Over the last few years, retail demand has picked up in a big way with growing urbanisation, rising middle class and their aspirations, as well as increasing affluence, with premiumisation trends gaining traction across consumption segments. This has led to a beeline for leasing space across shopping malls. With new supply lagging demand, vacancies have fallen significantly, in turn keeping rentals in prominent shopping centres and highstreets firm.
According to retail and real estate consultancy Anarock, vacancy in prominent malls declined to just 8.3 per cent in the first half of 2024, from 9 per cent in 2023 and 12 per cent in 2022. Current vacancy levels are also considerably lower than 15.5 per cent in 2021 and 15.4 per cent in 2020, when the Covid pandemic led to lockdowns and people were housebound for a long period, hurting the retail industry hard.
The fall in vacancy comes at a time when demand continues to outstrip supply for a third consecutive year. For instance, in the first half of this year, when the net absorption of retail space stood at 3.1 million square feet, there was only 0.6 million square feet of new supply. Similarly, in 2022, while 6.5 million square feet of space was absorbed, there was new completion of 5.3 million square feet. In 2021 too, demand (3.2 million square feet of net absorption) was more than supply (2.6 million square feet).
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"As malls and shopping complexes evolve to become centres of experience that combine dining, entertainment and an active shopping experience, the preference of the retailers and brands are shifting towards such large-scale developments that are capable of offering a wholesome experience to their patrons," noted Anuj Kejriwal, CEO and MD - retail, industrial and logistics business at Anarock.
Kejriwal further pointed out that India had now become a preferred destination for major luxury and high-end brands across the world.
"The growing uncertainty in the advanced economies owing to the prevailing geopolitical crisis has made India the obvious choice as it remains to be the fastest growing economy in the world," he said.
Apparel and accessories, and food and beverages categories remain the dominant segments in terms of retail leasing.
The strong demand is driving new development in existing as well as new areas across major markets. Over the next four to five years, close to 4.19 crore worth of gross of leasable area will be added, according to Anarock. The National Capital Region (NCR), Mumbai Metropolitan Region (MMR) and Hyderabad will account for 85 per cent of the total supply, it stated. According to Anarock's data, NCR alone would see the addition of 2.77 crore square feet of gross leasable area, followed by 48.10 lakh square feet in MMR and 43.50 lakh square feet in Hyderabad.
