Domestic manufacturers outpace global firms in India’s factory space race

As per the latest business developments, Indian manufacturers have surpassed foreign players in the demand for industrial real estate, with manufacturing-space leasing by domestic firms growing at a 34 percent compound annual expansion rate (CAGR) between 2020 and 2025 against 23 percent for multinationals, a Savills India report has stated.

Overall manufacturing leasing nearly quadrupled from 5.8 million square feet (msf) in 2020 to 21.3 msf in 2025 and is projected to touch 32 msf by 2030, the Report, which was released last week, says.

Automotive and auto components accounted for 31 percent of the space leased by Indian manufacturers between 2020 and 2025, followed by electrical and electronics at 12 percent and renewable energy at 10 percent.

Foreign manufacturers have calibrated their expansion, often referring a joint venture or partnerships route and moving from pilot or assembly operations towards full manufacturing. Their leasing rose from 2.8 msf in 2020 to 7.8 msf in 2025.

Manufacturers are increasingly going for larger units that can accommodate automation, integrated operations and future expansion.

According to the report, average manufacturing leasing size rose from 71,000 square feet in 2022 to 94,000 square feet in 2025, signalling demand for larger facilities.

The shift is particularly visible in auto and auto components, renewable energy, electrical and electronics, and batteries and energy storage.

Grade-A facilities accounted for 53-58 percent of leasing in 2024-25, up from 44 percent in 2020.

“Over time, the sector is anticipated to move beyond its traditional cost advantage towards a capability-led ecosystem anchored in innovation, supply chain resilience, and export competitiveness,” Savills India managing director–industrial & logistics Srinivas N stated.

Tier-2 cities accounted for 77-93 percent of manufacturing leasing between 2020 and 2025. The share of tier-2 and 3 cities increased from 7 percent to 13 percent during the period.

Softer operating costs, larger land parcels and improving infrastructure are helping expand manufacturing into secondary markets.

Pune remained the largest market, with 26.7 msf of cumulative leasing during 2020-25, followed by Chennai at 9.4 msf and Bengaluru at 7.2 msf. Locations such as Hosur, Ahmedabad, Coimbatore, Indore and Nagpur are gaining traction.

Market observers stated the emerging picture is as a result not simply “Make in India” attracting multinational factories.

“Government initiatives such as ‘Make in India’, the PLI scheme and ‘Atmanirbhar Bharat’, along with global supply chain shifts, are accelerating India’s transition from ‘Make in India’ to ‘Made by India’, positioning it as a competitive manufacturing and export hub,” Srinivas stated.