India’s Industrial and Logistics Absorption Climbs 14% to 24.3 mn sq ft in Q3 as Tier-II Cities Gain Share

Summary

India’s industrial and logistics sector absorbed 24.3 million sq ft in Q3 2026, up 14.1% year on year, according to Savills India. Tier-II and III cities raised their share of leasing to 18% from 16% a year earlier, while manufacturing overtook third-party logistics as the largest demand segment. New supply grew even faster, rising 21.3% to 26.2 million sq ft.

Article

New Delhi: India’s industrial and logistics absorption rose 14.1% year on year to 24.3 million sq ft in the July-September 2026 quarter, according to a Savills India report released on October 9.

How did tier-II cities perform?

Tier-I cities continued to dominate, accounting for 19.9 million sq ft, or 82% of total absorption. Tier-II and III cities contributed 4.4 million sq ft, or 18%.

That marks a clear gain for smaller markets. In Q3 2025, tier-II and III cities accounted for 3.5 million sq ft, or 16% of absorption, while tier-I cities took 17.8 million sq ft, or 84%. Leasing in smaller cities therefore grew about 26% year on year, roughly double the pace of tier-I markets.

Savills classifies Ahmedabad, Bengaluru, Chennai, Hyderabad, Kolkata, Mumbai, Delhi-NCR and Pune as tier-I cities. Its tier-II and III list covers Guwahati, Bhubaneswar, Patna, Hosur, Coimbatore, Rajpura, Lucknow, Jaipur, Nagpur, Surat, Indore, Kochi, Hubli, Vizag, Belgaum and Anantapur.

Which cities led demand?

Delhi-NCR remained the largest market with 20% of total absorption, followed by Bengaluru at 16%, Mumbai at 14% and Pune at 13%.

Which sectors drove leasing?

Manufacturing led absorption with a 31% share, up from 27% a year earlier. Third-party logistics (3PL) followed at 26%, down from 34%, while retail jumped to 12% from 5%.

What about new supply?

Fresh completions rose 21.3% to 26.2 million sq ft in Q3. Tier-I cities contributed 19.2 million sq ft, or 73%, while tier-II and III markets added 6.9 million sq ft, or 27%. Pune was the largest single contributor to supply at 18%, followed by Delhi-NCR and Mumbai at 15% each.

With supply growing faster than absorption, developers are adding stock ahead of demand, particularly in smaller cities, where tier-II and III markets accounted for 27% of new supply but 18% of absorption.

How does the year look so far?

Cumulative absorption for January-September 2026 reached 59.1 million sq ft, up 6.9% year on year. Growth has accelerated since the first half, when absorption of 34.8 million sq ft was up just 2.4%.

Why does it matter for logistics?

The rising share of manufacturing occupiers reflects expanding production capacity across sectors, which in turn drives demand for warehousing close to factories, ports and consumption centres. The steady shift towards tier-II and III cities points to the spread of distribution networks beyond the metros, supported by new expressways, dedicated freight corridors and multimodal logistics parks. For port-linked logistics hubs, the trend signals growing hinterland demand for Grade-A warehousing well beyond traditional gateway cities.

FAQs

How much industrial and logistics space was absorbed in Q3 2026?

Absorption rose 14.1% year on year to 24.3 million sq ft, according to Savills India.

What share did tier-II and III cities take?

Tier-II and III cities accounted for 4.4 million sq ft, or 18% of absorption, up from 16% in Q3 2025.

Which city led absorption?

Delhi-NCR led with 20%, followed by Bengaluru at 16%, Mumbai at 14% and Pune at 13%.

Which sector drove demand?

Manufacturing led with 31% of absorption, followed by 3PL at 26% and retail at 12%.

How much new supply was added?

Fresh completions rose 21.3% to 26.2 million sq ft in Q3 2026.