Retail Leasing on a High Growth Path

As brands embark on expansion into untapped micro markets, with newer formats, retail leasing is seeing positive momentum, doubling its growth on a QoQ basis.

According to a recent JLL report, during the second quarter (Q2) of the calendar year 2024, the leasing activity by retailers in organized retail centres and key high streets across the top seven cities experienced a surge. While certain discretionary retail categories have faced a slowdown in consumption growth in recent quarters, retailers have responded by closing unviable stores and expanding strategically.

Leasing activity rose to 2.2 million sq. ft, in Grade A and Grade B retail centres in top 7 cities,exhibiting a remarkable 100 percent  increase compared to the previous quarter (Q1 2024). This positive momentum translated into a robust H1 2024, resulting in an impressive cumulative leasing transaction of 3.3 million sq. ft.

The surge in leasing activity can also be attributed to retailers proactively securing leases in newly completed Grade A projects that were launched by established developers and institutional owners during last year. In addition, retailers also expanded in organized high streets and newer evolving catchments.

Gross Leasing H1 2024: Snapshot

Source: REIS, JLL Research and Retail

“The first half of 2024 saw domestic brands taking the lead in retail market, accounting for an impressive 80 percent of the gross leasing. Among the international brands, Europe, Middle East, and Africa (EMEA) based retailers dominated the gross leasing, having more than 50 percent of the share, while the Americas accounted for 27 percent  and APAC for 21 percent. Additionally, India’s appeal as a retail destination was strengthened with the opening of nine international brands’ maiden stores, primarily focusing on expansion in Delhi NCR and Mumbai”. said Dr. Samantak Das, Chief Economist and Head of Research & REIS, India, at JLL.

The expansion of leading fashion and apparel chains in the value and super value segments, along with the introduction of new formats and brands, has contributed to the Fashion and Apparel segment capturing the highest share (38 percent) in leasing activity in the first half of 2024 (January-June). Within this segment, the mid segment accounts for the highest share (56 percent) of the leasing activity, followed by the affordable segment with a significant share of 28 percent.

Notably, the F&B and entertainment segments together represented approximately 30 percent of the leasing volume in H1 2024, highlighting the growing significance of these categories in retail destinations. These categories are transforming shopping malls into vibrant and captivating spaces that go beyond mere shopping experiences. It is seen that developers have started dedicating a larger portion of their spaces to F&B and entertainment. The goal is to create an engaging and immersive environment that stimulates place-making in retail developments.

Source: REIS, JLL Research and Retail

Note: Entertainment includes multiplexes and Family Entertainment Centres (FECs); Others include banks, automobile showrooms, lifestyle stores etc 

“Bengaluru, Delhi NCR and Mumbai stood out as the leading cities in terms of gross leasing, accounting for a combined share of 62 percent  in H1 2024. Bengaluru stood out among these cities, recording almost the double of the leasing activity in Mumbai and Delhi NCR. With a remarkable 1 million sq. ft of transactions, the city showed significant leasing activity in prominent retail centres and key high streets. Additionally, it is interesting to observe that Bengaluru and Mumbai had the largest proportion of gross leasing in the Fashion and Apparel segment, while Delhi NCR stood out in the F&B segment, “said Rahul Arora, Head of Office Leasing & Retail Services, India, and Senior Managing Director (Karnataka, Kerala) JLL.

Given the positive demographics, stable economy, and the projected completion of high-quality retail developments within the next five years, the outlook for the retail segment is bright. India is likely to remain a key market for global brands looking to expand their store network. As the retail market in India continues to evolve, the growing popularity of new concepts and trends and development of more destination-oriented shopping malls which act as social meeting places and entertainment hubs, is anticipated.