Retail property leases are on the rise, but what will sustain India’s shopping mall boom?

Experts say that the retail boom will sustain only if developers focus on differentiated experiences.

India’s retail real estate saw robust momentum during the September quarter, with leasing volume and rentals rising across key metros, however, analysts have cautioned that the rapid expansion may put the sustainability of demand for shopping malls to test.

According to data from Cushman & Wakefield, retail leasing across top eight cities has reached about 2.41 million square feet (msf), growing by 7.6 percent quarter-on-quarter (QoQ) and a massive 45 percent year-on-year (YoY). The Delhi-NCR region is among India’s top three retail markets, clocking 0.51 msf of leasing - a huge growth of 70 percent compared to Q2CY25 - led by fashion, food and beverage (F&B) and entertainment.

Data showed that vacancy in Grade A+ malls fell to 2.27 percent, reflecting high absorption and limited fresh supplies. With no major malls added during the quarter, retail rentals have firmed up - especially in NCR and Mumbai - where premium assets saw only 1-2 percent quarterly appreciation.

Observers said for investors and occupiers, the retail real estate is shifting towards experience-led consumption. Developers are investing heavily in design, entertainment and hospitality-driven formats, to increase dwell time and repeat footfalls.

Mitul Jain, Managing Director, SPJ Group said such experiential retail assets would be the differentiator in secondary markets.

He added that the expansion not just about adding retail stores, it is also about restoring consumer confidence, and creating modern retail infrastructure in retail hubs that have been fragmented.

“We are creating multi-sensory spaces that go beyond shopping - food streets, artisanal cafés, and family zones. Even with rising rentals, the sustained weekend traffic is proving that customers want vibrant, community-centric destinations,” Mitul Jain said. He also sees immense potential in old Gurugram’s revival from an unorganised retail space into an organised retail hub.

“This will underscore the significance of how organised retail can reshape legacy neighbourhoods, and reflects changing consumer preferences in mature residential clusters," Mitul Jain said.

Property experts believe the leasing surge signals a structural strength rather than short-term exuberance in the retail category. However, over-supply risks loom, as several new malls are expected to become operational post-2026 in Gurugram, Pune and Hyderabad.

Cushman & Wakefield’s data showed that fashion (21 percent), Food & Beverage (19 percent), and entertainment (16 percent) accounted for over half of the leasing activity in the September quarter. In anticipation of a rise in disposable income and trends emerging from festive buying, retailers are expanding aggressively, but analysts warn that any rent escalation must align with sales productivity, in order to remain viable.

Jatin Goel, Executive Director, Omaxe Group, a real estate developer, said there is a clear appetite for Grade-A retail and the leasing momentum - especially from fashion, F&B, and entertainment - is backed by rising consumer confidence and high-quality mall infrastructure.

However, sustaining this growth will depend on how well developers balance supply with differentiated formats and curated tenant experiences, said Jatin Goel.

“The current leasing and rental appreciation show strong retail health, but developers need to be cautious of oversupply and shifting shopper behaviour. Malls that do not adapt to changing formats — integrating leisure, technology, and experiences — may struggle to sustain foot traffic. The next decade will reward quality and differentiation, not just expansion,” Jatin Goel added.

Goel further said that new micro-markets across NCR are gaining increased traction from retailers and brands, and developers are capitalising on opportunities in creating one-of-a-kind experiences in such locations. “We foresee Faridabad emerging as one of the fastest growing micro-markets, witnessing the surge in investors and brands' interest,” Jatin Goel said.

Nandini Taneja, CEO, Bhumika Enterprises, a property developer, said the retail boom would sustain only if developers focus on differentiated experiences.

“The next growth wave will not come from more square footage, but from curating tenant mixes and building destination ecosystems. Malls must evolve into experience centres and that’s what will keep leasing and rentals resilient,” Nandini Taneja said.

Taneja added that India’s consumer preferences are evolving faster than its shopping infrastructure, and developers who understand this phenomenon will define the next decade of retail real estate.