The top seven cities recorded gross leasing of approximately 4.1 million sq. ft. of Grade A mall space in H1 2026, compared with only around 0.9 million sq. ft. of new completions. This means retailers leased almost 4.5 times the amount of Grade A space delivered during the period.

The demand-supply imbalance comes even as both leasing and new mall completions moderated from the exceptionally strong levels recorded in 2025. Leasing declined approximately 24% year-on-year in H1 2026, while new completions fell by around 57%.

Mall supply fails to keep pace with retailer demand

ANAROCK’s data shows that the mismatch between Grade A mall supply and leasing demand has been building over several years.

In 2023, the top seven cities added approximately 5.3 million sq. ft. of new Grade A retail supply against gross leasing of 6.5 million sq. ft. In 2024, new supply dropped sharply to just 1.1 million sq. ft., while leasing remained at around 6.5 million sq. ft.

The gap widened considerably in 2025. Although new mall supply recovered to approximately 5.2 million sq. ft., leasing surged to a record 13 million sq. ft.

The trend continued in H1 2026, when only 0.9 million sq. ft. of new Grade A mall space was completed against leasing of 4.1 million sq. ft.

Anuj Kejriwal, CEO – Retail and CEO – Europe, Middle East & Africa, ANAROCK Group, said the supply problem is cumulative and has been worsening over the years. According to him, consistent leasing demand has steadily absorbed available Grade A space even as new mall completions have fluctuated.

The result is a supply-constrained market where retailers are increasingly facing difficulty in securing suitable locations.

Delhi-NCR the only market with new Grade A mall supply

Delhi-NCR was the only market among the top seven cities to record new Grade A mall completions during H1 2026.

The region added approximately 0.9 million sq. ft. of new supply, while leasing stood at approximately 1.26 million sq. ft.

Mumbai, Hyderabad, Bengaluru, Pune, Chennai and Kolkata recorded leasing activity but virtually no new Grade A mall completions during the first half of the year.

This means retailers in these markets were largely competing for space within existing Grade A malls, further tightening the availability of quality retail locations.

Why is new mall development difficult?

ANAROCK said the shortage cannot simply be attributed to developers failing to respond to rising demand. Developing a successful Grade A mall is more complex than delivering several other forms of real estate.

Large-format malls require sizeable and contiguous land parcels in strategically located catchments. Developers also need to commit substantial upfront capital and undertake detailed consumer and catchment analysis.

Securing anchor tenants, obtaining approvals and completing construction can further lengthen the development cycle.

The availability of suitable land has become a particular constraint in established urban markets, while rising land prices can make projects more difficult to structure.

According to Kejriwal, approval timelines, financing conditions and construction schedules can also delay delivery. The sharp decline in new supply in 2024, when only 1.1 million sq. ft. of Grade A mall space was completed despite strong leasing demand, demonstrated how quickly the development pipeline can be disrupted.

The 57% year-on-year fall in new completions during H1 2026 further highlights that mall supply cannot be increased quickly in response to rising retailer demand.

Grade A mall vacancy falls to 6.7%

The tightening supply-demand equation is also reflected in vacancy levels.

Grade A mall vacancy across the top seven cities fell to 6.7% in H1 2026, the lowest level recorded since 2010, according to ANAROCK.

The post-pandemic vacancy rate had peaked at 15.5% in 2021. Before the pandemic, the highest Grade A mall vacancy was recorded in 2011 at 21.5%.

The contrast with lower-quality retail stock is significant. Grade B and C malls across major cities continue to report substantially higher vacancy levels, ranging from approximately 8% to as high as 35%.

The data suggests that India’s challenge is not a shortage of retail real estate in terms of total space. Instead, the market is short of well-located, professionally managed and institutionally owned Grade A and A+ malls capable of meeting the requirements of major national and international retailers.

Opportunity for developers and institutional investors

ANAROCK said the combination of low vacancy, strong retailer demand and the continued growth of experience-led consumption creates an opportunity for developers and institutional investors to increase investment in high-quality retail assets.

The opportunity is particularly significant in markets where Grade A mall vacancy has already fallen to near-record lows.

However, unless new supply increases meaningfully, retailers could face longer waiting periods for prime locations, rising occupancy costs and greater competition for established mall space.

The H1 2026 data therefore points to a structural shift in India’s organised retail real estate market: demand for quality mall space is increasingly outpacing the ability of developers to deliver new Grade A supply.

Also Read: India’s Retail Boom to Attract USD 3.5 Billion in Next 3 Years as Western Malls Crumble

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While leasing activity saw a 15% quarter-on-quarter dip, it still recorded a marginal 1% year-on-year growth, reflecting resilience in retailer demand. The strong demand environment led to a decline in mall vacancy rates to 11.9%, down from 12.3% in the previous quarter.

A key highlight of the quarter was the dominance of metro cities. Mumbai led leasing activity with a 26% share, followed by Bengaluru and Delhi NCR at 21% each. Together, these three markets accounted for 68% of total leasing across the country, underlining continued retailer preference for high-consumption urban hubs.

Supply constraints played a major role in reshaping leasing patterns. With only 0.25 million sq. ft. of new mall space added during the quarter, retailers increasingly turned to high streets, which accounted for 48% of leasing activity. Shopping malls followed with a 40% share, despite limited availability of new Grade A retail space.

On the occupier front, domestic retailers remained the primary drivers, contributing 79% of total leasing volume. Direct-to-consumer (D2C) brands maintained a steady 7% share, continuing their transition from online to offline formats. Meanwhile, international retailers posted a strong 48% year-on-year growth in leasing, driven by aggressive expansion strategies targeting India’s growing consumer base.

In terms of categories, fashion and apparel continued to dominate, while the entertainment segment emerged as the second-largest contributor with a 16% share. Cinema operators accounted for a significant 71% of entertainment-led leasing, reflecting expansion of next-generation multiplex formats. Food and beverage followed closely with a 15% share.

Looking ahead, the sector is poised for significant expansion. A robust development pipeline of 46.1 million sq. ft. is expected to be delivered across the top seven cities between 2026 and 2030. This upcoming supply is anticipated to ease current constraints, support retailer expansion, and further compress vacancy levels.

The report highlights that India’s retail real estate market is entering a new growth phase, driven by rising consumption, increasing demand for organized retail, and evolving retailer strategies that balance high streets and malls. With institutional-grade supply set to expand over the next few years, the sector is well-positioned for sustained growth and increased investor interest.

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Despite a minor 5.4% dip QoQ and 6.3% YoY, the sector remains healthy, backed by strong H1 2025 volumes of 4.61 MSF — a 17% YoY growth, reflecting stable consumer demand and upbeat retailer sentiment.

Q2 2025 Retail Leasing Snapshot

City	Q2 2025 (MSF)	QoQ Change	YoY Change
Hyderabad	0.76	-0.9%	-22.5%
Mumbai	0.52	-9.6%	155.9%
Delhi-NCR	0.30	-26.0%	-41.4%
Pune	0.23	37.8%	148.7%
Bengaluru	0.18	-6.3%	-44.2%
Chennai	0.16	-8.6%	50.4%
Kolkata	0.05	29.3%	-23.0%
Ahmedabad	0.04	-17.2%	-63.2%
TOTAL	2.24	-5.4%	-6.3%

Format Split: Malls vs High Streets

• High Streets: 1.23 MSF (55%)
  • Saw a 26% QoQ decline, but remain dominant due to limited mall stock.
• Malls: 1.01 MSF (45%)
  • 42% QoQ growth, highest share in 5 quarters.
  • Vacancy dropped by 77 bps to 8.16%.
  • Superior malls saw just 4.28% vacancy.

New Supply Outlook

“Nearly 4.16 MSF of Grade A malls are expected by Q4 2025, especially across Mumbai, Delhi-NCR, and Hyderabad,”
— Suvishesh Valsan, Head, Research India, Cushman & Wakefield.

This influx is expected to ease tight vacancies and unlock new opportunities for expansion-hungry retailers.

City-Wise Retail Market Highlights

Mumbai

• Leasing: 0.52 MSF
• YoY: 1.6x growth
• Vacancy: 7.9% (70 bps rise due to relocations)

Hyderabad

• Leasing: 0.76 MSF
• Vacancy in superior malls: 1.85%
• Expected supply: 1.7 MSF by Q4 2025

Delhi-NCR

• Leasing: 0.3 MSF
• Vacancy: 11.9%
• Expected supply: 1.7 MSF by year-end

Pune

• Leasing: 0.23 MSF
• YoY: 1.5x growth
• Vacancy in superior malls: 5–6%

Retailer Participation & Segment Trends

Quote

“The preference for experience-led and quality retail spaces is clear. With international brands and emerging categories like wellness and grocery gaining traction, we expect leasing momentum to rise further in top-tier metros,”
— Suvishesh Valsan, Cushman & Wakefield.

Outlook: What Lies Ahead?

• Q3–Q4 2025 to see over 4 MSF of fresh Grade A retail space.
• Vacancy tightening in superior malls indicates landlord-favorable conditions.
• Expansion opportunities expected to grow for both domestic and global retailers.

Also Read: 35% of companies see full offices after 2 years

The post India Retail Leasing Sees 2.24 MSF Activity in Q2 2025; Malls Gain Traction as Vacancies Tighten appeared first on Square Feat India.

“The surge is also prompted by a perceivable shortfall in new supply of Grade A malls across cities,” says Anuj Kejriwal, CEO & MD, ANAROCK Retail. “The data speaks for itself.”

New Grade A Mall Supply (CY 2025-26): Top 7 Cities

• Total new Grade A mall supply: 16.6 Mn sq. ft.
• Delhi-NCR and Hyderabad alone to contribute ~65% of this total supply.

Mall Leasing & Vacancy Trends (CY 2021–26)

*Projected

“Despite the sudden spike in new supply, we do not foresee a severe oversupply scenario, as leasing demand remains very strong,” Kejriwal noted.

Rising Demand for Organized Retail Spaces

One of the strongest drivers of this mall boom is the entry of over 60 global retail brands across categories like:

• Fashion
• Electronics
• Lifestyle
• Food & Beverage (F&B)

These brands are choosing high-footfall malls and high streets, boosting demand for high-quality organized retail infrastructure.

Retail Boom Reaches Tier 2 & Tier 3 Cities

The retail expansion is no longer restricted to metros. Smaller cities are witnessing a consumption renaissance, spurred by:

• Higher disposable incomes
• Greater smartphone & internet penetration
• Faster ecommerce adoption

Ecommerce Shopping Share (By City Tier)

*Projected

• Online shoppers in India:
  • 2020: 140 Mn
  • 2024: 260 Mn
  • 2030 (projected): 300 Mn
  • 2035 (projected): 700 Mn

Outlook

With leasing activity staying robust and vacancy rates projected to stabilize around 8.2%–8.5%, the organized retail space in India is on a strong upward trajectory. The convergence of global brand entry, consumer confidence, and emerging consumption centers positions India as one of the most dynamic retail markets in the world today.

Also Read: Mall Space Demand Surges, Supply Struggles to Keep Up for Third Year

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