India's manufacturing sector doubles its share in office leasing
- IBEF
- October 3, 2023
According to Cushman and Wakefield's most recent report, the commercial real estate market is benefiting from the increased activity in India's manufacturing sector, with its share increasing from 6% in 2018 to 15% in 2022.
The government's Make in India initiative, which seeks to attract foreign investment in the manufacturing sector, and the Production Linked Incentive (PLI) schemes, which have the potential to produce an additional Rs. 30 lakh crore (US$ 360 billion) in production by 2027, are two factors that are fuelling this growth
Occupiers in the engineering and manufacturing (E&M) sector are noted to have actively pursued the lease of office space throughout the top eight cities since the implementation of the PLI scheme in 2020. According to the report, as of 2021-22, the segment made a major 15-18% contribution to the total leasing volume, the most ever leased by the E&M sector.
The two major E&M sub-sectors driving demand in the previous five years are chip manufacturing and electronic equipment, which together now account for approximately 36% of the market. Almost 70% of the overall E&M sector’s office demand was concentrated in three major cities- Bengaluru, Delhi NCR, and Mumbai.
The flex space segment has benefited from the acceleration taken up by the E&M industry. Over the last few years, enterprise seat take-up in the flex space market has grown rapidly and within that, the E&M sector’s contribution grew from 3% to 9% in merely three years (2020-22).
The report emphasises that one of the main forces behind the manufacturing growth narrative is India's rise as the preferred alternative manufacturing destination in Asia. India is likely to be viewed by global manufacturers as a suitable alternative due to its favourable ecosystem and China+1 diversification plan.
According to the report, manufacturing drew close to US$ 21.34 billion in investment in FY22, and the positive sentiment is projected to increase FDI inflows into manufacturing in the years to come.
India's steady and considerable improvement in ranking according to the World Bank's Ease of Doing Business Report during 2015-20, a testament to its market's attractiveness to international manufacturers, is another factor that the report ascribed to the expansion of the E&M sector.
Disclaimer: This information has been collected through secondary research and IBEF is not responsible for any errors in the same.
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