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 estimates that in 2024, the e-commerce market stood at USD 125 billion, with expectations to hit USD 345 billion by 2030. This surge, driven by factors such as increasing internet penetration, smartphone adoption, digital payment infrastructure, and government initiatives like ‘Digital India,’ is fostering rapid transformation across the industry. The expansion of logistics and supply chain networks has further boosted the sector’s prospects.

E-Commerce Penetration in Smaller Cities

Beyond metropolitan areas, e-commerce firms are tapping into the growing consumer demand from smaller towns. The share of online shoppers from Tier 2 and 3 cities rose to 56% in FY2024, compared to 46% in FY2020, and is expected to further climb to 64% by FY2030.

“Besides the metros, e-commerce players are also tapping the growing demand from smaller towns and cities. Resultantly, the share of online shoppers from Tier 2 and 3 cities has increased to 56% in FY2024 from 46% in FY2020, and is expected to reach 64% by FY2030,” said Anuj Kejriwal, CEO & MD – ANAROCK Retail.

Meanwhile, India’s overall retail industry is projected to hit USD 2,500 billion by 2035, marking a threefold rise compared to 2019. This expansion is fueled by rising disposable incomes, increasing urbanization, and a burgeoning middle class. Today, the industry is characterized by a blend of sprawling malls, thriving e-commerce, and traditional retail markets.

Mall Vacancy Drops Amidst Rising Demand

The study also highlights significant trends in India’s shopping mall landscape. In 2024, new mall supply across the top seven cities stood at just 1 million sq. ft., while absorption was recorded at 6 million sq. ft. The post-pandemic resurgence in leasing, driven by experiential retail, has led to a significant drop in mall vacancy rates—from 15.4% in 2019 to just 8.1% in 2024.

“New supply is lagging far behind demand. Current supply and demand trends for mall spaces indicate a post-pandemic rebound in leasing, now largely driven by experiential retail,” noted Kejriwal. “Apparel and the F&B sectors consistently contribute nearly 45% of demand, remaining the top footfall drivers.”

With major domestic and international retailers expanding their presence in smaller cities, the supply of malls in Tier 2 and 3 locations is expected to grow substantially. The report projects that these markets will account for over 26 million sq. ft. of mall spaces by 2030, reflecting the growing appetite for organized retail in India’s emerging urban centers.

As India’s retail and e-commerce sectors continue to evolve, the interplay between online platforms and physical retail is expected to shape a dynamic and robust industry landscape in the coming decade.

Also Read: Emerging Tier II-III Cities Drive India’s Warehousing Growth with 100 Million Sq. Ft. Contribution

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