A recently released report by Cushman & Wakefield emphasises India's strong preference for main-street retail leasing due to limited mall openings and high demand for top-tier retail spaces. In Q2 2024, high-street leases constituted 70% of total leases, with notable rent increases in Kolkata, Bangalore, Hyderabad, and Mumbai. Mall vacancy rates declined in major cities, with Grade A/A+ malls maintaining low vacancies. H1 2024 saw no new mall openings, but H2 is expecting 4.5 MSF of Grade-A malls. Nexus Select REIT saw 98% occupancy and plans to double its portfolio. Leasing activity surged in Delhi-NCR, Mumbai, Bengaluru, Hyderabad, Kolkata, Pune, Chennai, and Ahmedabad.
A recently released report by Cushman & Wakefield emphasises the enduring dominance of main-street retail leasing, propelled by scarce new mall openings and demand for premium retail spaces. Retailers are increasingly focusing on main streets in key Indian locations, clustering around residential and commercial hubs. This trend is evident in leasing activity, with high street leases comprising 70% of total leases in Q2 2024, compared to 30% for mall leases. Rental growth across prominent main streets in Q2 2024 highlights their growing appeal.
Cities like Kolkata, Bangalore, Hyderabad, and Mumbai experienced notable year-on-year rental increases, indicating strong demand for high-street retail. The report also notes a decline in mall vacancy rates in Delhi NCR, Bengaluru, Pune, and Ahmedabad due to limited new mall openings and strong demand for high-quality retail spaces, resulting in a demand-supply imbalance. Superior Grade A/A+ malls, renowned for their high experiential value, continue to maintain very low vacancy rates, typically in the single digits, across major cities.
Regarding supply, while the first half of 2024 saw no new mall openings, expectations are for the second half to introduce approximately 4.5 MSF (million square feet) of primarily Grade-A malls. Mumbai will lead with 1.2 MSF, followed by Chennai and Delhi-NCR each with 1.2 MSF, and Bengaluru with 0.9 MSF. Nexus Select REIT's retail portfolio boasts nearly 98% occupancy, underscoring the demand for superior-grade retail real estate. Since its May 2023 IPO, the REIT's stock has surged nearly 30%, with plans to almost double its portfolio size in the next five years.
Saurabh Shatdal, Head Retail and Managing Director, Capital Markets at Cushman & Wakefield, highlighted strong demand for Grade A malls and high-street retail in Q2 2024, reflecting India's dynamic retail landscape. Rising high street rental rates may stabilise with the anticipated supply of 4.5 MSF of Grade A malls, adjusting to evolving demand and supply dynamics. Shatdal anticipates a sustained, vigorous presence on main streets, underscoring the significance of domestic brands and the dynamic performance of the fashion and food industries, indicative of evolving retail preferences in India.
In Q2 2024, Delhi-NCR's main streets and malls recorded 0.51 MSF of activity, nearly doubling from the previous quarter and increasing by 54% compared to the same period last year. Main streets, primarily in Gurgaon, drove this activity, accounting for 0.36 MSF of leasing. Mumbai experienced robust leasing with 132,900 square feet in Grade-A malls and anticipates adding 1.2 MSF of Grade-A mall space by the year's end.
In Q2 2024, Bengaluru leased 0.16 MSF on main streets and anticipates adding 0.9 MSF of Grade A mall space in 2024. Hyderabad's retail sector saw a significant increase, leasing 0.63 MSF. Kolkata experienced a 61% QoQ increase in retail leasing, amounting to approximately 63,000 square feet. Chennai's main streets leased 0.10 MSF, with domestic brands accounting for 77% of the volume. Ahmedabad saw steady rental growth, with around 61,000 square feet leased on its main streets.
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