CBRE South Asia Pvt. Ltd, today announced the findings of its latest retail report, “CBRE India Retail Figures H1 2022”. Supported by strong footfall, demand for quality retail space in major malls and high streets has seen an increase in Mumbai, according to the report.
Among the major retail categories, rentals were driven primarily by home goods and department stores with a 55% share of total rentals, followed by foodservices (18%) and fashion & clothing. clothing (11%).
The main transactions recorded during the first half of 2022 in the city were:
- IKEA has leased 72,000 square feet in the R city mall
- Copper Chimney has leased 4,800 square feet in the Infiniti Mall
- Levi’s leased 3,800 square feet in Oberoi Mall
Homeware and department store brands, food service players and fashion and apparel retailers with a strong customer base, brand recognition and ability to create their own retail ecosystem have opened stores in secondary and outlying locations.
The report says rental in India’s retail sector grew by around 166% year-on-year, crossing 1.5 million square feet. In the first half of 2022, the total inventory of investment-grade shopping centers exceeded 77 million square feet.
The report highlights that among cities, Delhi-NCR and Pune, followed by Bangalore and Hyderabad, led rental activity, together accounting for more than 70% of overall retail space take-up. According to the report, pent-up supply is expected to enter the market in the second half of 2022, and total supply for the year is expected to exceed pre-pandemic levels. The rental dynamic should accelerate in H2 2022 due to the expected take-up in the newly completed galleries.
The report also observed that due to strong demand from retailers in malls and prime shopping streets, rental values increased on a semi-annual basis in some micro-markets in most cities. Among the main streets, rents increased by around 5-12% in parts of Delhi-NCR, Bangalore, Hyderabad and Pune, and by around 1-3% in Mumbai. While major shopping mall clusters in Pune and Delhi-NCR saw rent growth of 5-11% on a semi-annual basis, a marginal increase of 1-3% was reported in a shopping mall cluster in Mumbai .
Anshuman Magazine, Chairman & CEO – India, South-East Asia, Middle East & Africa, CBRE, said, “It is evident that retailers have regained confidence and are ready for expansion mode. We expect that in the future, national brands will remain proactive in relocations/expansions, and that the strong appetite of international retailers will continue. We expect retail leasing to hit 6-6.5 million square feet in 2022, double the quantum of 2021. Additionally, due to huge growth potential, we expect many brands companies are launching stores in Tier II and Tier III markets.
Ram Chandnani, Managing Director, Advisory & Transactions Services, CBRE India, said, “We expect approximately 5.5 to 6.0 million square feet of new investment-grade shopping centers to be operational during the year, representing annual growth of almost 40%. Accounting for almost 85% of all investment-grade mall completions, Hyderabad, Delhi-NCR and Bangalore are expected to dominate the addition of retail supply in H2. Additionally, Mumbai and Chennai are also expected to see an increase in supply. Among the consumer segment, fashion and apparel retailers will continue to expand their physical sales networks and pay particular attention to improving flagship stores.
Report observation:
- Expansionary demand should strengthen leasing: national brands should remain proactive in relocations and expansions. Among international retailers, brands with strong local market knowledge and established management teams are expected to drive rental business. On the other hand, new-to-market brands are likely to remain cautious and work with domestic partners to launch in India. Overall rental is expected to reach approximately 6.0 to 6.5 million square feet in 2022.
- Addition of pent-up supply expected in H2 2022: Pent-up supply is expected to come into service during H2 2022 as 5.5-6.0 million square feet of new investment-grade shopping centers are expected to become operational during the year, registering a 40% year-on-year growth.
- Experiential retail must remain front and center: themed stores, promotional events, and expansive exhibition areas and showrooms are expected to grow in 2022, and retailers will continue to create engaging, immersive, and hands-on experiences that would give customers a reason to visit the stores.
- Innovation in Tenant Mix: The last two years have seen an increase in demand for service-oriented retailers, including beauty, medical, pets, child care and entertainment. With the broader customer experience in mind, landlords should place greater emphasis on this sector in their tenant mix, and in doing so, could redefine “consumer spaces.”
- Omnichannel to stay relevant in the times to come: Retailers will continue to rely heavily on omnichannel strategies to sell and deliver goods. Some may generate most of their revenue online, but leverage a number of physical showrooms for their products to be seen and tested. On the other hand, a mall-based retailer that derives most of its revenue from in-store sales can use online/social media channels to market and sell goods.
- Retail partnerships to foster: Retailers continue to explore new business models and concepts, including fostering new partnerships and relationships, not only with owners but also with international players to facilitate their smooth entry into India.
