The stock of Grade A shopping malls in the top seven cities of India, Delhi, Mumbai, Pune, Bangalore, Kolkata, Chennai, and Hyderabad is at 90.6 million sq ft in H1 2022.
More than 50 percent of the mall stock is in Delhi NCR with 29 million sq. ft and Mumbai with 19 million sq. ft, respectively. Mall supply of around 1.3 million sq ft has been recorded in H1 2022, with additions in Pune, Bengaluru, Mumbai, and Hyderabad. Institutional investors and reputed developers are also increasing their focus on Tier II and III cities state JLL’s report launched at the MAPIC India 2022.
“Since March 2022, there has been a swift recovery in the retail sector owing to the favorable demographics, rapid urbanization, and rising consumption. With growth potential in the retail sector, investors are looking for quality Grade A assets by established developers and having a marginal vacancy, with a preference of leased-based assets over strata-sold assets to ensure fair market rentals and timely returns,” said Rahul Arora-Head, Office Leasing Advisory, and Retail Business, India- JLL.
He further added, “The Tier II and III cities are witnessing a considerable supply of quality retail assets by established developers. Additionally, investments by these big institutional players help developers to exit the project partially or fully, reduce their debt, and focus on other developments.”
According to the report, institutional investment in the retail sector has been picking up, with more than $862 million recorded from 2021 to date.
Since superior-grade malls are preferred by both consumers and retailers, there is a widening gap between vacancies in superior and average malls, leading to vacancy polarization.
“More than 70 shopping malls with a total retail space of 31.02 million sq ft are expected to become operational during H2 2022-2025 across the top seven cities of India. Delhi NCR and Chennai will be the major contributors with a 48 percent share in the upcoming supply. Bengaluru and Hyderabad with a considerable combined share of 30 percent of total supply till 2025. Led by a buoyant demand, a robust supply pipeline by established developers is expected to get operational by 2025” said Dr. Samantak Das-Chief Economist, and Head of Research and REIS, India-JLL.
- Demand for superior quality malls rise
There is a higher demand for Superior Grade shopping malls that can promise higher footfalls and sales. Therefore, vacancy in such malls is lower. Consumers also prefer Superior malls that offer a comprehensive tenant mix and good mall management and infrastructure.
- Omnichannel: now part of core retail strategy
In the last two years, retailers have built a strong omnichannel platform, integration of physical and digital is taking place to provide an interactive and all-inclusive in-store experience.
The marked shift towards online shopping is evident in the F&B segment as well, with online food delivery gaining traction post-pandemic, further boosting the concept of cloud kitchens in India. Some brick and- mortar F&B operators also entered this segment.
- Higher allocation to F&B, but upgrading food brands and variety is the key
Due to restrictions and limited capacity rules F&B was affected, however, it has now become one of the primary reasons for consumers to visit a shopping mall. The space allocation for the same in some malls has increased from 12-15 percent before the pre-Covid period to 25-30 percent now, the allocation varying by region and market as it is driven by various factors.
Therefore, the increase in consumption is not only limited to metros but Tier II and III cities as well. The surge in sales is being driven across all channels, including online retailing and brick-and-mortar stores.
The retail segment is expected to innovate and transform itself further to strengthen the omnichannel platform. While the physical stores will be equally important as they provide human connection and ‘experience’ to shoppers.
As a result of the retail segment’s strong comeback, leasing demand in malls is expected to expand and surpass pre-pandemic levels by 2023. This would bring more transparency and improvement in the operating environment of shopping malls. REITs in retail will be the next big move in the sector as institutional investors are building portfolios of superior-grade retail assets