High street rentals rise 15 percent YoY in Q3 2024 amid tightening vacancies, decline in mall leasing

High streets dominated the leasing landscape, accounting for 68% of the total 1.6 million square feet (MSF) leased this quarter.

Strong demand for high streets has pushed rental growth up, particularly in Delhi NCR, Bengaluru, Chennai, and Kolkata, where rates surged by 15 percent year-over-year in the third quarter of 2024, amid low vacancies.

High streets dominated the leasing landscape, accounting for 68 percent of the total 1.6 million square feet (MSF) leased this quarter, with Hyderabad, Delhi-NCR, and Chennai accounting for 70 percent of the total high street leasing volume, data from Cushman & Wakefield showed.

Delhi clocked 13-15 percent of rental growth; Bengaluru witnessed 12-14 percent of rental growth followed by Mumbai with 5-7 percent.

"The Indian retail sector is evolving rapidly, and main streets continue to record high leasing due to limited mall supply. The strong demand-supply dynamic has driven rental growth, particularly in Delhi NCR and Pune," Saurabh Shatdal, Head Retail and Managing Director, Capital Markets, Cushman & Wakefield added.

High streets are making a comeback across top cities in India, as Moneycontrol had previously reported, with higher rental yields compared to malls. Industry experts estimate rental yields on high streets to be 10-12 percent, while malls command around 8 percent.

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Souptik Datta

Correspondent|Moneycontrol

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In Bengaluru, Commercial Street sees rents of Rs 275-325 per sq ft, while rents on Brigade Road stand at Rs 300-325 per sq ft. In Delhi, Khan Market commands more than Rs 900-1,000 per sq ft, driven by the presence of premium brands and larger store sizes. Mumbai’s high streets also see strong demand, with rents in Colaba ranging around Rs 500-700 per sq ft and Linking Road commanding Rs 600-800 per sq ft.

In the third quarter of 2024, prominent Bengaluru high streets like Indiranagar 100 Feet Road and Vittal Mallya Road witnessed a 2-3 percent surge in rental growth and Mumbai recorded at least 5-7 percent in rental growth.

Malls witness lower leasing compared to high streets

In the third quarter of 2024, leasing activity in malls remained relatively low, constituting just 32 percent of the total leasing volume. The lack of new mall supply in the quarter, with no fresh mall commencements contributed to this subdued leasing activity.

The fourth quarter is expected to bring much-needed additional retail space with approximately 1.8 MSF of Grade-A malls anticipated to open, primarily in Mumbai, Delhi-NCR, and Pune, providing fresh options for retailers amid tightening vacancy.

"Malls, however, faced a quieter quarter due to a lack of supply—a gap that we expect to be addressed in Q4. Retail leasing trends, led by Fashion, F&B, and Accessories, reveal a clear shift toward more discretionary spending, highlighting the evolving lifestyles of Indian consumers," Shatdal said.

Owing to the prevalent demand-supply dynamics, with tightening vacancy rates, Grade-A malls across major cities are witnessing a significant decline.

The vacancies in Grade-A malls have also tightened due to high demand from international brands, which continue to prioritise these locations over main streets. According to Cushman, foreign brands accounted for a 30 percent share of leasing volume in malls until October 2024.