Physical retailing stands on a firm footing in India

Amidst so much brouhaha over the growth of e-tailing in India, physical retailing has started showing signs of a stronger growth, at least going by the by the recent trends in new retail developments. The physical retail market in India has a robust supply of nearly 41 million sq. ft. of retail developments scheduled to be operational between 2024 and 2028, across the top seven cities. This supply constitutes projects that are either under construction or in active planning stage. Delhi NCR is projected to have the majority share (34 per cent), followed by Chennai (20 per cent), Bengaluru and Hyderabad each at 15 per cent, according to a recent JLL study. And add to this, the story of how India remains on the radar of international brands’ expansion plans. About 14 new international brands entered India in 2023, up from 11 and 8 brands in 2022 and 2021, respectively. A majority (eight) of this year’s entrants opened their first stores in Mumbai followed by Delhi NCR with F&B segment being the top ranker. Around 33 global brands have entered the country since 2021. Interestingly, most of the large foreign institutional investors continue to acquire/invest in retail assets via greenfield and brownfield development platforms. These investors currently hold close to 24 per cent (9.7 million sq. ft.) of the new supply, which will get delivered over the next five years.

With the roll-out of India’s first retail-led REIT in 2023, it would not be a wrong notion to believe that there would be more acquisitions to expand the retail portfolio in the days ahead. As most global institutional funds have created retail development platforms with key developers, the retail segment seems set to get on a faster growth trajectory, sooner than later. The most pertinent question at this point is what has caused such robust growth? There is no doubt, whatsoever, that the leading realty developers have been encouraged by the increased buoyancy of the Indian economy and the significant announcements to launch retail developments. Stable economic conditions have fuelled consumption-led growth, which has enabled footprint expansion by retailers and new mall announcements.

Apart from the strong supply pipeline, mall developers are also focusing on building large-sized malls to offer better shopping experience. Significantly, the operational stock of retail developments, which, at present, stands at 91 million sq. ft. is expected to increase by 45 per cent and reach 132 million sq. ft. by the end of 2028, if things move the way it has been envisaged. In 2023, 8.7 million sq. ft. of gross leasing across malls and prominent high streets was recorded in the top seven cities. Bengaluru led the gross leasing with a share of 33 per cent, followed by Delhi NCR 18 per cent and Mumbai 17 per cent. Experts are of this view that this certainly is a story in continuity. Consumer confidence is getting translated into expansion by retailers to increase their store network and sales. And there is no reason to believe that the trend will reverse in near future, if one plays one’s cards well.