India’s warehousing and logistics sector showed signs of occupier recovery in the first quarter of 2026, with leasing activity rebounding strongly in western markets even as institutional investment fell sharply, according to a report by Vestian.
The sector recorded absorption of 11.4 Mn sq ft in Q1 2026, the highest level in the past four quarters. While this marked an 8 per cent rise over the previous quarter, absorption remained 14 per cent lower than the same period a year earlier. Vestian said the steady sequential recovery since Q2 2025 reflects improving occupier confidence, largely driven by demand from third-party logistics (3PL), engineering and manufacturing, and consumer goods and services companies.
Mumbai continued to dominate leasing activity with a 42 per cent share of total absorption in Q1 2026. The Bhiwandi micro-market alone contributed around 69 per cent of Mumbai’s absorption and nearly 30 per cent of the pan-India total, underscoring the city’s continued strength as a logistics hub.
Pune emerged as the second-largest contributor, accounting for 39 per cent of total absorption, its highest quarterly share on record. The city recorded 4.46 Mn sq ft of leasing, surging 162 per cent quarter-on-quarter and 42 per cent year-on-year, helped by the closure of several large transactions.
Together, Mumbai and Pune accounted for 81 per cent of the country’s warehousing absorption in the quarter, signalling a pronounced shift in leasing momentum towards western India.
In contrast, most other major cities saw subdued demand. NCR’s absorption declined 61 per cent over the previous quarter and 57 per cent year-on-year to 0.73 Mn sq ft. Chennai’s leasing fell 50 per cent sequentially and 34 per cent annually to 0.59 Mn sq ft. Kolkata recorded negligible absorption of 0.01 Mn sq ft following the conclusion of large deals in earlier quarters.
Hyderabad reported absorption of 0.69 Mn sq ft, down 17 per cent from the previous quarter but up 50 per cent from a year ago. Bengaluru saw a sharp 566 per cent quarterly increase but remained 87 per cent lower year-on-year at 0.17 Mn sq ft, resulting in only a 2 per cent share of national absorption.
Vestian noted that the quarter highlighted a concentrated recovery led by western markets, while other cities experienced muted occupier activity.
Weighted average rentals across the top seven cities remained largely stable, ranging between Rs 20–29 per sq ft per month. Chennai recorded the highest rental value at Rs 29 per sq ft per month, registering a 22 per cent quarterly and 21 per cent annual increase — the strongest growth among leading markets.
Bengaluru’s rentals rose modestly to Rs 28 per sq ft per month, up 4 per cent sequentially and 8 per cent year-on-year. Hyderabad saw a 5 per cent quarterly decline to Rs 21 per sq ft per month, though rentals were still 15 per cent higher than a year earlier.
Mumbai witnessed a 17 per cent quarterly drop in rentals to Rs 20 per sq ft per month, but levels remained 11 per cent above Q1 2025. NCR rentals were steady at Rs 27 per sq ft per month, marking a 30 per cent annual increase. Pune’s rentals rose 4 per cent over the previous quarter to Rs 27 per sq ft per month but were 6 per cent lower year-on-year.
Sector-wise, 3PL players continued to dominate demand, accounting for 43 per cent of total absorption in Q1 2026, up from 37 per cent in both Q4 2025 and Q1 2025. Engineering and manufacturing firms increased their share to 25 per cent from 19 per cent in the previous quarter, while consumer goods and services accounted for 6 per cent.
Despite the recovery in leasing, institutional investment into the warehousing and logistics sector fell sharply. The sector attracted USD 22 Mn in Q1 2026, representing just 2 per cent of total real estate investments during the quarter. In value terms, this marked a 96 per cent decline from the previous quarter following a strong end to 2025.
The only major deal recorded during the quarter was the acquisition of a Grade-A warehousing asset in Pune by NDR InvIT for USD 22 Mn. Located in the Chakan–Talegaon belt, the fully leased property offers a stable income profile supported by a diversified tenant base.
Vestian said the subdued investment activity indicates a selective, value-driven approach by investors, with capital flowing mainly into high-quality Grade-A assets in prime locations.
Looking ahead, the firm expects investment activity to recover gradually as investor sentiment improves and occupier demand remains resilient. Western markets, particularly Mumbai and Pune, are expected to remain key growth engines supported by infrastructure expansion, manufacturing-led demand, and government initiatives aimed at improving logistics efficiency.
Rental values are likely to remain stable with selective upside in high-demand corridors, while absorption levels are expected to stay healthy through 2026 on the back of strong underlying demand fundamentals. |
