Mumbai, September 19, 2024 — India’s retail industry is on the verge of a significant transformation, driven by rising domestic consumption and favorable economic conditions. A new report from Cushman & Wakefield, titled Resurgent Retail: Powered by Rising Retail Consumption, reveals that the country will require approximately 55 million square feet (MSF) of Grade-A mall space by 2027 to meet growing demand and align its Retail Space Per Capita (RSPC) with other South Asian nations.
Growing Demand for Premium Retail Spaces
The report highlights the burgeoning appetite for premium retail spaces as consumer spending shifts toward discretionary items and experiential retail. In urban India, spending on discretionary goods has risen from 27% in FY2011-12 to nearly one-third in FY2022-23, indicating a marked increase in consumer confidence. Concurrently, expenditures on essentials have seen a decline. Categories such as food delivery, travel, and premium consumer durables are witnessing significant growth, further fueling demand for high-quality retail environments.
International Brands Targeting India
Cushman & Wakefield’s report also underscores the increasing appeal of the Indian market to international retailers. The AT Kearney Global Retail Development Index 2023 suggests a high urgency for global brands to enter and expand in India, bolstered by economic growth, rising incomes, supportive government initiatives, a robust digital payment ecosystem, and improved infrastructure. The influx of international brands has surged from an average of 12 annually before the pandemic to 25 in 2024, enhancing the demand for premium retail spaces.
Urgent Need for Quality Retail Development
Despite rising demand, the report points out that the pace of Grade-A mall developments has been sluggish. Over the past eight years, only 20 MSF of Grade-A mall space has been added, averaging just 2.5 MSF per year. Alarmingly, no new mall supply entered the market in the first half of 2024. Currently, India’s total Grade-A mall inventory stands at 61 MSF across its top eight cities, resulting in a mere 0.5 square feet of RSPC—significantly lower than countries like Indonesia, the Philippines, and Vietnam.
To reach a more competitive RSPC of 1.0 by 2027, India will need to construct 55 million square feet of new mall space, according to the report. The projected pipeline of Grade-A retail mall projects through 2027 totals just 18 MSF, highlighting a critical gap that developers must address.
High Streets and Office-Retail Complexes on the Rise
The report also notes the growing prominence of office-retail complexes (ORCs) and high streets as viable alternatives due to the limited availability of Grade-A mall spaces in major cities. Over the last 7-8 years, more than 70 ORC projects have been completed, successfully attracting quality retail tenants and leading to peak rental premiums. Notably, rental rates in prime high street locations have exceeded pre-COVID levels.
Conclusion
Saurabh Shatdal, Managing Director of Capital Markets and Head of Retail at Cushman & Wakefield, emphasized the critical moment facing India’s retail sector. “The rising consumer confidence and increased discretionary spending indicate the sector’s potential. To capitalize on this growth, addressing supply-side challenges and ensuring the availability of quality retail spaces is imperative,” he stated. “The addition of 55 million square feet of Grade-A retail space is crucial for meeting the demands of this dynamic market.”
As India’s economy continues to expand, the call for concerted efforts among industry stakeholders becomes more pressing to unlock the full potential of the retail sector.
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