With the worst impact of the Covid pandemic having subsided, revived consumer sentiment, consumption appetite, and omnichannel adoption by brands and retailers are expected to sustain growth in the retail sector. Mall developers, too, are upbeat because of this bright outlook.
According to the Retailers Association of India (RAI), the retail market size is expected to touch $2 trillion by 2032. Surpassing the pre-pandemic levels, retail sales grew around 19 per cent in 2022.
Increased retail demand
Buoyed by this growth, developers plan to add nearly 25 million square feet of new mall space across the top 7 cities over the next 4-5 years; NCR and Hyderabad account for nearly 46 per cent of total new upcoming supply, closely followed by Bengaluru at 19 per cent, according to the report.
Kumar Rajagopalan, CEO, RAI, said: “Currently, the top cities have over 51 million square feet of mall stock across the country, with NCR, MMR (Mumbai Metropolitan Region), and Bengaluru accounting for 62 per cent of total stock.”
Also, spending by high-end brands in tier-II cities has increased over 50 per cent compared to the pre-pandemic period. The availability of large land parcels and lower rentals vis-à-vis larger cities has been instrumental in attracting many brands, the report stated.
In fact, buyers’ changed behaviour and interest in tier-II and tier-III centres for an “experience” where shopping is clubbed with leisure and entertainment has pushed mall developers and brands to consolidate their presence in these untapped markets. “Tier-II and III cities also gained prominence due to the opening up of employment centres in these cities,” said Anuj Kejriwal, CEO & MD, ANAROCK Retail.
Owing to increased consumer spending power, demand for retail leasing has increased. This has led to a surge in average rentals, too. “An industry analysis shows that rents at high-street locations in the country's top eight cities surged up to 50 per cent in 2022, while shopping malls saw a 10 per cent YoY average rent increase,” said Aman Trehan, executive director, Trehan Iris.
The Anarock-RAI report mentioned that there has been a rise in mall rents by nearly 15 per cent, which is higher than the pre-pandemic levels. Bengaluru registered the biggest uptick, around 27 per cent.
Though the percentage change is not much because rentals came down considerably during the Covid period, they are still 20 per cent more than the pre-COVID times, Kunil said.
Developers are of the opinion that average rentals are expected to rise further by around 15 per cent in the next six months as more retail brands seek to establish a presence in prime locations.
Online vs offline retail
According to industry estimates, the online retail market in India is around 25 per cent of the total organised retail market and it is likely account for around 37 per cent by 2030. Despite the rising penetration of online retail, it holds a small portion of the overall business.
After the pandemic, despite the establishment of e-commerce channels, offline retail space did not face any major setbacks as a high degree of integration of physical and digital took place, said industry experts.
Trehan said e-commerce has not affected offline retail as India is majorly an offline retail market and retailers are adapting to the changing market dynamics and shifting to an omnichannel environment where customers can shop through a variety of online and offline channels. “Thus, it’s a win-win situation for us,” he said.