Retail space stock across the country witnesses 2% fall: JLL

The operational retail stock across Delhi NCR, Mumbai, Pune, Bengaluru, Kolkata, Chennai, and Hyderabad stood at 89 million sq ft as of H12023

The stock of operational retail spaces in the country’s top seven cities fell around 2 percent from 90.6 million sq ft in June 2022 to 89.2 million sq ft in June 2023. Around 4 million sq ft of organised shopping malls were either downgraded or shut down even as 2.63 million sq ft of mall spaces was added during the same period, a report by property consultancy JLL has said.

Operational retail spaces refers to shopping malls that are operating and not stalled or shut.

The operational retail stock across Delhi NCR, Mumbai, Pune, Bengaluru, Kolkata, Chennai, and Hyderabad stood at 89 million sq ft as of H12023. More than 50 percent of the current operational mall stock lies in Delhi NCR (28 million sq ft) and Mumbai (17 million sq ft). Mall completions of around 1.1 million sq ft were recorded in H1 2023, with additions in Hyderabad and Delhi NCR, the report titled India Retail: Evolving to a New Dawn said.

However, the shopping mall stock is expected to increase by around 43 percent to reach 127 million sq ft by the end of 2027, the report added.

The maiden listing of India’s first retail REIT, Nexus Select Trust REIT backed by Blackstone, has offered the opportunity for retail investors to own a stake in the retail asset class. The stock under Nexus REIT currently stands at around 9.9 million sq ft and offers an overall potential of around 43-44 million sq ft of REIT-worthy retail assets across cities, of which more than half are in Mumbai and Delhi NCR region, the report noted.

With a quality supply pipeline and new malls announced by established developers, the Indian retail sector is expected to attract more institutional investment. The report stated that tier I cities continue to attract the maximum investor interest, but 30 percent of the institutionally held assets are in tier II and tier III cities such as Amritsar, Chandigarh, Ludhiana, and Mohali in the north, Mysuru and Mangaluru in the south, Surat in the west, Bhubaneswar in the east, and Indore and Nagpur in central India.

REIT-worthy retail stock includes organised malls classified as ‘superior’ and ‘good’, with a leasable area of at least 100,000 sq ft and current vacancy levels of less than 20 percent as of June 2023. Malls are classified as ‘superior’, ‘good and ‘average on the basis of tenant mix, quality of mall management, amenities, vacancy and ownership pattern.

The report noted that 24 new international brands have entered India since 2021, making a beeline for superior-quality mall developments in the gateway cities of Delhi NCR, Mumbai and Bengaluru. Nearly a quarter of these new entrants were in the F&B or food and beverages category.

Gross leasing across the top seven cities (in shopping malls and on leading high streets) stood at 3.16 million sq ft in H1 2023, indicative of consumer confidence translating into expansion by retailers.  Bengaluru led with a 34 percent share followed by Delhi NCR (23 percent) and Hyderabad (19 percent). Fashion and apparel and F&B brands have dominated the H1 leasing activity.

Premium outlet centres: Although at a nascent stage in India, the emergence of premium outlets is cashing on the changing lifestyle and aspirational choices of young, affluent and well-travelled Indians. Premium outlets could be a good alternative for landowners/developers looking to create a differentiated product but an optimal brand mix and mall size remain the most crucial parameters.

Highway retailing: With infrastructure augmentation and an uptick in leisure travel, highway retail is expected to be a big growth driver for the retail sector.  With the government promoting electric vehicles (EVs), many EV charging stations along highways are slated to be set up as part of the overall charging infrastructure in the country.

Consequently, support retail comprising quick service restaurants (QSRs) and convenience stores are expected to come up at these stations. Entertainment is a fast-moving retail category in highway retail as travel is usually undertaken with family or groups. With an uptick in demand for global brands, more such retailers with an international pedigree are expected to venture toward highway retail, the report observed.