Existing retail stock in top 7 cities offers potential of 43–44 million sq ft REIT-worthy retail assets: report

September 12, 2023

The existing retail stock across the top 7 Indian cities offers a potential of 43–44 million square feet of REIT-worthy retail assets, of which more than half are in Mumbai and NCR-Delhi region, according to a JLL India Report.

In addition to the progress witnessed in these seven cities, their Tier 2 and 3 counterparts are also rapidly emerging as growth corridors for the retail sector.

The report noted that after the success of three office-led REITs, India’s public markets saw the launch of the first retail-led REIT – Nexus Select Trust, backed by Blackstone, in 2023. The maiden listing has offered the opportunity for retail investors to own a stake in the retail asset class as it has brought greater transparency in transaction and management structures.

Additionally, with a pipeline and new malls announced by established developers, the Indian retail sector is expected to attract more institutional investment.

Tier I cities continue to attract the maximum investor interest; however, 30 per cent of the institutionally held assets are in tier II and tier III cities such as Amritsar, Chandigarh, Ludhiana, and Mohali in the north, Mysuru, and Mangaluru in the south, Surat in the west, Bhubaneswar in the east, Indore, and Nagpur in central India.

As of the first half of 2023, the organised retail stock in the top seven cities, including Delhi, Mumbai, Pune, Bengaluru, Kolkata, Chennai, and Hyderabad, stands at 89 million square feet.

More than 50 per cent of the current operational mall stock lies in Delhi NCR (28 million sq ft) and Mumbai (17 million sq ft). Mall completions of around 1.1 million square feet were recorded in H1 2023, with additions in Hyderabad and Delhi NCR.

A few non-performing and poorly managed malls in Delhi NCR and Mumbai have been shut down, either undergoing a revamp or being converted for other purposes.

Additionally, although at a nascent stage in India, the retail sector is witnessing the emergence of premium outlet centres that are cashing in on the changing lifestyle and aspirational choices of young, affluent, and well-travelled Indians. Recently, ABFRL partnered with Galeries Lafayette to open luxury department stores in the country.

Furthermore, India continues to be a focal point for the global expansion strategies of international brands, with 24 international companies venturing into the country since 2021, spanning various sectors such as food and beverages, home furnishings, and accessories, according to the JLL India Report.

Most of these retailers made a beeline for superior-quality mall developments in the gateway cities—Delhi NCR, Mumbai, and Bengaluru. Furthermore, nearly a quarter of these new entrants were in the F&B category, such as Laduree, Popeyes, Tim Hortons, and Pret A-Manger, which are opening their stores in prominent retail developments and F&B destinations.

In fact, the report states that premium outlets could be a good alternative for landowners and developers looking to create a differentiated product; however, optimal brand mix and mall size remain the most crucial parameters.

Apple also opened its first two physical stores in Mumbai and Delhi, respectively. Global brands such as West Elm, Pottery Barn, and H&M Home have entered the country in the home furnishing segment. In addition, retail chains such as Reliance Retail and Aditya Birla Fashion and Retail Limited (ABFRL) are creating partnerships with global brands to ease their entry into India. US headquartered retailers account for the majority of new entrants through this route, followed by the UK, Canada, and Switzerland.

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