Retail leasing ends 2025 on a high, will supply crunch spoil the party in 2026?

Retail leasing maintains momentum in 2025, but can supply keep up in 2026?

India’s retail real estate market is set to close 2025 on a strong note, with leasing activity remaining robust as brands expanded aggressively across malls and high streets.

Retail leasing in top seven cities is expected to cross the 10 million square feet mark during the year, a growth of around 15 percent from the previous year, fuelled by robust consumption growth, rising discretionary spending and the rapid offline expansion of digital-first brands, data from real estate consultancy firm JLL shows.

Retail leasing in these cities stood at around 6.2 msf in 2023 and increased to about 8.7 msf in 2024, JLL estimates.

In an expansion phase

Data shows that robust consumption growth boosted demand from fashion, food & beverage, entertainment and daily-needs retailers, driving a 65 percent year-on-year jump to 3.2 msf in Q3 alone. In the first nine months, the take up is around 8.9 msf.

Delhi-NCR and Hyderabad together accounted for more than half of this activity, underscoring the strength of organised retail in key micro-markets.

Mumbai, Bengaluru, Chennai, Kolkata and Pune are the other top cities for the real estate market.

India’s retail sector is in a strong expansion phase, with record leasing activity driven by consumption, sustained brand expansion and the continued offline push by digital-first retailers, Jatin Goel, executive director, Omaxe Ltd, said.

A supply choke in 2026?

However, as the sector looks towards 2026, developers and retailers alike are flagging concern if the supply pipeline can keep pace with demand, especially in high-performing micro-markets.

According to data from Anarock, around 16.6 msf of Grade-A retail space is likely to be added across the top seven cities in 2026.

“As the sector heads into 2026, the central question will be whether the supply of high-quality, Grade-A retail space can keep pace with rising demand, especially in urban catchments,” Goel told Moneycontrol.

Within NCR, demand is no longer confined to traditional core locations, with several tier-2 cities and peripheral markets such as Faridabad seeing strong leasing activity. “The availability of Grade-A supply remains selective, and any delays in project execution could further tighten availability and push rentals higher in 2026,” he said.

Improved connectivity through infrastructure projects like the FNG Expressway and Metro expansion, coupled with Faridabad’s positioning as a cost-effective alternative to Gurugram and Noida, is attracting retailers and occupiers seeking quality yet affordable spaces, Goel said.

“This has resulted in robust demand across both retail and office segments, with analysts forecasting 8–15 percent annual rental appreciation and attractive investor return, particularly in Greater Faridabad,” he said.

Rents across premium malls and high-street locations recorded steady mid-single to low double-digit growth during the year, supported by strong store sales and intense competition for space, JLL data shows.

Gurugram cements lead

Within NCR, Gururgam continued to consolidate its position as a premium retail destination, backed by high-income households, strong corporate presence and evolving lifestyle preferences.

Luxury brands, destination dining and entertainment-led formats remained key demand drivers throughout 2025.

“There is a visible transition underway in legacy markets like Old Gurugram,” said Mitul Jain, managing director, SPJ Group.

At the same time, older retail micro-markets are undergoing a structural transformation. Areas such as Old Gurugram, historically dominated by unorganised retail, are seeing a shift towards planned, organised formats as redevelopment gains traction.

“Organised retail is reshaping these locations by offering better planning, stronger brand mixes and improved consumer experience,” he said.

Retailers and brands are keen on such markets because of dense residential and office catchments. But the challenge will be timely delivery of projects. Any slippage in the 2026–27 pipeline could constrain supply just as retailer interest peaks,” he said.

Jain said retail real estate appears well positioned for another year of growth.

Industry experts say while developers have announced several new malls and mixed-use retail districts, much of the upcoming supply remains concentrated in a few top markets, leaving emerging catchments underserved. This uneven distribution could keep vacancy levels tight and rentals firm through 2026, particularly in established malls and dominant high streets.

Umang Jindal, CEO, Homeland Group, retail leasing in 2025 was a structural narrative of growth and strategic brand evolution.

“With gross leasing volumes surging, exemplified by India’s 3.2 msf in Q3 2025 alone and robust year-on-year momentum across top cities, retailers are not just chasing space but relevance. D2C brands now command 18 percent of leasing activity, up from 8 percent last year,” he said.

Tier-2 cities are now matching the leasing momentum of metros, driven by rising consumption and brand confidence. This demand clearly outpaces 2026’s projected new supply, calling for sharper planning and next-generation mall experiences, he said.