Mall Vacancy Levels Drop to Just 8% as Leasing Activity Surges
After years of dominance by online retail platforms such as Meesho, Myntra, and Amazon, the retail industry is witnessing a significant shift, with more retailers returning to physical spaces, particularly malls. While e-commerce continues to thrive, physical retail has regained momentum, and the latest ANAROCK Retail RELEAP report for the first half of 2024 indicates a remarkable recovery. Mall vacancies have dropped to just 8.3%, a substantial decrease from 15.5% in 2021, as demand for retail spaces has now outpaced supply.
Desire for Experiential Shopping
One of the key drivers of this shift is the growing consumer demand for experiences that go beyond what e-commerce can offer. Malls have evolved into vibrant lifestyle destinations that combine shopping, dining, and entertainment, creating a dynamic environment for shoppers. Consumers are increasingly looking for immersive experiences, which online shopping cannot replicate, leading to a rise in footfalls.
Economic Growth and Rising Affluence
India’s strong economic recovery and growing affluence are helping to fuel this trend. As disposable incomes rise, consumers are spending more on premium and luxury products. Malls offer an ideal platform for showcasing these high-end brands, where customers can engage with the products in person.
The Return of Luxury and Premium Brands
High-end retailers, particularly in the watches and jewellery sectors, have also seen increased demand for mall spaces. According to the ANAROCK report, watches and jewellery now account for almost 6% of the total retail leasing activity in 2024. The increasing aspirations of India’s affluent middle class have driven this trend, with luxury brands eager to establish a physical presence in prime locations.
Preference for Smaller Retail Spaces
While the demand for larger stores is expected to grow in the future, smaller retail spaces dominate current leasing trends. Nearly 70% of the leases signed in H1 2024 were for spaces under 2,500 square feet. Retailers prefer these compact spaces as they are cost-effective, strategically located, and offer a more personalized shopping experience for customers.
Anuj Kejriwal, CEO & MD of Retail, Industrial & Logistics at ANAROCK Group, observed, “Retailers and brands continue to prefer smaller spaces, but as the market stabilizes, larger spaces will take a larger share of the total leased area.”
The future also holds substantial growth in retail space supply, especially in key markets such as the National Capital Region (NCR), Mumbai Metropolitan Region (MMR), and Hyderabad, which are set to account for over 85% of the total new mall supply in the next 4-5 years. As new developments come online, the demand for quality mall spaces is expected to continue driving rental values upward.
