Retail leasing up 130% in March quarter: Report

Real estate consulting firm CBRE South Asia on May 2, 2023, announced the findings of its report, ‘India Market Monitor – Q1 2023’, which highlights growth, trends and dynamics across various segments of the real estate sector in India. Retail sector leasing grew by 130% YoY to 1.5 msf in the first quarter (Q1) of calendar year 2023 (CY23), says the report. During this period, Ahmedabad led the absorption with a 27% share, followed by Delhi-NCR at 26%, and Bangalore and Chennai at 14% each. The cumulative leasing share of the three cities stood at 81%.

Supply during the quarter increased by 474% YoY to 1.1 msf. Ahmedabad saw the highest supply with a 73% share, followed by Delhi-NCR at 20%. According to the report, the fashion and apparel segment had a majority share in total leasing activity at 31%, followed by homeware and department stores at 19%, F&B at 11%, luxury at 8% and consumer electronics at 5%.

Anshuman Magazine, chairman and CEO-India, South-East Asia, Middle East and Africa, CBRE, said: “Retail supply this year is expected to surpass 2022 levels owing to pent-up supply addition, with several investment-grade projects launched in the past two years set to become operational in 2023. This would give a fillip to primary leasing, which is likely to be the main demand driver for retail space in 2023.”

Office leasing

According to the report, office leasing grew by 9% YoY to 12.6 msf in Q1 2023. Bangalore, Delhi-NCR and Chennai were among the top cities in terms of leasing, with a cumulative share of 62%. Supply during Q1 2023 increased by 31% YoY to 11.6 msf. Bangalore, Delhi-NCR, Pune and Hyderabad saw the highest supply with a cumulative share of 82%. According to the report, the BFSI sector and flexible space operators had a majority share in total leasing activity at 22% each. In Q1 2023, domestic corporates led the leasing activity with a 48% share.

Current short-term macro-economic uncertainty might put downward pressure on absorption, however, space take-up activity would pick up pace in the second half of the year as India remains an attractive cost-effective destination and source of highly skilled talent, says the report.

Residential real estate

Housing sales jumped nearly 12% QoQ as well as YoY to more than 78,000 units in Q1 2023. The majority share of the units sold belong to the mid-end category, standing at 41%.  Mumbai, Pune and Delhi-NCR were among the top cities in terms of sales, with a cumulative share of 62%. The launches of new units increased by 35% YoY to more than 81,000 units in Q1 2023. Mumbai, Pune and Delhi-NCR remain the top cities in terms of apartment launches as well, with a cumulative share of 64%. Mid-end and high-end categories dominated unit launches in India during this period with shares of 43% and 27%, respectively.

Strong sales and launch momentum expected in the first half of 2023; a minor tapering in activity likely in the middle of the year but its impact could be cushioned by the festive season, says the report. Projects with better amenities, focus on health and safety and clean surroundings to further gain an edge amidst evolving consumer preferences, it added.

Investment

Overall capital inflows witnessed in Q1 2023 stood at $0.96 billion. Land/development sites dominated investments during this period with a share of 43%, followed by the I&L sector with a share of 23%. Mumbai, followed by Delhi-NCR and Bangalore, accounted for a cumulative share of nearly 30% in investment inflows in Q1 2023. Developers accounted for nearly 65% of investment inflows, followed by institutional investors with a share of 17%.

Domestic investors accounted for 80% of capital inflows during Q1 2023, leaving only 20% for foreign investors.  Investors from the US accounted for 86% of the foreign capital inflows. 70% share of the total capital inflows in land acquisitions were deployed for residential developments, while around 12% was committed for mixed-use developments.

The report states that capital inflows in 2023 are expected to remain steady, but some tapering is likely in the first half owing to recessionary fears in the US and Europe. Higher financing cost amidst tighter monetary policy rates due to sticky inflation could impact investor sentiments in the short term, the report added.