Shopping Mall Sales In Top-8 Cities To Hit $39 Bn By FY28: Knight Frank

Organised retail sales volume in the top eight Indian cities is estimated to grow at a compounded annual growth rate (CAGR) of 17 per cent, from $52 billion in FY22 to $136 billion by FY28, according to a report by Knight Frank India.

The eight cities include, Ahmedabad, Bengaluru, Chennai, Hyderabad, Kolkata, Mumbai, National Capital Region (NCR) and Pune.

In the same period, potential retail sales in Indian malls are estimated to grow at a CAGR of 29 per cent in the FY22-28 period to reach $39 billion by FY28.

Indian malls across these cities grew at a CAGR of approximately 3 per cent to reach $8 billion in FY22, with consumption estimated to surpass the pre-Covid-19 levels in FY23.

The high revenue growth has largely been predicted due to increasing mall supply in the next six years, and sustenance of rising consumption demand.

Across the top eight cities in the first half of 2022, the total mall stock (leasable area) is estimated at 92.9 million square feet at the gross level, with 271 operational malls. In the second half of 2019, it was 77.4 million sq ft across 255 malls. In the first half of 2022, NCR contributed the highest with 34 per cent, followed by Mumbai at 18 per cent and Bengaluru with 17 per cent, said the report.

Sharing an overview on the ‘Mall Culture’ in India, Shishir Baijal, chairman & managing director at Knight Frank India said, “The retail real estate sector has reached a new level of maturity where smaller sized and lower grade developments are giving way to Grade A malls.” Existing Grade A malls have over 95 per cent occupancy which is a sign of the demand for quality real estate in this segment. Like the office segment, post consolidation, retail real estate too will offer a great opportunity for investments, including REITs, in the future, he added.

CBRE also expects retail leasing to increase. Anshuman Magazine, chairman & CEO-India, South-East Asia, Middle East & Africa, CBRE, said, “We foresee retail leasing to touch 6-6.5 million sq ft in 2022, twice the 2021 quantum.” The first half of 2022 saw an increase in retail leasing activity by 166 per cent YoY crossing 1.5 million sq ft, accounting for a near 85 per cent share in overall investment-grade mall completions, he added.

He also said that the experiential retail is currently counterbalancing the prevalence of e-commerce and ensuring profitability by increasing the brand’s physical presence.

“We expect these positive sentiments to sustain in the near term even as retailers explore innovative means to attract consumers and drive sales on both offline and online fronts.”

Recovery in Consumption

The eastern and northern regions of India witnessed a strong recovery in consumption reaching new heights by crossing pre-pandemic levels in March 2022. According to the latest findings, the eastern region registered an increase from 100 in March 2019 to 123 in index value at the end of March 2022. In the north, it rose to 118 during that period. The southern region registered a steady improvement with an index value of 108 whereas the western region took the worst hit with 99 index value.

As per the analysis in the first 2022, the retailer category split in malls presents a similar picture compared to pre-Covid times. Apparels and accessories expanded their footprints. Apparel grew from 26 per cent to 29 per cent and accessories grew from 8 per cent to 12 per cent in malls, said the report.

Beauty, footwear and entertainment categories also registered a marginal growth in category split during the same period.

Other categories which include gymnasium and other miscellaneous categories were the worst hit and recorded a gradual decrease from 21 per cent in pre-Covid to 12 per cent in the post-Covid period.

Post Covid-19 pandemic, retailers are keen to grab space and launch new stores as consumption recovery is at 110-115 per cent whereas footfall is around 70-80 per cent of pre-Covid-19 levels during March 2022.

Ghost malls

According to Knight Frank's research survey, as many as 21 per cent or 57 malls across the top eight cities in India are currently in different 20 stages of dilapidation. These 57 malls comprise nearly 8.4 million sq ft in gross leasable space. The survey says NCR occupies 3.35 million sq ft space as stock for ghost malls followed by Bengaluru with 1.38 million sq ft ghost malls space.

Shubhranshu Pani, founder of real estate consultancy firm, Treta Advisory said, “Number of ghost malls are increasing because of the disparity between the office rentals and retail rentals. These non-functional malls can be used alternatively as offices, hotels, consumer centric co-working spaces, educational institutes.”

Pani explained that a lot of places people have built without understanding the demand supply match. Within a span of two kilometres, there are 11 multiplexes, they can’t sustain.

“There is a lot more than brick and mortar in shopping malls,'' said Baijal on being asked about future innovations. This asset class requires more experts not only in terms of design but also in running them efficiently, they should invest time and energy to ensure a safe and hygienic experience and give consumers the confidence to come back, he added.