Despite slowdown in urban demand, vacancy levels in shopping malls across the country have come down significantly to 8.3 percent in the first half of 2024 from 15.5 percent in 2021. Experts attribute the drop in vacancy levels to the retail sector’s growth, robust leasing amid favourable economic factors and rising affluence.
According to data from ANAROCK, over 3.1 million square feet (msf) retail space was leased across top seven cities in the first half of 2024 with the apparel and accessories category leading the leasing chart.
The data showed that the demand outpaced the supply for the third consecutive year in 2024. The highest share of upcoming new supply over the next 4-5 years is planned in NCR (National Capital Region), MMR (Mumbai Metropolitan Region) and Hyderabad micro-markets, accounting for over 85 percent of total supply.
The vacancy in shopping malls was at its peak post-Covid in 2021 at 15.5 percent and it started reducing from 2022. In 2022, the retail space saw some momentum in leasing and mall vacancy reduced to 12 percent. It further went down to 9 percent in 2023 and in the first half of 2024 mall vacancy across the country stands at 8.3 percent, the ANAROCK report showed.
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Anuj Kejriwal, CEO and MD – Retail, Industrial & Logistics – ANAROCK Group, said that vacancy in prominent malls continues to be on the decline owing to limited supply and robust leasing.
“Superior malls across the country are operating almost full capacity. Major national and global brands are keen to take up quality spaces in successful malls and high streets across cities,” he said.
The apparel & accessories and the food & beverage categories remain the dominant segments in terms of leasing. However, exclusive stores for watches and jewellery have also witnessed remarkable growth during the year – accounting for nearly 6 percent of the total retail leasing volume.
Apparel & accessories leased 36 percent of the total retail space leasing, followed by the food and beverages segment at 22 percent. The data showed that around 41.9 msf of new supply is expected to be added by 2028 in India.
Top marquee deals (based on total area leased)
Apparel brand Lifestyle International leased the largest area of around 1.9 million square feet of retail space across India in the first half of 2024 followed by Reliance Projects and Property Management Services at approximately 1.2 msf, the data showed.
Similarly, Aditya Birla Fashion and Retail leased around 1.1 msf retail space while PVR Limited leased around 1.02 msf.
Also Read: Also Read: Malls to grow slower than residential real estate, industry players say
Experts said that the next few years will witness major supply addition across the top seven cities, with NCR accounting for the majority.
Kejriwal said that as fresh supply gets added in the coming years, larger spaces will garner an increasing share of total leased area.
The fall in mall vacancies is coming at a time when there is widespread concern about a slowdown in urban demand and an overall slowdown in India’s economic growth. India’s GDP for Q2 of FY25 came in at 5.4 percent, much lower than expected. In its latest monetary policy committee meeting, the Reserve Bank of India cut the GDP forecast for FY25 to 6.6 percent from its previous estimate of 7.2 percent.
However, real estate sector experts said that while there may be a slowdown in urban spending overall, the demand for experiential shopping has not waned – in fact, it has increased. Experts added that this is line with the continued growth seen in premium products across various consumer categories, even as products from the mass categories seem to be facing some slowdown
"Many Indian cities do not have adequate destinations for weekend leisure apart from malls, which offer upbeat, cheerful environments and combine entertainment and eating out with shopping. Malls are therefore not merely about shopping alone," Kejriwal said.
Premiumization factor may also be at play here when it comes to retail leasing and drop in vacancy.
Kejriwal added that premiumization as a strategy helps to reduce mall vacancy as developers transform traditional shopping malls into sophisticated and mixed-used destinations which are able to lure the elite and international brands.
"The premium segment targets upscale consumers who are looking for unique and high-end experience and thus enhance the traffic and sales. For this, retailers must lease high end spaces in order to attract the target market of aspirational shoppers - as well as to enhance their brand image," he said.
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