Retail leasing may touch 5.5-6 msf in 2023: Report

Retail leasing in India is expected to touch 5.5-6 million square foot (msf) in 2023, highest after 2019 peak of 6.8 msf, shows real estate consulting firm CBRE South Asia’s report, ‘2023 India Market Outlook’. The report points out that primary leasing in newly completed malls will remain the key driver of retail space demand in 2023. The supply scenario is set to improve owing to a significant amount of pent-up supply lined up for completion during 2023.

Several investment-grade projects launched by reputed players in the past 2 years are also expected to become operational in 2023, contributing to this growth. As per the report, it is estimated that supply would touch 6 million sq ft in 2023, the highest in the past five years.

Anshuman Magazine, chairman and CEO-India, South-East Asia, Middle-East and Africa CBRE said, “We believe that any impact of an expected slowdown on economic activity will be circumvented by strong macroeconomic fundamentals and domestic consumption. The government’s strong capex programme, with a focus on infrastructure development and capacity building across sectors, is aimed at driving investment. As the second-largest employment generator in India, the real estate sector will continue to be a focus area for these investments. Meanwhile, India’s strong domestic consumption would continue to strengthen the retail sector, which would see a strong supply pipeline in 2023, driving leasing activity.”

Ram Chandnani, managing director, advisory & transactions services, CBRE India said, “Retailers must be prepared and consider strategic investments amid rapidly changing consumer behaviour. While global headwinds could impact discretionary retail spending, cautious optimism among consumers along with diversified location and omnichannel sales strategies of retailers are likely to help the sector navigate the next normal.”

Indian retail sector: Five top trends expected

• Store will remain at the heart of business operations: Examining the products, support provided by a salesperson, real-time purchase and a layer of experience offered by brick-and-mortar stores continue to be top reasons for engaging customers in an in-store shopping experience. 

• Retailers will continue to carve out success in diverse locations:   Most of the brands have an existing customer base who are willing to explore locations where retailers have used innovative concepts to draw crowd. Currently, prevalent among F&B retailers, but other categories are also likely to adopt this approach to expand their footprint and existing customer base. In a bid to diversify their location strategies further, several international brands in the F&B and apparel segments are also opening stores along expressways or highways.

• Leisure spend may be constrained: Compared to other economies, Indian consumers remained confident about their personal economic situation despite the current global outlook. Although household spending has held up so far, consumers are likely to keep a close eye on the inflationary pressures and their impact on the prices of commodities going forward.

• Retailers will become more active in untapped markets: Rising urban population, increase in per capita income, supply chain revamp after the pandemic and successful brand launches in tier-II, III and IV markets have led retailers and prominent developers alike to explore these emerging untapped markets. India’s transition into an organised retail market would be driven by the continued growth in these cities.

• Increased awareness towards sustainability: Developers are not only promoting sustainable initiatives (recycling, waste management, etc.) across their assets but also sustainable brands. In a bid to become more sustainable, many retailers are re-evaluating sustainability credentials of their product / brand and directing their strategies towards investing in a sustainable and responsible growth.