Cost of land to birth new logistics and industrial clusters

Bengaluru: While cities such as Pune, Chennai and Bengaluru have seen strong leasing volumes in recent years, the rising land prices and construction costs will push for market diversification, with new alternate logistics and industrial clusters emerging in 2025.

According to a report by real estate services firm Cushman and Wakefield, out on Tuesday, most of the prime logistics and industrial submarkets across top eight cities are experiencing land supply constraints as these locations have now become attractive for developers in the affordable housing space too.

Rising land prices and consistent rise in cost of construction will force landlords in the warehousing and industrial space to look for new peripheral locations that attract competitive land prices.

For example, land transaction for a proposed warehouse in Farukh Nagar, Gurugram got concluded at Rs 5.8 crore per acre in 2024; the rate in 2023 in the same submarket was close to Rs 2.3 crore per acre.

Similarly, land prices in Chakan, Pune and Bhiwandi, Thane (near Mumbai) rose 20-25 per cent since 2023.

The annual leasing volume in the logistics and industrial (L&I) sector is set to exceed 50 million square feet (msf) for the third consecutive year. This strong momentum is likely to prevail in 2025 too.

The main drivers of growth have been growth in the engineering and manufacturing, e-commerce, and retail sectors.

Warehousing rentals have remained largely stagnant, a trend expected to continue in 2025.

This year marked the third consecutive year of record office leasing at 66.4 msf, up 14 per cent year-on-year (YoY), as per a report by professional services company Colliers also out on Tuesday.

Bengaluru drove Grade-A office space demand, with the highest-ever leasing volume of 21.7 million square feet with a 40 per cent YoY increase.