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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The report underscores the growing importance of IACs, which offer a diverse range of entertainment options designed for individuals and groups. These centers, found either in standalone venues or integrated within retail developments, provide a mix of games, attractions, and food and beverage options, appealing to shoppers seeking immersive experiences beyond conventional retail offerings.

Currently, India boasts approximately 6.6 million square feet of operational IAC space across more than 500 centers, with projections suggesting this could expand to around 11 million square feet by 2028. These entertainment hubs attract visitors of all ages, significantly enhancing the allure of shopping destinations.

“Larger retail developments and malls are expected to house more expansive and innovative IACs in the future,” said Dr. Samantak Das, Chief Economist and Head of Research and REIS at JLL India. “Standalone centers offering diverse entertainment concepts are also on the rise, with one-fifth of IACs now exceeding 50,000 square feet, reflecting the growing demand for premium entertainment options.”

The Rise of Premium IACs

Over the past two decades, IACs have evolved significantly, with both international and local operators introducing premium formats that require larger spaces to deliver comprehensive offerings. These upscale centers combine high-end gaming with luxurious lounges and dining experiences, catering to consumers seeking quality and exclusivity.

Notably, concepts like “Eatertainment,” which integrate dining and entertainment within one venue, have gained popularity, especially among teens and office-goers. This model, which hosts multiple games and attractions, is now featured in over 50 centers across 0.85 million square feet in India. Additionally, the concept of competitive socializing, which blends entertainment with a competitive edge, is also on the rise, often accompanied by upscale dining options.

As the boundaries between retail, entertainment, and dining continue to blur, it is anticipated that larger malls will allocate more space to innovative IACs. This shift is expected to redefine the retail landscape, transforming shopping centers into holistic lifestyle destinations that offer more than just shopping.

The ongoing evolution of Indoor Amusement Centers in India exemplifies the changing dynamics of consumer experiences and the adaptability of the real estate market. As this trend progresses, it promises exciting developments for consumers and opens new avenues for investors and developers within the burgeoning experience economy.

Also Read: Indoor Amusement Centers in India to Expand by 67% by 2028

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