Last year, there was a 72 percent surge in the addition of retail space in shopping malls, reaching 59.48 lakh square feet across eight major cities, driven by the increasing demand from retailers, as reported by Cushman & Wakefield. In 2023, a total of 11 shopping malls were inaugurated, providing 59,48,395 square feet of space in the top eight cities. In contrast, the preceding year saw the opening of nine malls in eight markets, covering a total area of 34,49,222 square feet.

Even though e-commerce has recently been a term in the retail business and companies are focusing on online channels, physical retail continues to thrive in big cities where customers are thought to be more connected and hence more likely to shop online. Following the Covid lockdowns, merchants began closing or shrinking their locations to save money on rent. The trend has reversed, as customers return to malls and marketplaces. 

According to Cushman & Wakefield, the new supply of retail space in shopping malls climbed 72 percent last year to 59.48 lakh square feet across eight major cities, meeting surging retailer demand. In 2023, up to 11 shopping malls will open, covering 59,48,395 square feet among the top eight cities. In the preceding year, nine malls entered eight markets, totaling 34,49,222 square feet. Hyderabad saw the completion of three retail malls, while Pune and Chennai got two apiece.

One retail mall each was built in the Mumbai metropolitan region, Delhi-NCR, Bengaluru, and Ahmedabad. No new supplies were seen in Kolkata. 

A Retail Real Estate Boom

According to a JLL India research ‘India Retail: Evolving to a New Dawn’ released last year, new supply of retail real estate space is likely to increase by 43% across seven key cities by 2027 as developers grow their businesses amid a robust comeback following the pandemic.

India’s retail sector is experiencing rapid growth, with a focus on creating an innovative built environment, strengthening consumer connections, and curating physical storefronts in underserved regions of the country, including tier II and III cities,” said Rahul Arora, Head of Office Leasing Advisory and Retail Services, India, JLL.

Following enormous residential growth, the retail sector is currently experiencing strong tailwinds. The major aspects driving this trend include a positive global perception, strong growth potential, rapid economic improvement, and optimistic investment sentiments,” Gaurs Group CMD Manoj Gaur stated in response to the report. Vinod Rajpaul, CEO of Gurugram-based real estate firm Ocus Group, stated that organized retail is on the rise. Malls have seen a significant boost in footfall, particularly

Out of the total retail stocks in malls of 89 million square feet as of June-end last year, Delhi NCR had the most at 28 million square feet, followed by Mumbai with 17 million square feet and Bengaluru with 14 million.

JLL claimed that the physical retail space market is likely to have a supply pipeline of more than 38 million sq ft of retail developments across the top seven cities between H2 2023 and 2027.. Out of the 38 million square feet of new retail supply in malls planned by 2027, Delhi-NCR will have 11.6 million square feet, accounting for 31% of the total supply.

Impact of Malls

Malls are anticipated to draw more than Rs 20,000 crore in investment over the next 3-4 years as the country’s largest mall developers, DLF, Prestige, and Phoenix, enter the next phase of expansion, while practically all prominent retailers increase their store count, industry officials told ET.

Private equity investments are driving much of the increase in retail space. Almost 60% of malls that opened in 2023 had private equity investment.

Most malls that opened in 2023 had strong pre-commitments and were promptly occupied upon opening. They include Palladium in Ahmedabad, Pacific Premium in Delhi NCR, Lulu Manjeera in Hyderabad, Mall of Millennium in Pune, and Mall of Asia in Bengaluru, all of which have occupancy rates exceeding 90%. According to ICRA, overall grade A retail mall supply in the top six markets is likely to expand to 116-118 million square feet by March 2025, up from 105 million square feet today.

According to Icra, mall owners’ rental income is predicted to rise by 9-10% year on year in FY24 and 8-9% in FY25, owing to strong occupancy levels, expected growth in trading values, and rental escalations. Jewelry, electronics, apparels, beauty care goods of premium brands, and entertainment had above-average consumption growth in the recent quarters, which is projected to continue in the near to medium term due to strong consumer demand, according to ICRA.

More and larger stores

Listed retail firms such as Reliance Retail, PVR, Aditya Birla Fashion, and Tata Trent boosted their store count dramatically last year as sales increased.

Retailers across categories are opening larger brick-and-mortar stores and expanding existing ones as consumers demand a better physical retail experience. According to real estate services business Anarock, the share of stores smaller than 2,000 square feet fell to 52% in the first half of 2023-24, down from 61% the previous year.

During this time, the proportion of stores sized 2,000-5,000 sq ft climbed from 19% to 21%, as did those sized 5,000-10,000 sq ft (11% from 9%) and 10,000-15,000 sq ft (13% from 9%).

Retailers across categories are using a two-pronged approach, expanding and entering newer markets while also boosting store sizes to leverage on the growing proportion of the organised retail industry. “The store now focuses on experience rather than merchandising. Anarock Retail’s COO and joint MD, Pankaj Renjhen, recently told ET that by extending the store, they are broadening their portfolio. 

Fashion and apparel, as well as home and department stores, accounted for more than half of all leasing activity. During this time, Bengaluru, Delhi-National Capital Region, and Pune had a combined share of more than 61%. The supply of new retail space increased by 577% year on year in the first nine months of 2023, reaching around 2.98 million square feet.

Outlet Malls

At least half a dozen factory outlet malls are planned in India, like in the United States and the United Kingdom, as retail facility developers try to compete with online rivals in a market increasingly driven by significant discounts, ET reported last year. While such retail locations, where brands are given at discounts throughout the year, are popular worldwide, the market remains unorganized in India.

We have created one such mall in Delhi’s Jasola, which has all of the luxury brands’ factory outlets. Some brands have established their first such store in the country. It is still in its early stages, but the concept is likely to acquire traction,” Abhishek Bansal, managing director of Pacific Malls, told ET last year. The mall offers discounted rates on brands like The Collective, The Tank, Tommy Hilfiger, Calvin Klein, Lacoste, Skechers, Adidas, and Birkenstock. The company hopes to expand.

Factory outlets for premium brands were not receiving adequate development in India, which has since changed with the introduction of premium outlet malls. According to Rajesh Jain, managing director and CEO of Lacoste India, these malls would offer the ideal setting, including food and beverages as well as movies, making shopping a comprehensive experience. “Until today, most factory outlets were located on busy streets, making it difficult for customers to find parking. “Our store at the Jasola mall has exceeded our expectations,” he stated.

Retail will expand beyond malls and high streets, moving to highways as additional infrastructure is created. On highways, a factory outlet mall with food and beverage options and recreational areas makes sense. Susil S. Dungarwal, founder of Beyond Squarefeet, a retail mall specialized company, told ET that this will become a popular concept in the next years

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Source : Economic Times