Indian manufacturers have surpassed foreign players in demand for industrial real estate, with manufacturing space leasing by domestic companies growing at a 34 percent compound annual growth rate between 2020 and 2025, compared with 23 percent for multinational companies, according to a Savills India report.

Overall manufacturing leasing nearly quadrupled from 5.8 million square feet in 2020 to 21.3 million square feet in 2025. The report projects manufacturing space leasing to reach 32 million square feet by 2030, reflecting continued expansion of domestic production capacity.

Automotive and auto components accounted for 31 percent of the manufacturing space leased by Indian companies between 2020 and 2025. Electrical and electronics followed with a 12 percent share, while renewable energy accounted for 10 percent.

Foreign manufacturers have also expanded their presence but have adopted a more calibrated approach, with several companies using joint ventures and partnerships before moving from pilot or assembly operations toward full-scale manufacturing. Leasing by foreign manufacturers increased from 2.8 million square feet in 2020 to 7.8 million square feet in 2025.

Manufacturers are increasingly opting for larger facilities capable of supporting automation, integrated operations and future expansion. The average manufacturing leasing size increased from 71,000 square feet in 2022 to 94,000 square feet in 2025. The trend has been particularly visible across automotive and auto components, renewable energy, electrical and electronics, and batteries and energy storage.

Demand is also shifting toward higher-quality industrial facilities. Grade A properties accounted for 53 to 58 percent of manufacturing leasing in 2024 and 2025, compared with 44 percent in 2020.

The geographical footprint of manufacturing is expanding beyond established industrial hubs as companies seek lower operating costs, larger land parcels and improving infrastructure. Tier 2 cities accounted for 77 to 93 percent of manufacturing leasing between 2020 and 2025, while the combined share of Tier 2 and Tier 3 cities increased from 7 percent to 13 percent during the period.

Pune remained the largest manufacturing real estate market, recording 26.7 million square feet of cumulative leasing between 2020 and 2025. Chennai followed with 9.4 million square feet and Bengaluru with 7.2 million square feet. Emerging manufacturing locations including Hosur, Ahmedabad, Coimbatore, Indore and Nagpur are also gaining traction.

The trend indicates that India's manufacturing expansion is increasingly being driven by domestic companies rather than being solely dependent on multinational investment. Government initiatives including Make in India, the Production Linked Incentive scheme and Atmanirbhar Bharat, combined with global supply chain diversification, are supporting India's transition toward a manufacturing and export-oriented ecosystem.

Savills India managing director for industrial and logistics Srinivas N said the sector is expected to move beyond its traditional cost advantage toward a capability-led ecosystem focused on innovation, supply chain resilience and export competitiveness.