India's industrial and logistics sector recorded a 14.1 per cent year-on-year rise in absorption to 24.3 million sq ft in Q3 2026, according to a report by Savills India released on 9 October 2026. The growth underscores sustained demand for quality warehouse and factory space across the country, even as fresh supply surged to keep pace.

Tier-I Cities Drive the Market

Tier-I cities continued to dominate, accounting for 19.9 million sq ft — or 82 per cent — of total absorption in the quarter. Tier-II and III cities contributed the remaining 4.4 million sq ft, or 18 per cent. Cumulatively, absorption for the first nine months of 2026 reached 59.1 million sq ft, up 6.9 per cent year-on-year, the Savills India report noted.

Supply Surges 21% in Q3

On the supply side, fresh completions totalling 26.2 million sq ft were added in Q3 2026, marking a 21.3 per cent year-on-year increase. Tier-I cities contributed 19.2 million sq ft or 73 per cent of new supply, while Tier-II and III markets added 6.9 million sq ft, or 27 per cent. Notably, Grade-A absorption climbed to 66 per cent during the period from 52 per cent a year earlier, and Grade-A supply rose to 58 per cent from 50 per cent, driven by growing emphasis on quality infrastructure, regulatory compliance, and ESG considerations, according to Savills.

Manufacturing Leads Sector-wise Demand

Manufacturing emerged as the top absorption driver at 31 per cent in Q3 2026, up from 27 per cent a year ago, reflecting the broader industrial push across the country. Third-party logistics (3PL) followed at 26 per cent, though its share moderated from 34 per cent previously. Retail recorded a sharp jump to 12 per cent from just 5 per cent a year ago, while e-commerce held steady at 10 per cent.

City-wise Absorption and Supply Rankings

Delhi-NCR retained its position as the leading market, accounting for 20 per cent of total absorption, followed by Bengaluru at 16 per cent, Mumbai at 14 per cent, and Pune at 13 per cent. On the supply side, Pune emerged as the highest contributor at 18 per cent in Q3 2026, followed by Delhi-NCR and Mumbai each at 15 per cent. Tier-II and III cities collectively accounted for 27 per cent of new supply, signalling growing developer interest beyond the traditional top-four markets.

What the Numbers Signal

The data points to a structural shift in India's warehousing landscape — away from speculative Grade-B stock toward institutionally owned, ESG-compliant Grade-A assets. This comes amid a broader policy environment favouring domestic manufacturing, with the Centre's production-linked incentive schemes continuing to draw investment into industrial corridors. The rising share of Tier-II and III cities in supply, even if absorption still lags, suggests developers are front-running anticipated demand rather than merely reacting to it. How quickly that latent demand converts will be a key watch-point for the sector through the final quarter of 2026.