The retail space landscape in the top seven cities of India has experienced a 2% reduction, according to real estate consultancy firm JLL. As of June 2023, the operational retail stock in these cities has decreased from 90.6 million square feet in June 2022 to 89.2 million square feet. JLL’s report highlights that during this period, approximately 4 million square feet of organized shopping malls were either downgraded or closed, while an additional 2.63 million square feet of mall space was introduced.
Operational retail spaces, as defined by JLL, are those actively operating and not stalled or closed. These retail spaces are concentrated in Delhi NCR, Mumbai, Pune, Bengaluru, Kolkata, Chennai, and Hyderabad, totaling 89 million square feet as of the first half of 2023. Delhi NCR and Mumbai account for more than 50% of the operational mall stock, with 28 million square feet and 17 million square feet, respectively. In the first half of 2023, there were mall completions totaling approximately 1.1 million square feet, primarily in Hyderabad and Delhi NCR.
Nevertheless, the report forecasts a 43% increase in shopping mall stock by the end of 2027, reaching 127 million square feet. This growth is expected to be fueled by India’s first retail Real Estate Investment Trust (REIT), Nexus Select Trust REIT, backed by Blackstone. The Nexus REIT currently comprises around 9.9 million square feet and offers a potential of approximately 43-44 million square feet of REIT-worthy retail assets across various cities, with Mumbai and Delhi NCR housing more than half of these assets.
The report underscores the potential for increased institutional investment in the Indian retail sector, with a particular focus on tier I cities. However, it also notes that 30% of institutionally held assets are located in tier II and tier III cities, including Amritsar, Chandigarh, Ludhiana, Mohali, Mysuru, Mangaluru, Surat, Bhubaneswar, Indore, and Nagpur.
The criteria for REIT-worthy retail stock include organized malls classified as ‘superior’ and ‘good,’ featuring a leasable area of at least 100,000 square feet and current vacancy levels below 20% as of June 2023. Mall classification is based on factors such as tenant mix, mall management quality, amenities, vacancy rates, and ownership patterns.
Additionally, the report highlights that since 2021, 24 new international brands have entered the Indian market, particularly targeting superior-quality mall developments in Delhi NCR, Mumbai, and Bengaluru. Nearly a quarter of these newcomers belong to the food and beverage category. Gross leasing activity in the top seven cities, encompassing shopping malls and prime high streets, reached 3.16 million square feet in the first half of 2023, indicating retailers’ confidence in expanding. Bengaluru led with a 34% share, followed by Delhi NCR at 23%, and Hyderabad at 19%. Fashion and apparel, along with food and beverage brands, dominated the leasing activity during this period.
Emerging Retail Trends
The report also sheds light on emerging trends in the retail sector:
- Premium Outlet Centers: While still in the early stages in India, premium outlet centers are capitalizing on the preferences of young, affluent, and well-traveled Indians. However, a carefully curated brand mix and appropriate mall size are essential considerations for developers and landowners.
- Highway Retailing: With infrastructure improvements and increased leisure travel, highway retail is expected to become a significant growth driver for the sector. The government’s promotion of electric vehicles (EVs) is set to lead to the establishment of EV charging stations along highways, attracting quick service restaurants (QSRs) and convenience stores. Entertainment options are also gaining traction in highway retail.
As demand for global brands continues to rise, the report predicts an influx of international retailers in the highway retail segment.
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