backed by improving infrastructure, enhanced connectivity and regulatory incentives, 3PL, engineering, and automobile occupiers are particularly expected to opt for larger, future-ready warehouses across key logistics corridors of the country.

• Logistics hubs in Tier II/III cities poised to emerge as key growth engines: As India’s infrastructure network continues to expand through new expressways, dedicated freight & industrial corridors and Multi-Modal Logistics Parks, industrial activity will increasingly extend beyond established Tier I cities. While leading markets will still command a significant share of demand and supply, Tier II & III cities are expected to gain far greater prominence in 2026 as enhanced connectivity and logistics efficiency open new avenues for regional growth. Rising freight movement along key infrastructure corridors will spur demand for modern warehouses, logistics parks, and manufacturing facilities across the country.

• Hyperlocal distribution models to amplify warehousing requirements: The surge in e-commerce and rapid-delivery platforms will accelerate the need for compact, neighborhood-centric storage solutions. Retailers and logistics operators are expected to expand their footprint in localities closer to high-demand neighborhoods to ensure faster delivery timelines. At the same time, dark stores built specifically for quick pick-up & dispatch, will play a pivotal role in optimizing last-mile efficiencies throughout 2026. These shifts will reshape urban supply chains, prompting greater investment in localized warehousing formats and agile fulfilment centers.

• Traction in EV sales and ancillary industries catalyze demand: As EV manufacturing ramps up, requirements for specialized facilities like battery storage, component manufacturing, electronics, and service logistics will intensify, thereby contributing significantly to the annual warehousing demand over the next few years.

• Institutional grade assets to pave the way for future REITs: In 2026, the demand for ESG compliant and technology adept Grade A warehouses & logistics parks is set to rise further. With developers adopting global standards in design, sustainability, and automation, the segment is expected to draw deeper institutional capital and accelerate the inclusion of premium warehouses in future REITs/InvITs.

Alternatives

2025 Round-Up: Data Centers, Shared Living Formats Gain Prominence

Alternative asset classes such as Data Centers (DC), senior living, co-living etc. continued to expand in India, amid compelling growth prospects. As of 2025, the country’s DC market[2] has significantly scaled up to more than 1,300 MW capacity entailing a real estate footprint of nearly 16 msf across the top seven markets (more than 2X growth in last five years). This growth is being propelled by surging demand for cloud and digital services, accelerated adoption of AI and IoT, deeper internet penetration, regulatory push and stricter data localization norms. Alongside the digital push, shared living formats such as senior and co-living too have seen an upward growth trajectory led by demographic shifts and changing lifestyle preferences. As of 2025, co-living and senior living inventory has reached 0.3 and 0.03 million beds, translating into a penetration rate of 5 per cent and 2 per cent respectively, albeit at nascent levels.

2026 Outlook: Alternative Assets to Enter Accelerated Growth Phase

Looking ahead to 2026, alternative asset classes such as data centers, senior living, and co-living are poised for sustained momentum as investors seek diversification and enhanced risk-adjusted returns. With India’s real estate market maturing across asset classes, capital allocation towards these emerging segments is expected to rise further. This trend signals a structural rebalancing of investor portfolios, positioning alternative assets as strategic growth engines of the future.

Data centers

• Capacity surge to be driven by increased AI adoption: AI & cloud computation are redefining the DC ecosystem of India supported by strong government initiatives and growing traction in machine learning and cloud-based services. With the AI market projected to reach USD 17 billion by 2030, the demand for high-performance DC infrastructure is set to gain traction in next few years. DC operators are likely to focus more on AI-powered, built-to-suit and controlled colocation models to ensure data security, regulatory compliance, and low-latency processing. As these trends converge, India’s overall DC capacity is expected to rise to 2 GW in the next few years, expanding into smaller markets driven by rapid digitalization, e-commerce penetration, and state-specific data center policies.

• Edge data centers to witness strong growth: In the coming years, growing emphasis on edge computing and increasing 5G roll-out will accelerate development of edge data centers. Leading operators have already announced plans to expand edge DCs across 200+ locations in the next few years. Moreover, as data consumption continues to grow manifold, energy efficiency, sustainability and carbon emissions are likely to become focal considerations in the Indian DC market.

Senior living

• Rising demand in Tier II cities and spiritual hubs: Apart from Tier I cities, senior living is set to gain traction in Tier II cities such as Surat, Coimbatore, Kochi & Panaji and spiritual tourism destinations like Vrindavan, Ayodhya, Dwarka & Rameshwaram driven by expansion of reputed developers, improving infrastructure and inclination towards slower pace of life and cultural experiences.

• Increasing interest amongst Non-Resident Indians: NRIs are showing growing interest in senior living projects, particularly in hubs like Kerala, Delhi NCR, Bengaluru, and Hyderabad viewing them as safe, community-driven options for ageing parents. Additionally, institutional investors are recognizing the untapped potential in the segment, which will alleviate supply-side constraints to a certain extent in the upcoming years.

Co-living

• Market consolidation, formalization & expansion beyond Tier I cities: India’s co-living segment is entering a new phase of growth, underpinned by urban migration, rising disposable incomes, and demand for hassle-free, community-driven housing among students and young professionals. In the next 1-2 years, the segment’s organized inventory is likely to double up, improving penetration from 5 per cent to 8-10 per cent. While Tier I cities will remain the primary market, operators will increasingly foray into Tier II cities through acquisition of unorganized players, Purpose-Built Student Accommodation (PBSA) and partnerships with educational institutions. As co-living gets formalized to a greater degree in India, efficiencies, occupancy levels and profitability margins are likely to improve significantly in the coming years.

• Smart solutions & asset-light strategies to power operator expansion: The segment’s next phase of growth will be powered by asset-light strategies and technology-driven experiences such as keyless entry, app-based management, and IoT-enabled services. While lease models will dominate the co-living segment, franchise & revenue-sharing models will also gain traction in 2026, enabling faster expansion through local partnerships particularly in Tier II/III cities.

Investment

2025 Round-Up: Investor Confidence Remains Upbeat in Indian Real Estate

Institutional investments in India’s real estate sector held firm in 2025 despite global headwinds and trade frictions, totaling $4.3 billion in the first nine months. The ongoing year reiterates growing depth and confidence among domestic investors. Moreover, capital deployment by both foreign and domestic investors is likely to remain at par in 2025. Altogether, investment volumes for 2025 are projected to be at around $6 billion, a testament to the market’s depth and stability. Office and residential segments will continue to dominate, contributing nearly 60 per cent of total investments, supported by strong occupier activity and a healthy supply pipeline. Additionally, alternative and mixed-use assets are likely to witness significant capital allocation, together accounting for more than one-fifth of the inflows in the year.

2026 Outlook: Investors Can Potentially Drive Greater Institutionalization Across Asset Classes

Institutional investments in Indian real estate are expected to strengthen at $6-7 billion in 2026, driven by a balanced interplay of foreign and domestic investors. While domestic investors will continue to expand their investment horizon, foreign inflows are expected to improve as cross-border investments pick pace. Core assets such as office and residential will remain dominant and will be complemented by uptick in investments across industrial & warehousing, alternatives and mixed-use developments. In 2026 and beyond, Indian real estate is set to enter a deeper phase of institutionalization, marked by platform-led acquisitions, strategic consolidations and expansion of REITs & SM-REITs. Furthermore, AIFs can gain traction and enhance liquidity, particularly in stressed assets. Overall, ESG compliance and sustainability-linked investments will remain central to capital allocation strategies, reinforcing India’s position as a high-potential market in the APAC region.

• Cross-border capital deployment in land & developmental assets to rise: Institutional investors in Indian real estate are pivoting towards build-to-core strategies, wherein assets are developed with a long-term intent of holding, rather than exiting. Global investors are likely to increasingly form joint ventures and participate in early-stage activities such as land acquisition and construction, particularly in quality office, residential and industrial & warehousing segments where demand fundamentals remain strong.

• Investments in retail & mixed-use segments to rise: Retail segment investments are set to rise in 2026, driven by Grade A malls with strong tenant mix, experiential formats, premium F&B outlets and entertainment zones. Mixed-use developments—combining retail, office, and hospitality spaces too will gain traction as developers and investors seek to maximize footfall, diversify income streams, and create integrated lifestyle destinations. Sustainability initiatives and tech-enabled ‘phygital’ experiences will further solidify global investor interest in the segment.

• Capital flows broadening towards emerging markets & multi-city portfolios: Institutional investors are expected to increase their focus on geographical diversification in the coming years. Building upon the momentum seen in recent years, multi-city deals are likely to account for 30-40 per cent of the total inflows in 2026. While Tier I cities will continue to dominate real estate investments, emerging Tier II/III markets can witness greater capital deployment across flexible workspaces, co-living accommodation, senior housing, mixed-use developments, data centers etc.

• Building resilient portfolios through alternate strategies: Developers are likely to increasingly review their credit strategies and leverage structured debt and mezzanine finance products in the next few years. Debt platforms and private credit solutions can enhance liquidity and help in repositioning underperforming assets through ESG upgrades and adaptive reuse. These approaches signal a strategic pivot towards capital-efficient models that balance risks with value creation, ensuring real estate portfolios remain resilient and future-ready.

• Real estate filings and equity market listings to pick up: Real estate IPOs are expected to remain steadfast in 2026, building on the strong momentum of recent years. In the last 5 years, nearly 40 real estate IPOs have cumulatively raised more than INR 500 billion, with 2025 alone contributing nearly INR 180 billion, 30 per cent up from the levels seen last year. Looking ahead, 2026 is likely to witness equally strong equity market listings from residential developers, housing finance companies, REITs, along with emerging categories like flex space operators and hospitality players as they scale operations and seek access to public markets.