Warehouse leasing across India's eight largest markets rose 12% from a year earlier to 19.1 million square feet in the July-to-September quarter, Knight Frank India said in a report released Thursday, as manufacturers and third-party logistics operators took up space ahead of the festive season.

For investors in Asian logistics property, the figures show demand holding up in the region's fastest-growing big economy even as costs climb. Rents rose in every one of the eight markets the consultancy tracks, and Mumbai, India's financial capital, did most of the heavy lifting on volume.

The rebound followed a softer second quarter, according to the report. Knight Frank said demand stayed firm despite geopolitical uncertainty and high oil and freight costs.

Manufacturers and 3PL operators take three-quarters of space

Manufacturing companies and third-party logistics (3PL) operators together accounted for 76% of the quarter's leasing, Knight Frank said. Leasing by 3PL firms jumped 27% from a year earlier as companies handed warehousing, inventory and distribution to specialists. Manufacturing leasing, which excludes consumer goods makers, rose 11%, helped by automotive, engineering, consumer durables and electrical equipment companies, according to BW Businessworld's account of the report.

Consumer-facing tenants also expanded before the festive season. Leasing by fast-moving consumer goods firms more than doubled, up 101%, while fast-moving consumer durables rose 43%. E-commerce leasing grew a more modest 5%.

Shishir Baijal, chairman and managing director of Knight Frank India, said the market was being reshaped by domestic manufacturing and specialized logistics providers. He said future growth would depend on quality facilities near production and consumption centers, adding that land, approvals and infrastructure would be “critical” to supporting India's supply chains.

Factory demand is spreading beyond the traditional auto hubs. Pune and Chennai accounted for 32% of manufacturing leasing in the first nine months of 2026, down from 45% a year earlier, according to the report. Chennai still took the biggest single share in the third quarter, leasing 2.7 million square feet, up 18%, or 22% of national manufacturing demand. In Bengaluru, manufacturing accounted for 98% of the market's leasing growth so far this year.

For a broader read on factory conditions, see India's latest core sector output and PMI data.

Mumbai and NCR drive nine-month gains

For January to September, leasing in the eight markets totaled 55.9 million square feet, up 14% from a year earlier. Mumbai led with 15.5 million square feet, a 55% increase, followed by the National Capital Region around New Delhi at 10.1 million square feet, up 14%.

Those two markets accounted for 99% of the incremental leasing across the country in the period, Knight Frank said. Elsewhere the picture was mixed. Bengaluru leased 6.2 million square feet, up 25%, and Ahmedabad 5.9 million, up 20%. Pune also leased 6.2 million square feet but was down 23% after an unusually strong 2025, and Chennai fell 11% to 5.7 million. Hyderabad rose 10% to 3.1 million square feet and Kolkata 2% to 3.3 million.

A separate count by consultancy Vestian, published earlier in the week, put third-quarter absorption at 10.58 million square feet and the nine-month total at 32.6 million, the highest in three years. Brokers measure the market differently, but both reports point to rising demand.

Rents rise even where vacancy is high

Average warehouse rents rose between 3% and 5% from a year earlier across all eight markets, which Knight Frank attributed to tenant demand and higher land and construction costs. Pune was the most expensive market at 28.9 rupees per square foot per month, followed by Mumbai at 26.2 rupees and Kolkata at 26 rupees.

Mumbai, Bengaluru, the NCR and Ahmedabad each posted 5% rental growth. Hyderabad had the slowest increase, 3%, taking average rents to 22.2 rupees.

The gains came despite ample empty space in some cities. Total industrial and warehousing stock in the eight markets reached 597.7 million square feet, with overall vacancy at 11.5%. Bengaluru had the highest vacancy at 18.5%, followed by Hyderabad at 17.4%, while Kolkata had the lowest at 8.7% and Chennai 10.3%. Mumbai and Bengaluru raised rents 5% even with vacancy above 14%, according to the report.

Tenants are also trading up. Grade A buildings took 66% of third-quarter leasing, up from 56% a year earlier, though they make up only 48% of total stock. Chennai has the highest share of Grade A space at 78%, while Mumbai and the NCR, the two busiest markets, sit at 37% and 39%.

That gap matters for developers and institutional landlords. In the markets where demand is growing fastest, less than two-fifths of existing warehouse space meets the standard that tenants are now choosing for two-thirds of their new leases.