According to the latest report from Cushman and Wakefield, the commercial real estate market is experiencing a boost thanks to the increased activity in India’s manufacturing sector. The sector’s share has grown significantly, rising from 6% in 2018 to 15% in 2022.
This growth can be attributed to the government’s Make in India initiative, aimed at attracting foreign investment in manufacturing, and the Production Linked Incentive (PLI) schemes. These schemes have the potential to generate an additional Rs. 30 lakh crore (US$ 360 billion) in production by 2027, further fueling the expansion.
Notably, occupiers in the engineering and manufacturing (E&M) sector have actively sought office space leases in the top eight cities since the introduction of the PLI scheme in 2020. As of 2021-22, this segment contributed significantly, making up 15-18% of the total leasing volume, marking a record high for the E&M sector.
Within the E&M sector, two major sub-sectors, chip manufacturing and electronic equipment, have emerged as key drivers, accounting for approximately 36% of the market. The demand within the E&M sector has been concentrated in three major cities: Bengaluru, Delhi NCR, and Mumbai, which together accounted for nearly 70% of the sector’s office demand.
The flex space segment has also benefited from the E&M industry’s acceleration. Enterprise seat take-up in the flex space market has grown rapidly over the past few years, with the E&M sector’s contribution increasing from 3% to 9% in just three years (2020-22).
The report underscores that India’s rise as a preferred alternative manufacturing destination in Asia is a significant driver of manufacturing growth. India’s favorable ecosystem and the China+1 diversification plan make it an attractive option for global manufacturers. In FY22 alone, manufacturing attracted close to US$ 21.34 billion in investment, and this positive sentiment is expected to drive further foreign direct investment (FDI) into manufacturing in the coming years.
Additionally, the report highlights India’s consistent improvement in the World Bank’s Ease of Doing Business ranking from 2015 to 2020. This improvement reflects the country’s attractiveness to international manufacturers and has contributed to the expansion of the E&M sector.
