A major boom awaits India’s organized retail space

Here’s some good news for India’s organised retail realty. The next five years, Q2 2024-end to 2028, will see a surge in organized retail space completions. The top seven Indian cities, including Mumbai, Delhi NCR, Bengaluru, Hyderabad, Pune, Kolkata and Chennai) are expected to add nearly 45 million sq. ft. through 88 new retail developments, outpacing the supply of the past decade (2014-2023), which was close to 38 million sq. ft. Keeping in mind the evolving preferences of modern shoppers towards unique experiences, developers are increasingly prioritizing larger retail centres.

Recent data from JLL suggests that upcoming retail developments will be larger in size compared to those that became operational in the last decade. Over the past ten years, the average size of new retail space supply stood at nearly 391,099 sq. ft. This is expected to increase by 30 per cent to reach 507,341 sq. ft. with the addition of new supply during Q2 2024-2028. It signifies a notable trend in retail market, which is moving towards larger-sized experience-led developments.

Out of the 88 upcoming retail developments in the next five years, there will be 12 large-sized projects, encompassing an area of at least one million square feet each. These projects will contribute up to 37 per cent of the total supply expected until 2028.

This marks a notable increase in comparison to the previous decade, where retail centres of one million square feet and above accounted for just 27 per cent of the completed supply. Furthermore, Delhi NCR will see two retail centres of over 2.5 million sq. ft. each in the next five years, if a recent study by JLL India, is anything to go by. Quite significantly, increasing global travel has heightened shoppers' awareness, leading to a demand for unique and immersive retail experiences.

Larger developments incorporating entertainment, leisure activities, and dining options are creating comprehensive destinations that cater to the modern consumer. A majority (78 per cent) of the upcoming retail supply of nearly 45 million sq. ft. is lease-based, which, in turn, allows developers to have a greater control over the quality of the tenant mix and day-to-day management of the property, thus enabling them to command higher rentals.

As a result, they can curate a diverse mix of tenants, who can align their vision for the development. Many sector analysts pointed out that the existing retail stock, which stands at 89 million sq. ft., is expected to grow by 50 per cent and reach 134 million sq. ft. by end-2028. Delhi NCR is expected to garner the highest share (43 per cent) in the supply in the next five years followed by Hyderabad with a share of 21 per cent and Chennai with 13 per cent share. Retail assets remain an attractive investment avenue for large foreign institutional investors, who are increasingly opting for greenfield and brownfield development platforms. Interestingly, 16 per cent (7.2 million sq. ft.) of the new supply is owned by institutional players. That is indicative of the things in store up ahead.