As demand rebounds, 25 million sqft of shopping mall space likely to be added in 4-5 years: Report

The Covid-19 pandemic and the restrictions that had been imposed in its wake hit the retail sector hard in 2020 and 2021. However, with Covid worries receding and restrictions removed, the rebound has been strong, especially for the organised retailers. The share of organised retail has doubled to 18 per cent now from just around 9 per cent in 2018-19, growing at a 20 per cent compounded annual rate.

The revival in demand and strong traction for organised retailers is driving a new wave of shopping centre developments in major markets. A report by consulting firm Anarock and Retailers Association of India (RAI) estimates 25 million square feet of mall space will be added in the top seven cities in next four-five years.

In 2022, 2.6 million square feet of mall space was added, a 27 per cent year-on-year growth. Out of the current stock of 51 million square feet, the National Capital Region (NCR), Mumbai Metropolitan Region (MMR) and Bengaluru accounted for 62 per cent. Out of the total upcoming supply of 25 million square feet, NCR and Hyderabad account for 46 per cent, followed by 19 per cent in Bengaluru, as per data from Anarock and RAI.

Malls were largely shut in 2020 amid the pandemic. The second wave in 2021 too had a major impact. The festive season last year was the first in two years without any restrictions and saw growth rebound. Sales value estimated during the festive season in late 2022 was Rs 2.5 lakh crore, nearly 2.5 times compared to the previous year, according to Anuj Kejriwal, CEO and MD of Anarock Retail.

"Revival of consumer sentiments and penchant for consumption was promptly acted upon by majority of the brands, retailers, and mall developers. Several national and global retailers quickly re-assessed their portfolios and charted ambitious expansion plans across the country," he said.

Overall, the organised retail market size is expected to clock a 25 per cent CAGR to touch $2 trillion by 2032, compared with $690 billion in 2021, according to the Anarock and RAI report.

Entry of new brands into the market, changing demographic profiles, and evolving consumer tastes and preferences are expected to sustain this growth in consumption.

This rise in demand for mall space is also driving rentals northward. Bengaluru saw rentals rise as much as 27 per cent year-on-year in 2022, followed by Kolkata, where rentals were up 20 per cent. In MMR, rentals grew 9 per cent, the slowest among the tier I cities, according to the report.

While tier I cities will continue to drive demand for organised retail and in turn shopping malls, new retail catchment areas are expected to emerge in the smaller tier II and tier III markets too as retailers and brands expand their footprint in newer geographies over the next few years.