Retail Leasing to Touch Newer Heights in 2023

Retail leasing in India is poised for major growth in 2023, as the country continues to develop its economy and its citizens enjoy rising incomes and greater purchasing power. This presents a significant opportunity for landlords and retailers alike, as the demand for high-quality retail space continues to grow. The retail leasing industry is expected to continue its growth trajectory and several factors are contributing to its rise such as: -

Improving Global Economy

One of the primary drivers of growth in the retail leasing market is India's rapidly growing middle class. According to the World Bank, the country's middle class is expected to grow from around 300 million in 2015 to nearly 600 million by 2030. This expanding middle class is fueling demand for a wider range of goods and services, including high-quality retail space. As a result, the growth & expansion of retailers has increased to an extent.

Growth of E-Commerce

India's e-commerce industry is growing rapidly and contributing significantly to the nation's economy. The pandemic has prompted businesses to establish an omnichannel presence, including physical stores, to enhance the customer experience and expand their reach. Brands are seeking the best product mix to ensure long-term survival and serve their customer base. The 2021 Global Payments Report by Worldpay FIS predicts an 84% growth in India's e-commerce industry by 2024, fueled by increased demand, especially through mobile shopping. The Indian government is actively promoting e-commerce growth through flagship initiatives such as Start-up India, Digital India, and Skill India, providing necessary infrastructure and support to drive the sector's growth.

Shift In Consumer Sentiments

The COVID-19 pandemic has had a significant impact on the retail industry, leading many brands to close their physical stores and driving consumers to shift towards online shopping. Despite this challenging scenario, the industry is showing positive signs of recovery, with consumers increasingly opting for a "Hybrid Commerce" approach that blends offline and online retail experiences. In response to the consumer demand for unique and engaging experiences, retailers are developing one-of-a-kind entertainment, experiential, food and beverage, and social interaction spaces.

As a result of these changing consumer preferences, e-commerce platforms have emerged, catering to the diverse needs of shoppers, from groceries to medical supplies to beauty and wellness products, all in one convenient location. Several social media platforms have also capitalized on the growing demand for online retail by adding more commerce features, enabling customers to browse and purchase products from participating online retailers.

Retailers Capitalizing the Growth

Developers are capitalizing on the growth in the retail leasing market, adopting a strategic approach that involves investing in high-quality retail spaces that are well-located, accessible, and designed to meet the needs of modern consumers. Kearney Research projects that the Indian retail industry is becoming increasingly dynamic and is expected to expand at a CAGR of 10.5% from 2021 to 2026. The Financial Express reports that the industry is projected to grow annually by 10%, reaching approximately $2 trillion by 2032. In India, malls are transforming into one-stop destinations for entertainment, food, and shopping, with location and mall positioning being critical factors for success. The government's active involvement in the retail sector is also essential, according to Cushman & Wakefield. Furthermore, IBEF predicts that around 60 shopping malls with a total retail space of 23.25 million square feet will become operational between 2023 and 2025.

The Road Ahead

India's rapidly expanding middle class, expanding urban areas, and expanding e-commerce sector will continue to fuel demand for high-quality retail space through 2023.

In 2022, Retail leasing in the top-7 cities of India increased by 70% year-over-year and supply increased by 27% year over year basis. Developers and retailers are taking a strategic approach to capitalize on this trend by investing in well-located, high-quality retail space designed to meet the needs of modern consumers. The sector anticipates greater growth momentum and additional brand expansion plans, which will make Delhi-NCR a hub of leading activities, with brands enhancing the customer experience by developing experiential centres, kids' entertainment zones, theme-based areas, and curating athleisure activities and zones, etc.