Resurgence of Retail Leasing

Ahead of the festive quarter, retail space supply and absorption reached a new high in the first nine months of the calendar year 2023, with Bangalore, Delhi-NCR and Pune emerging as the main drivers.

According to a recent CBRE  report, retail sector leasing witnessed 46% Y-o-Y growth in the Jan-Sep’23 period. The total absorption across the top 8 Indian cities stood at 4.73 mn. sq. ft, compared to 3.23 mn. sq. ft. in Jan-Sep’22 period. fashion & apparel and home & department stores accounted for over 50% share in leasing. In terms of cities, Bangalore, Delhi-NCR, and Pune collectively accounted for a share of over 61% in leasing activity during this period. Supply addition also recorded a 577% Y-o-Y increase in Jan-Sep’23, crossing 2.98 mn. sq. ft.

During the nine-month period (Jan-Sep’23), fashion & apparel sector’s share in leasing stood at 34%, home & department stores at 17%, and food and beverage at 13%. Delhi-NCR, Chennai and Pune led leasing activity in the fashion & apparel category, while home & department store leasing was highest in Pune, Ahmedabad, and Mumbai. Bangalore recorded the highest leasing share of 30% during the Jan-Sep’23 period, followed by Delhi-NCR at 19%, Pune at 12% and Chennai at 11%.

During the Jul-Sep’23 quarter, total leasing stood at 1.84 mn. sq. ft. The combined share of Bangalore and Pune in retail space leasing stood at 59%. Bangalore emerged as the frontrunner in leasing, capturing a significant 35% share, followed by Pune with a 24% share and Hyderabad with a 14% share. Delhi NCR also had a 11% share in total leasing during this period. Fashion & apparel brands led leasing activity with a 33% share in the total leasing in the top 8 cities during Jul-Sep’23, while leasing by homeware and department stores accounted for 22% share in total leasing.

During Jul-Sep’23, the top 8 cities also saw a 100% Y-o-Y growth in mall completions. Pune led the growth in supply addition with a 58% share, followed by Delhi-NCR at 19%. During this period, the share of leasing activity was led by domestic firms (68%), followed by retailers from EMEA (22%), APAC (8%), and America (3%).

According to Anshuman Magazine, Chairman & CEO – India, South-East Asia, Middle East & Africa, CBRE,  with the surge in newly available spaces and the onset of the festive season,  a continued upswing in space utilization is anticipated as retailers are keen on revamping the in-store experiences with cutting-edge technology, personalized services, and space optimization. Says Ram Chandnani Managing Director, Advisory & Transactions Services, CBRE India,  “As construction costs continue to challenge the industry, we anticipate a surge in redeveloping and reimagining existing spaces, particularly in prime locations with strong occupancies and rents. With malls becoming entertainment centers, footfalls in brick-and-mortar stores are expected to continue rising. Secondary leasing in the retail sector is also expected to remain strong and primary leasing is likely to continue gaining momentum, given the strong supply pipeline and the festive season. Additionally, we foresee Tier-II cities gaining momentum as retailers seize the opportunity to enter these promising markets, capitalizing on their potential for growth while managing operational costs. This strategic move allows them to enhance brand presence, foster customer engagement, and offer value through in-person shopping experiences.