Mumbai retail leasing up 14.6% YoY to 0.21 msf in H1 2023: Report

Mumbai recorded a 14.6% year-on-year (YoY) increase in retail leasing across investment-grade malls, high streets and standalone developments in the first six months of 2023 (H1 2023), shows a report by real estate consulting firm CBRE South Asia. The report titled India Retail figures H1 2023, also shows that total retail leasing in the city during January-June 2023 stood at 0.21 million square foot (msf), compared to 0.18 msf in the corresponding period last year.

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During H1 2023, among the industry segments in Mumbai, homeware and department stores led leasing with a share of about 20%, followed by consumer electronics (17%) and fashion and apparel (17%). Key leasing transactions recorded in the city were:

Tenant	Size	Location (property leasing)
Leading consumer electronics player	20,800 sqft	Jio World Drive (Mall)
Pantaloons	13,500 sqft	Kasturi Regius (High Street)
Croma	10,800 sqft	Vishwaroop IT Park (High Street)

Retail leasing in other Indian cities in H1 2023

Delhi-NCR

The leasing activity and supply addition in Delhi-NCR continued to strengthen in H1 2023. Key sectors that drove absorption included fashion and apparel (47%), luxury (13%) and food and beverage (8%). Saket District Center recorded one of the highest rents amongst mall clusters in India.

Hyderabad

Leasing in Hyderabad improved in high streets in H1 2023. Retail leasing in the city was led by homeware and department store brands with a share of 33%, followed by fashion and apparel (30%) and food and beverage (11%). Central locations commanded the highest rent across mall clusters.

Chennai

Half-yearly leasing in Chennai doubled in malls. The space take-up was led by domestic brands. Fashion and apparel drove retail leasing with a share of 38%. This was followed by entertainment players at 20% and home and department stores at 15%. Central Zone mall clusters commanded the highest rental value.

Kolkata

Demand for quality space remained strong in Kolkata during H1 2023. Space take-up was led by domestic Food and beverage brands with a share of 51%, followed by luxury brands (16%) and consumer electronics players (15%). Owing to strong demand and availability of limited quality retail space, strong rental growth was witnessed across most mall clusters and high streets.

Ahmedabad

In H1 2023, leasing activity in Ahmedabad was dominated by primary space take-up. Yearly rental growth was recorded across most high streets. Key sectors that drove absorption included fashion and apparel (32%), home and department stores (24%) and food and beverage brands (13%).

Pan-India retail leasing in H1 2023

On a pan-India basis, retail leasing witnessed a 24% YoY growth in H1 2023, and a 15% increase compared to H2 2022. Total leasing during H1 2023 stood at 2.9 msf compared to 2.31 msf in H1 2022. Bangalore, Delhi-NCR and Ahmedabad collectively accounted for a cumulative share of 65% in leasing activity during the first six months this year. H1 2023 also recorded a 148% YoY increase in supply. Total supply the first six months of 2023 stood at 1.09 msf compared to 0.44 msf during the same period last year. Further, boosted by the increased appetite of shoppers, the top eight cities saw an 8% growth in mall completions on a half-yearly basis. Ahmedabad led the growth in supply addition with a 73% share, followed by Delhi-NCR at 20%.

Recognising the immense potential of the consumer market in India, international brands continued to reinforce their presence in the country. Apple launched its first two new stores in Mumbai and Delhi-NCR and UK-based coffee and sandwich chain Pret A Manger also opened stores in Mumbai and Delhi-NCR. Canadian coffee brand Tim Hortons which debuted in India last year, strengthened its presence in Delhi-NCR and Punjab and entered the Mumbai market this year. European luxury brand Balenciaga is set to open its first brick-and-mortar store in Delhi-NCR through its partnership with Reliance Brands. Additionally, Galeries Lafayette, a leading shopping centre based in Paris, is also set to establish its presence in India by opening two stores in Mumbai and Delhi-NCR in collaboration with Aditya Birla Fashion and Retail.

Anshuman Magazine, chairman and CEO – India, South-East Asia, Middle East and Africa, CBRE, said, “Despite global headwinds and looming uncertainty, India is poised for strong economic growth and sustained recovery during the endemic stage. Retailers have expressed positive leasing sentiments, indicating their strong interest in establishing new setups, expanding operations, and upgrading existing stores. The leasing performance displayed positive trends on a half-yearly basis as well, exhibiting a 15% rise in space take-up compared to 2.49 msf of leasing recorded during H2 2022. Going forward, the anticipated growth in mall supply coupled with encouraging consumer spending trends, especially during the festive season, is expected to further augment the sentiment for expansion among both international and domestic retailers who are well positioned in the market”.

Ram Chandnani, managing director, advisory and transactions services, CBRE India, said, “The retail leasing market presented notable trends and opportunities in the first half of the year. Retail leasing is expected to touch 5.5-6.0 msf in 2023, the highest level after the 2019 peak of 6.8 msf. It is expected that primary leasing in newly completed malls would remain the key driver of retail space demand in 2023. Led by strong demand for quality retail space, rental values increased on a half-yearly basis in select micro-markets across most cities. Additionally, tier-II cities are expected to gain greater traction as retailers recognise the potential of these markets”.

Retail trends in 2023

According to the CBRE’s report, the following are the major retail trends witnessed in 2023.

Prime assets will continue to gain traction

Strong flight-to-quality demand will continue to prompt retailers to seek high-quality retail spaces in city centres and along prime high streets. While decentralised properties will also continue to attract interest, assets in prime locations are expected to outperform in 2023. Cost-sensitive retailers are likely to seek opportunities to add new stores in secondary locations.

Experience to remain at the helm of retailer strategies

The retail equation is more evolved than ever, with the elements of experience, leisure and customer-centric strategies gaining greater significance. Experiential retail has emerged as a compelling response to the prevalent accessibility of e-commerce, offering a strategic avenue for brands to optimise their physical presence and yield substantial returns by prioritising immersive and engaging in-store experiences.

Retail supply chain optimisation to become a new normal

As the final 50 feet remains one of the most expensive legs of the logistics journey, retailers can thus hedge against rising transportation costs by assigning a more active supply chain role to their brick-and-mortar stores. As consumers increasingly expect to be able to shop for any product, at any time, retailers will not only look to manage their expectations in-store but also upstream throughout the supply chain.

Retailers will continue to explore tier II, III and IV markets

Population with increased spending potential, smart city recognition by the government, developing infrastructure and airport connectivity, availability of land and successful brand launches in tier II, III and IV markets are some of the factors that are elevating preference for these markets. The surge in online shopping during the pandemic led stakeholders to move operations closer to the end-user markets. India’s transition into an organised retail market will be driven by the continued growth in these cities and it will become vital for retail stakeholders to harness their economic and development potential.

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