Strong Growth Outlook For Retail Realty

The buoyant economy and continuous investments by foreign institutional investors, has contributed to footprint expansion of retail real estate- shopping malls and high street retail, holding a positive outlook for 2024.

The physical retail market has a  robust supply of 41 million sq ft of retail developments scheduled to be operational between 2024 and 2028 across top 7 cities of India.  This supply constitutes projects which are either under construction or in active planning stage. Delhi-NCR is proojected to have the majority share (34 percent) followed by Chennai (20 percent) , Bengaluru and Hyderabad each at 15 percent.

Large foreign institutional investors continue to acquire/invest in retail assets via greenfield and brownfield development platforms. These investors currently hold around 24 percent ( 9.7 million sq ft)  of the new supply which will get delivered over the next five years.

Stable economic conditions have fuelled the consumption-led growth which has enabled footprint expansion by retailers and new mall announcements. Apart from the strong supply pipeline, mall developers are focusing on building larger-sized malls to offer better shopping experience.

According to Dr Samantak Das , Chief Economist and Head of Research & REIS, India JLL , encouraged by the increased buoyancy of the Indian economy, leading real estate developers have made significant announcements to launch retail developments in the country. A substantial proportion of the upcoming supply is by institutional players. The operational stock of retail developments which stands at 91 million sq ft , is expected to increase by 45 percent and reach 132 million sq ft by the end of 2028. With the launch of India’s first retail-led REIT in 2023, there may be more acquisitions to expand the retail portfolio further. As most global institutional funds have created retail development platforms with key developers, the retail segment is set to get on a faster growth trajectory 

“A total of 16 retail developments with a gross leasable area of 6.2 million sq ft became operational in 2023, up by 125 percent y-o-y. Notably, 44 percent (2.7 million sq ft) of the new supply that became operational in 2023 had the presence of institutional funds. The average size of mall developments that got completed in 2023 has increased by 41 percent from 276,800 sqft in 2022 to 389,900 sqft. Developers are coming up with bigger malls to offer elevated experience to the shoppers, be it entertainment, F&B, or fashion.” says Rahul Arora, Head of Office Leasing Advisory and Retail Services, India, JLL.

In 2023, 8.7 million sq ft of gross leasing across malls and prominent high streets was recorded in top 7 cities. Bengaluru led the gross leasing with a share of 33%, followed by Delhi NCR with a share of 18% and Mumbai with a share of 17%. Consumer confidence is getting translated into expansion by retailers to increase their store network and sales.

Fashion and Apparel had the highest share of 40 percent in the total leasing volume .   Super Value and Value Fashion segments have witnessed great traction from leading retailers as they are launching their new formats and expanding in this segment. Other categories that contributed majorly were  F&B (16 percent), and Entertainment (13 percent). Home & Furnishing (6 percent) and Daily Needs & Grocery (5 percent).

Source: REIS, JLL Research

Note: Others include Lifestyle stores, Kids & related, Automobile, Banks, and other services.

Gross Leasing includes refers to all lease transactions recorded during the period, including confirmed pre-commitments.

A total of 14 new international brands entered India in 2023, up from 11 and 8 brands in 2022 and 2021 respectively. The majority (8 brands) of the new entrants this year opened their first stores in Mumbai followed by Delhi NCR  with the F&B segment being the top ranker.

Note: A few non-performing and poorly managed malls have been removed from the stock that have either shut down, undergoing a revamp, or being converted for other purposes.