Why developers are shopping for offline retail

Many more of such malls likely to come up soon. (Jithendra M/Mint)
Many more of such malls likely to come up soon. (Jithendra M/Mint)


  • While smaller malls have continued to die out due to poor footfall and occupancy, bigger malls are doing well

We all love shopping online. The fallout? Many malls, beyond the top graded ones, have closed. However, developers continue to be bullish on retail spaces, numbers released this month by JLL India, a property advisory, show. Mint explains why:

What is the expected supply looking ahead?

Organized retail space completion will see a significant surge and add nearly 45 million sq. ft between 2024 and 2028-end in the top seven cities. The new addition of space will happen through 88 new retail developments, including shopping malls and large, integrated retail-led projects, according to estimates by JLL India. The new supply will outpace the supply in 2014-2023, which was around 38 million sq. ft. The upcoming retail projects will also be bigger in size. In the past decade, the average size of a retail project was around 391,099 sq. ft. This is expected to rise by 30% in the coming years.

Why are developers so bullish on retail?

Grade A malls have performed well, maintained good occupancy levels, footfall, and conversion rates. Nexus Select Trust, India’s first retail real estate investment trust, is planning acquisitions. Mall developers Phoenix Mills, DLF, Prestige Group and Lulu Group are also looking to expand their portfolios and launch new shopping malls. Some developers are hopeful of raising capital from institutional investors or partnering with them. Retail assets have been an attractive investment avenue for foreign institutional investors. Around 16% or 7.2 million sq. ft of the new supply is owned by institutional players.

Which locations will see more supply?

Delhi-National Capital Region (NCR), which has the highest operational retail space (26.7 million sq. ft), is expected to grab the largest share of new supply in the next five years. It will be followed by Hyderabad and Chennai. The massive supply in Delhi-NCR is mainly due to larger retail projects being planned to address a wide consumer base.

Aren’t there ghost malls to fill?

Yes. Outside the quality malls, there is a growing section of under-performing ones with high vacancy rates. As per property advisory Knight Frank India, there has been a sharp rise in low-performing retail assets, spanning around 13.3 million sq. ft in 29 cities, called ‘ghost shopping centres’. NCR accounted for the highest of this stock at 5.3 million sq. ft, a 58% on-year rise in 2023. This is followed by Mumbai and Bengaluru. Kolkata witnessed the sharpest rise of 237% in 2023, though from a lower base.

What kind of new projects will we see?

With online shopping witnessing increasing customer spend, new offline retail projects have to offer more than just shopping. New malls are likely to focus on large, experience-led retail. Of the 88 upcoming retail developments in the next five years, 12 are large projects of at least 1 million sq. ft each, JLL said. Developers are looking to offer a wider range of services, in entertainment, food and social activities, as in malls in Dubai and other countries. Some malls even have auditoriums, and fulfilment centres for brands.

Catch all the Industry News, Banking News and Updates on Live Mint. Download The Mint News App to get Daily Market Updates.