Retail leasing in India increased by 114 percent YoY between January–September 2022 and crossed 3.4 million sq ft in the nine-month period, while supply grew by 102 percent Q-o-Q in Q3 2022, a new report has said.
Hyderabad (29 percent), Delhi-NCR (25 percent), Mumbai (13 percent) and Bengaluru (12 percent) together accounted for 79 percent of the overall retail space absorption, a report by CBRE South Asia Pvt. Ltd has said.
Fashion and apparel retailers continued to drive the leasing activity with a share of 46 percent in Q3 2022. Other prominent categories that led absorption during Q3 2022 included food and beverage (13 percent) followed by consumer electronics (9 percent), said the report titled ‘India Market Monitor – Q3 2022’.
The report also -noted quarterly rental growth in select pockets of Delhi-NCR (Green Park 5-7 percent), Ahmedabad (Prahlad Nagar 3-5 percent) and Mumbai (South Mumbai 1-2 percent). The regional share of leasing activity was led by domestic corporates (73 percent), EMEA corporates (16 percent), American corporates (9 percent) in Q3 2022.
“Nearly 40 percent Y-o-Y growth in leasing activity was observed in the retail sector in Q3 2022 and 114 percent Y-o-Y between Jan–Sept 2022. Owing to the high growth potential, we expect many international brands to continue to view India as a growth market,” said Anshuman Magazine, chairman and CEO - India, South-East Asia, Middle East & Africa, CBRE.
“Retail leasing is expected to further strengthen. In Q3 2022, the overall retail absorption and supply was 1.1 mn sq. ft. and 0.5 mn sq. ft. respectively. Strong leasing momentum across Hyderabad, Delhi-NCR, Mumbai and Bengaluru indicates regained retailer confidence and expansion potential,” said Ram Chandnani, Managing Director, Advisory & Transactions Services, CBRE India.
The report observed that the total capital inflows in the nine-month period in 2022 was up by nearly 10 percent Y-o-Y to touch $5.3 billion. Overall capital inflows in Q3 2022 was up by 7 percent Y-o-Y ($1.4 billion). Mumbai, Bengaluru and Hyderabad dominated total investment quantum in Q3 2022, with a cumulative share of about 66 percent.
Land/development sites dominated investments with a share of 51 percent; followed by built-up office assets (49 percent). Institutional investors led investment activity with a share of nearly 59 percent, followed by developers (19 percent), the report noted.
Domestic investors dominated the investment volume in Q3 2022 with a share of 51 percent. Foreign investors garnered the remaining share. Among them, investors from Singapore (24 percent), followed by Abu Dhabi (14 percent) pumped in major capital in India, the report said.
Around 38 percent of the total capital inflows in site / land acquisitions during Q3 2022 were deployed for residential developments, while 30 percent was committed for the office sector.
The report said that compared to 9M 2021, the office sector witnessed a significant recovery in leasing activity in 9M 2022 with the easing of COVID-19 restrictions, a gradual acceleration of return to office (RTO), expansion by occupiers and the release of post-pandemic pent-up demand.
Around 42.1 mn sq. ft leasing witnessed in 9M 2022, a rise of almost 66percent Y-o-Y and a total supply addition of 35.6 mn sq. ft. Was recorded in in 9M 2022; a growth of 4 percent Y-o-Y. The total absorption stood at 12.7 mn sq. ft. in Q3 2022. The leasing was led by cities such as Bengaluru, Mumbai, and Delhi-NCR, which together accounted for a share of 65 percent in Q3 2022.
It noted that rental recovery continued across several cities due to sustained recovery in leasing, moderating vacancy levels and persistent demand for investment-grade assets and the key sectors that drove leasing in Q3 2022 include technology (24 percent), flexible space operators (23 percent), BFSI (20 percent), and engineering and manufacturing (13 percent). Regionally, domestic corporates (64 percent) and American corporates (20 percent) dominated the space take-up during the quarter.
It said that sustained leasing activity is expected in the coming quarters, although there could be some impact from global economic headwind. Return to office may pick up pace but would remain punctuated by hybrid working.
Leasing activity in the industrial and logistics space also picked up in Q3 2022, a nod towards the resilience of the Indian I&L sector. Supply addition remained slow but is likely to pick up in the coming quarters. Around 22 mn sq. ft. leasing activity was witnessed in 9M 2022, almost stable on a Y-o-Y basis and around 13 mn sq. ft.was the total supply addition in 9M 2022.Delhi-NCR and Mumbai led the absorption, together accounting 57 percent share in leasing activity in Q3 2022, the report added.