India's manufacturing sector is reshaping the commercial real estate landscape, doubling its presence in office leasing from 6% in 2018 to an impressive 15% in 2022, according to a recent report by Cushman and Wakefield.
The surge is attributed to the government's Make in India initiative and the impact of Production Linked Incentive (PLI) schemes, poised to generate an additional Rs. 30 lakh crore (US$ 360 billion) in production by 2027.
The PLI scheme, implemented in 2020, has been a catalyst, prompting occupiers in the engineering and manufacturing (E&M) sector to actively seek office space leases across India's top eight cities.
The E&M sector has significantly contributed to total leasing volume, marking a notable 15-18% share in 2021-22, an unprecedented achievement. Key drivers within the E&M sector include chip manufacturing and electronic equipment, accounting for approximately 36% of the market. Bengaluru, Delhi NCR, and Mumbai emerge as focal points, absorbing nearly 70% of the E&M sector's office space demand.
The flex space segment has experienced a surge, mirroring the E&M industry's acceleration. Enterprise seat uptake within the flex space market has skyrocketed, with the E&M sector's contribution expanding from 3% to an impressive 9% in just three years (2020-22).
India's ascent as a preferred alternative manufacturing destination in Asia is a pivotal factor driving this growth. The country's favorable ecosystem and the China+1 diversification strategy position India attractively for global manufacturers.
The report forecasts increased Foreign Direct Investment (FDI) inflows into manufacturing, with close to US$ 21.34 billion already invested in manufacturing in FY22.
India's consistent improvement in the World Bank's Ease of Doing Business Report from 2015 to 2020 underlines its appeal to international manufacturers. This positive sentiment is a significant contributor to the expanding footprint of the E&M sector.
India's manufacturing sector is expected to grow at a compound annual growth rate (CAGR) of 7.9% from 2022 to 2027.
The PLI schemes are expected to generate an additional Rs. 30 lakh crore (US$ 360 billion) in production by 2027.
India's rise as the preferred alternative manufacturing destination in Asia is being driven by a number of factors, including its favourable ecosystem, its China+1 diversification plan, and its steady improvement in ranking in the World Bank's Ease of Doing Business Report.
In FY22, manufacturing attracted close to US$ 21.34 billion in investment.
Latest facts:
The E&M sector's contribution to flex space has grown from 3% to 9% in just three years (2020-22).
Almost 70% of the overall E&M sector's office demand was concentrated in three major cities- Bengaluru, Delhi NCR, and Mumbai.
The manufacturing sector drew close to US$ 21.34 billion in investment in FY22.
These facts indicate that the growth of India's manufacturing sector is on a strong footing. The increase in office leasing by the manufacturing sector is a sign of the sector's confidence in the Indian economy and its future prospects.