by THO
Around 8 million square feet of retail supply is expected to hit the market this year. Over a third of the inventory is anticipated to be in superior category malls and nearly half is likely to be in Hyderabad, a new report by Cushman & Wakefield has said.
The report further reveals that the vacancy rate of Grade-A malls across many cities especially in Delhi-NCR, Pune and Chennai, witnessed a notable decline in the first quarter.
This is primarily because Q1 2024 saw no new Grade-A mall commencing operations, thereby contributing to a demand-supply imbalance to some extent, according to Cushman & Wakefield’s Q1-2024 Retail Marketbeat Report.
The superior category malls (institutional grade or listed developer assets with high experiential quotient) boast very low vacancy rates (typically in the single digits) in most major cities.
Increase in demand for high streets
With limited availability in malls, retailers are increasingly turning their attention to high streets. The report highlights a rise in demand and y-o-y rental growth in prominent high streets across key Indian cities, along with emerging retail clusters around residential or commercial hubs.
Ahmedabad recorded a healthy main street leasing volume of around 67,000 sf in the first quarter of 2024, recording a nominal 9% drop against a strong previous quarter. Main street rentals have largely remained stable on a q-o-q basis but witnessed a 10-15% growth on a y-o-y basis.
Bengaluru recorded retail leasing volumes of 0.18 msf in Q1 2024, with a total of 0.9 msf projected to be added to Grade A mall supply in 2024. Main streets such as Indiranagar 100 feet Road, Kamanahalli Main Road, and HSR Layout 27th Main recorded rental appreciation of around 10% on a quarterly basis on the back of strong demand and lower availability at prime locations.
Also Read: New supply of retail space expected to increase by 45% by 2028: Report
In the first quarter, the main streets of Chennai saw a significant rise in leasing volume, reaching 0.12 msf, a 36% growth on a q-o-q basis and a 9% expansion as compared to the same period last year. During the quarter, mall rentals remained unchanged. However, marginal rental growth is anticipated in the near term due to the limited supply of mall space and the drop in vacancy rates.
Delhi-NCR received close to 0.26 msf of leasing across both malls and main streets in Q1-24. In terms of rental growth, Prime main streets of Gurugram (Galleria Market) witnessed a 5% growth on y-o-y basis, whereas South Delhi markets such as South Extension and Lajpat Nagar witnessed a 7-10% growth on y-o-y basis.
In the first quarter of 2024, main street leasing touched around 491,000 square feet in Hyderabad. This leasing volume represents a 45% growth compared to the previous quarter, while it aligns closely with the level recorded in Q1-23.
Kolkata recorded retail leasing volumes of around 40,000 sf in Q1 2024, with Rentals at main streets such as Park Street, Camac Street, Gariahat, Kankurgachi increased by 3-5% on a quarterly basis.
Rental appreciation
By the end of 2024, close to 1.2 m sq of Grade A mall supply will become operational across two suburban micro-markets in Mumbai. It is expected that the city-level vacancy will largely remain range-bound in the upcoming quarters given the pre-commitment activity in the upcoming supplies, the report said.
City-wide mall rentals witness an uptick of 2-5% on a q-o-q basis on the back of limited space availability and active term renewals. Prominent main streets in prime locations also witnessed a rental appreciation of 2-3% from last quarter and 7-12% in annual terms.
“We have been witnessing a significant shift in the Indian retail landscape. Grade A or superior malls not only boast of high pre-commitment rates but are also experiencing vacancy levels dipping to single digits within a couple of quarters of their launch. This trend highlights a supply-constraint market. We anticipate this trend to continue especially with superior malls,” speaking of the developments, Saurabh Shatdal, Managing Director, Capital Markets and Head of Retail, India.
