Cushman & Wakefield’s Q3 2024 Retail MarketBeat Report reveals a sustained surge in retail leasing activity across India’s top cities, with main streets driving the majority of the leasing volume. The report highlights that main streets accounted for a significant 68% of the 1.6 million square feet of retail space leased during the third quarter of 2024, underscoring their dominance in the retail market.
Among the leading cities, Hyderabad, Delhi NCR, and Mumbai recorded the highest leasing volumes, collectively representing 70% of the leasing activity on main streets. The demand for retail space in these locations has pushed rental rates upward, particularly in Delhi NCR, Bengaluru, Chennai, and Kolkata, where rents surged by up to 15% year-over-year.
Rental Growth Across Prominent Main Streets
The report outlines the year-over-year rental growth across various prominent main streets:
- Delhi NCR: 13-15% increase
- Bengaluru: 12-14% increase
- Chennai: 12-14% increase
- Kolkata: 12-14% increase
- Mumbai MMR: 5-7% increase
- Pune: 1-3% increase
- Hyderabad: No significant change
- Ahmedabad: 8-10% increase
In contrast to the strong performance of main streets, retail leasing in malls has remained relatively subdued, constituting just 32% of the total leasing activity. The absence of new mall supply in Q3 2024, coupled with tightening vacancy rates in existing Grade-A malls, has contributed to a more cautious leasing outlook in the mall segment.
Tightening Mall Vacancies
Across major cities, Grade-A mall vacancy rates have continued to tighten, driven by increasing demand, especially from international brands. Foreign brands now account for nearly 30% of leasing activity in malls for the year-to-date period in 2024.
In Q3 2024, the following cities saw the most significant declines in Grade-A mall vacancies:
- Mumbai MMR: 0.89%, down by 18 basis points
- Delhi NCR: 13.91%, down by 33 basis points
- Bengaluru: 5.35%, down by 213 basis points
- Pune: 6.49%, down by 125 basis points
- Hyderabad: 1.50%, down by 137 basis points
- Chennai: 1.74%, down by 17 basis points
- Kolkata: 2.69% (no change)
- Ahmedabad: 11.75%, down by 122 basis points
With vacancy rates tightening in Grade-A malls, demand from international retailers remains high. Notably, foreign brands represented approximately 15% of the overall leasing volume in 2024.
Projected Supply and Leasing Activity
Looking ahead to Q4 2024, approximately 1.8 million square feet of Grade-A malls are set to open, primarily in Mumbai, Delhi NCR, and Pune, providing new opportunities for retailers. This upcoming supply is expected to help alleviate the tightening vacancy rates, though the demand-supply imbalance may persist for some time.
Regional Market Highlights
- Delhi NCR: Retail leasing activity reached 0.3 million square feet in Q3, with Gurugram leading the charge, accounting for 44% of the leasing volume. Main street rentals in Galleria Market in Gurugram saw a remarkable 20% growth both quarter-over-quarter and year-over-year. In Khan Market, rentals also jumped 7% during the same period.
- Mumbai: The city’s retail sector saw leasing volumes of 0.16 million square feet in Q3, a 76% increase from the previous year. Prominent suburban malls accounted for the majority of this activity, contributing 64% of the total leasing volume.
- Bengaluru: With 0.2 million square feet of retail leasing in Q3, Bengaluru recorded a 10% year-over-year growth. Main street leasing contributed 56% of the total leasing volume, with notable growth seen in high-street locations.
- Chennai: Main street leasing in Chennai surged by 28% quarter-on-quarter and 57% year-over-year. However, leasing in malls was limited, reflecting the lack of quality space in the market. Main street rentals in areas like Anna Nagar and Pondy Bazaar saw a strong 8-12% increase.
- Hyderabad: Retail leasing activity reached 0.49 million square feet, up 22.3% year-over-year. Main street rents rose by up to 10%, particularly in key areas like M.G. Road and Abids. The city’s Grade-A mall vacancy rate dropped to just 1.5%.
- Kolkata: Main streets continued to lead retail leasing activity, with limited Grade-A mall supply contributing to the ongoing demand. The overall vacancy rate in malls remained stable at 6.8% quarter-over-quarter.
- Pune: Retail leasing in Pune grew significantly in Q3, with mall leasing volumes increasing 85% from the previous quarter. Main street leasing saw a remarkable 104% jump quarter-over-quarter, particularly in established areas like NIBM Road.
- Ahmedabad: Retail leasing in Ahmedabad remained steady, with main street leasing totaling approximately 59,900 square feet. Malls saw a slight decline in leasing activity, though vacancy rates continued to tighten.
Future Outlook
Despite the slower leasing activity in malls during Q3 2024, the outlook for Q4 remains positive, with a significant influx of new Grade-A mall supply expected. This should help meet the growing demand for retail space, particularly from high-end international brands and expanding domestic retailers.
Saurabh Shatdal, Head of Retail and Managing Director, Capital Markets at Cushman & Wakefield, commented on the findings: “The Indian retail sector is evolving rapidly, with main streets driving high leasing due to limited mall supply. While malls saw a quieter quarter, we expect this gap to be addressed in Q4 with a strong influx of new Grade-A spaces. The evolving lifestyles of Indian consumers, especially in fashion, food & beverage, and accessories, are also playing a pivotal role in shaping retail leasing trends.”
As the retail landscape continues to evolve, Cushman & Wakefield’s latest report underscores the ongoing growth of India’s main streets, alongside a promising supply pipeline that will help meet the growing demand for premium retail spaces across key urban markets.
