India to hit 100 million sq ft of retail real estate in the next few years

25 June 2018 Authored by Consultancy.in

An increasing level of economic prosperity, and the subsequent spike in levels of urbanisation have created the perfect scenario for India’s retail real estate sector to thrive in. The total volume of shopping-mall space in the country – which has increased steadily over the last two decades – is set to approach 100 million square feet in the near future.

The turn of the millennium in India represented a period of heavy transformation in India. Markets had been liberalised for nearly a decade, and the newly relaxed regulations were emerging from their gestation period to produce tangible effects on the country’s GDP, boosting overall economic growth.

Amongst the sectors most directly affected by liberalisation was the organised retail industry, which was suddenly flooded with a plethora of international brands looking to capitalise on the newly open – gargantuan – Indian market. Major shopping centres came up to house these brands, which spelled corresponding growth for the retail real estate sector. 

Cumulative mall stock in India, 2000-2017

A new report from real estate consultancy JLL titled ‘India Retail: Stepping Up the Game,’ has detailed this growth story. In essence, the concept of shopping malls took off instantly in India, primarily due to the existence of a number of conducive factors in the market.

What the report terms as the “novelty factor” was responsible for the first wave of popularity gained by shopping malls, as people were keen to have a new shopping experience that did not traditionally exist in the country. Thereafter, the multifaceted utility of shopping malls added to their allure, offering solutions to consumer needs in every domain, including apparel, food & beverage, electronics, and others.

The next wave of popularity came when entertainment was made part of the mall experience, primarily with the advent of multiplexes, which significantly boosted the traffic in shopping centres. Underlying these factors are macroeconomic trends, such as a consistent upward trajectory in the country’s GDP, alongside a substantial increase in economic prosperity, and the subsequent expansion of the consumer market.

Cumulative mall openings in India

One ancillary factor that was of particular significance is the high levels of heat in India, which make the opportunity of shopping in an air-conditioned centre an attractive prospect. The interplay of all these factors has led to steady growth in the retail real estate space, driven by eight of India’s largest cities.

The amount of “mall stock” in India by square metre (sq mt) began at 0 in 2000, and had increased to 1 million sq ft by 2001, driven by the establishment of India’s first shopping mall. The numbers have only escalated over the years, having jumped to 5 million in 2003, to 8 million by 2004, and by 2010 the figure stood at 40 million sq ft, occupied by 152 malls.

The biggest jump in the mall stock, however, came between 2010 and 2011, which represented a bumper year for the retail real estate sector. The cumulative magnitude of  net completions over this period stood at 13.8 million sq ft, registering an increase of as many as 28 shopping malls.

Net completions

Following this peak, the sector hit what the report describes as a ‘rationalisation period,’ wherein the number of shopping malls – and correspondingly the total area covered – continued to increase annually, but to a much lesser degree than in 2011.

In 2012, for instance, the area under net completions fell to 4.1 million sq ft, driving the total up to 55 million sq ft through the establishment of only 8 new shopping malls. By 2017, total area coverage had increased to 76 million sq ft, with a total of 246 malls, although the total net completion stood just below 1 million sq ft. Over the next two years, the report predicts a total net completion of 7.4 million sq ft in 2019, and 5.3 million sq ft in 2020.

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