Warehousing leasing dips 7pc in Q2, but H1 absorption hits one-year high: Vestian

THEBUSINESSBYTES BUREAU

NEW DELHI, JULY 28, 2026

India's warehousing and logistics sector saw leasing activity moderate in the second quarter of calendar year 2026, with gross absorption declining 7 per cent sequentially to 10.56 million square feet (msf). However, robust demand during the first quarter helped push H1 2026 absorption to 22 million sq ft, the highest first-half leasing volume recorded over the past year, according to real estate consultancy Vestian.

The H1 performance marks a 16 per cent increase year-on-year and an 11 per cent rise over the second half of 2025, highlighting continued resilience in occupier demand despite an uncertain global economic environment.

The quarter's leasing activity remained heavily concentrated in western India, with Mumbai and Pune accounting for nearly 65 per cent of total absorption, compared with 33 per cent in the corresponding quarter last year. Mumbai emerged as the country's largest warehousing market, recording 5.04 million sq ft of leasing, up 6 per cent quarter-on-quarter and 459 per cent year-on-year. Demand was driven primarily by the Bhiwandi micro-market, which contributed nearly 69 per cent of the city's total absorption.

Pune, the second-largest market during the quarter, recorded 1.78 million sq ft of leasing. However, absorption fell 60 per cent from the previous quarter after several large transactions were concluded in Q1, although it remained 90 per cent higher than a year ago.

Among other major markets, the National Capital Region (NCR) leased 1.24 million sq ft, registering 70 per cent sequential growth and a 75 per cent increase over the year-ago period. Bengaluru recovered from a weak first quarter to record 0.97 million sq ft of absorption, while Chennai continued its steady growth trajectory with leasing of 0.69 million sq ft, up 17 per cent quarter-on-quarter and 52 per cent year-on-year.

Hyderabad reported 0.46 million sq ft of absorption, down 34 per cent sequentially but broadly unchanged from the corresponding quarter last year. Kolkata witnessed a sharp rebound, with leasing touching 0.38 million sq ft, compared with negligible activity in the previous quarter, registering 212 per cent annual growth.

Third-party logistics (3PL) companies continued to dominate demand, accounting for 41 per cent of total leasing during the quarter. Consumer Goods & Services contributed 12 per cent, while Engineering & Manufacturing accounted for 11 per cent. Together, these three sectors represented 64 per cent of total warehousing absorption. Energy, Automobiles & Auto Components, and Chemicals & Petrochemicals collectively accounted for another 22 per cent, indicating broad-based industrial demand.

Despite healthy occupier activity, investment sentiment remained cautious. Institutional investments in the warehousing segment stood at USD 27 million during Q2, representing just 1 per cent of overall real estate investments during the quarter. Although investments increased 25 per cent over the previous quarter, they remained below year-ago levels, reflecting selective capital deployment amid global uncertainties.

Shrinivas Rao, FRICS, Chief Executive Officer of Vestian, said the sector is undergoing a structural shift beyond traditional considerations such as supply chain optimisation and proximity to consumption centres. Increasingly, occupiers are seeking Grade-A green warehouses that align with their environmental, social and governance (ESG) commitments, making sustainability a key differentiator in leasing decisions.

According to Vestian, the sector is expected to benefit from the Union Budget 2026-27's continued emphasis on infrastructure creation. Higher capital expenditure on multimodal connectivity, dedicated freight corridors, logistics parks and cold-chain infrastructure is likely to improve supply chain efficiency and support the expansion of organised warehousing across the country.

The consultancy expects demand from 3PL operators, engineering and manufacturing firms, and consumer goods companies to remain the key drivers of leasing activity. Continued investments in logistics infrastructure and technology-enabled warehousing are also expected to strengthen long-term institutional interest in the sector.