What are the key drivers of retail leasing growth in India, and how has it developed so quickly?
According to Boston Consulting Group's estimate, India's retail space has grown to become the fifth-largest market in the world and is expected to reach an incredible value of US$ 2 trillion by 2032. With these forecasts and continuous expansion, retail leasing in India has a bright future. But there are other trends and variables that have helped the sector grow, not just one.
Consumer behavior evolving
As a result of increased buying and socialising habits among Indian customers, more people are now seen at malls and retail districts throughout cities. Brands and retailers are forced to expand their physical presence as a result of the fast rise in customers for brick-and-mortar stores. These clients prefer going to stores over making purchases online since they are now looking for pleasant, practical, and immersive experiences.
The average rental rate for the prime areas has increased along with the increase in foot traffic. In 2022, high-street locations across the country will see a jump in rentals of up to 50%, while malls will see an average rent increase of 10% YoY, according to a forecast by real estate consultants Cushman & Wakefield.
Retailers are expanding outside of the major cities in order to take advantage of consumers' hunger for branded items and access to high-quality retail infrastructure.
Cities in Tiers 2 and 3 are developing.
Tier 2 and Tier 3 cities are also catapulting India's retail sector into its next stage of growth due to factors including economic development and major brand expansion. Other factors driving the demand for retail space in these areas include rising internet usage and brand awareness. Retailers are expanding outside of the major cities in order to take advantage of consumers' hunger for branded items and access to high-quality retail infrastructure. Furthermore, since the start of the pandemic, high-end brand expenditure has surged by more than 50% in tier-II cities.
Due to the availability of huge land parcels and the lower rents compared to those of larger cities, various brands have been drawn to these regions.
"India's retail industry has gone through numerous stages of development while developing into a vibrant and quickly growing industry."
Quick availability of good retail spaces
For the retailer to increase client traffic and sales, a prominent location is crucial. The most sought-after places for such projects are metropolitan cities, particularly Delhi-NCR, which is a hub for the retail sector because of the area's huge population of natives, consumers, and visitors from throughout the country as well as from overseas. As a result, developers of retail space seized the chance to extend high-quality developments over these areas. Retail real estate developers are also structuring themselves to meet the ever-changing expectations of consumers as well as tenants. They are rapidly evolving in terms of location, facilities, distinct settings, and value-added services.
Open spaces have also been exploited in high street retail developments as they have been transformed by developers into popular spots for dining, shopping, and entertainment requirements. In response to the increased demand from the public, upscale high street retail developments that provide consumers with top-notch food and beverage, shopping and entertainment have also been presented. According to a Cushman & Wakefield's MarketBeat report, Delhi-NCR saw total leasing of roughly 0.36 msf in Q4 2022. The entertainment segment accounted for the majority of leasing activity in malls with a 42% share, followed by the F&B segment with a 20% share.
India's retail industry has gone through numerous stages of development while developing into a vibrant and quickly growing industry. Changes in consumer behavior, real estate growth, and further investments in the industry have made these improvements possible. Due to the optimistic outlook of investors, developers, and customers, high occupancy rates are already being observed in retail locations, and new records are expected to be set in the upcoming years. Numerous contracts and new building initiatives are currently under way as a result of the growing trend, reflecting the expansion of retail leasing in the next years.