India's Manufacturing Boom Fuels Surge in Office Leasing, Doubles Market Share

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.

Manufacturing Momentum:

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.

E&M Sector's Leasing Dominance:

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.

Flex Space Boom:

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).

Global Manufacturing Hub:

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.

Ease of Doing Business Impact:

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.

Relevant facts:

• 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.