House Full: Malls defy cooling demand, vacancy drops to 7.8% in 2024

Shopping Mall vacancies drop to 7.8 percent in 2024 despite slower urban demand

Despite a slowdown in urban demand, vacancy levels in shopping malls across the country have come down significantly, to 7.8 percent in 2024 from 15.5 percent in 2021. Experts attribute this to the retail sector’s growth, robust leasing, and rising affluence.

According to a report from ANAROCK, a real estate consulting firm, over 6.5 million square feet (msf) of organised retail space was leased in 2024 across the top seven cities, surpassing the supply of new stock substantially. This led to a reduction in vacancy levels, causing rentals to increase.

The top seven cities are Delhi-NCR, the Mumbai Metropolitan Region (MMR), Chennai, Bengaluru, Hyderabad, Kolkata, and Pune.

The vacancy in shopping malls was 15.4 percent during Covid (2020), and peaked at 15.5 percent post the pandemic, in 2021. But from 2022, there was an uptick in leasing and mall vacancy dropped to 12 percent, which further reduced to 9 percent in 2023. In the first half of 2024, mall vacancy across the country came down to 8.3 percent and stood at 7.8 percent by the end of the year, according to data from ANAROCK.

The decline in mall vacancies comes at a time when there is growing concern over a potential slowdown in urban demand and a broader deceleration in India's economic growth. However, experts in the real estate sector have pointed out that while broader urban spending may be slowing down, the demand for experiential shopping remains strong — in fact, it has grown.

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Experts explain that in many Indian cities, malls are among the few destinations for recreation, that offer a lively  environment which blends entertainment, dining, and retail therapy. Hence, malls are not just about shopping, which is also one of the reasons for  the drop in mall vacancy.

Demand outpaced supply

The report also shows that in 2024, demand outpaced  supply for the third consecutive year. That year, absorption of organised retail space  was 6.5 msf across the top seven cities, while only 1.1 msf of new supply was added.

The maximum fresh inventory — about 78 percent — over the next few years is planned in the NCR (National Capital Region), MMR, and Hyderabad. Overall, around 37.7 msf of new mall space is planned across the seven cities in the next few years.

“Notable mall developments include  World Mark in Aerocity, New Delhi (30 lakh square feet), Ramsons Trends Square Mall in Bengaluru and Orion Mall in Kokapet, Hyderabad (both 10 lakh sq ft),” said Anuj Kejriwal, CEO and MD, ANAROCK Retail.

The data shows that the apparel and accessories category leads the charts, accounting for 40 percent of the leasing, followed by food and beverages (19 percent).

Rising rentals

Kejriwal said that because of the huge demand for high quality organised retail space, rents are expected to continue their upward climb until adequate supply is added.

Per ANAROCK's data, key high street locations include MG Road in Bengaluru (lease rate Rs 250-350 per sq ft), South Extension in New Delhi and Linking Road, Mumbai (lease rate Rs 800-1,000 per sq ft for both).

Trends show that retailers  are preferring larger spaces, with stores measuring between 2,000-5,000 sq ft recording the largest number of transactions, at 18 percent.