CBRE South Asia Pvt. Ltd, India’s leading real estate consulting firm, announced the findings of its latest India Retail MarketView Report – H2 2017. According to the report, retail assets in the country witnessed investments of over US $0.8 billion from PE firms and wealth funds in 2017; a 15 percent increase over 2016. This steady capital inflow highlights the continued growth of the retail sector across the country.
While close to 3.4 million sq. ft. of supply entered the market, 15 new brands established their presence in the country. A notable trend witnessed during the year was the adoption of omni-channel strategies by established players. Several e-commerce retailers such as Urban Ladder, Craftsvilla, Myntra, Jaypore, Pepperyfry and Nykaa opened their brick-and-mortar stores; whereas established retailers such as Zara launching their online portals.
During the review period (July – Dec 2017), demand for retail space remained strong, as international brands such as Tom Tailor, Miniso, Simon Carter, and Jo Malone opened their first outlets in the country. At the same time, other well-known brands including Starbucks, H&M, Mango, Westside, Pantaloons, and Hamleys continued to expand operations across the country.
Madame Tussauds also made its debut in the country with its first museum opening in Connaught place, Delhi in October 2017. Well-known Swedish home furnishing brand IKEA opened an experience center, Hej Homes, in Hyderabad during H2, 2017. On the supply side, close to 2 million sq. ft. of new supply entered the market in H2, 2017, a majority of which was concentrated in Kolkata, Delhi National Capital Region (NCR), Chennai, Pune and Bangalore.
Commenting on the findings of the report, Anshuman Magazine, Chairman, India & South East Asia, CBRE said, “The government’s continued focus towards making India a preferred investment destination is having a positive impact on the country’s economy as well as the retail landscape. The recent announcement allowing 100 percent FDI in Single Brand Retail Trading under the automatic route is likely to further ease the entry of global retailers. Competitive rentals, availability of quality space, and with more brands coming in driven by a growing consumer base, the sector can expect significant growth in times to come.”
Vivek Kaul, Head, Retail Services, India for CBRE South Asia Pvt. Ltd. said, “The steady supply of quality retail developments in key cities is indicative of the continued demand for retail space in the country. Additionally, the recent policy reforms are encouraging global retailers and investors to consider investing into India’s retail landscape. Thanks to increasing globalization, demand for international brands continues to influence the retail story in the country. Going forward, increasing investments coupled with availability of quality space in both tier 1 and tier 2 cities will propel the market.”
City Highlights – H2, 2017
Delhi NCR
– Delhi-NCR continued to be the gateway for global players eyeing high streets to launch/expand their operations
– Fashion and apparel continued to dominate leasing activity in the city
– Rentals in key mall developments registered a marginal increase while high street rentals remained largely stable
0.2 million sq.ft. of new supply entered the market in H2, 2017
Mumbai
– Oberoi Mall, High Street Phoenix, Xperia Mall witnessed major leasing activity
– Demand remained steady for high streets such as Fort, Khar, Andheri, Powai and Ghodbunder Road
– Rentals remained largely remained stable, across both the high streets and the malls due to steady demand
Bangalore
– Leasing activity remained stable, due to the entry and expansion of both domestic and international brands across high streets and malls
– Blue Horizon Group’s Vega City mall on Bannerghatta Road was completed during H2, 2017, infusing fresh retail supply of approx. 0.4 million sq.ft. in the city
– Rentals in select high streets witnessed a marginal appreciation while rental values in mall developments remained largely stable
Hyderabad
– Retail leasing activity in Hyderabad increased during the second half of 2017, largely driven by apparel brands
– The highlight of H2 2017 was the launch of the ‘Hej Home’, Swedish home furnishing retailer IKEA’s experience centre in Forum Mall, Kukatpally
– Rental values remained stable across both high streets and malls
Chennai
– Chennai witnessed increased retail activity across both high streets and shopping centres
– 0.2 million sq.ft. of new supply entered the market with the completion of Palladium
-Apparel and electronics stores led leasing activity across high streets
– While high street rentals remained stable, the organized segment reported varying rental trends
Pune
– Strong demand for retail space was reported across prominent mall developments, as multiple pubs came up across the city
– 0.6 million sq. ft., of new supply entered with the completion of The Pavilion on SB Road
– The city witnessed the entry of new F&B players such as Tales and Spirits, Cabaret, Poona Republic, Ales Brews and Ciders, Bombay Brasserie
– Rentals across high streets and malls remained stable
Kolkata
– 0.6 million sq.ft. of new supply entered the city with the launch of three malls; DownTown Mall, Star Mall and Astra Mall
– Demand was dominated by the F&B, apparel and hypermarket segments
– H&M marked their foray into East India with their first store in the city
During the 1st half of 2018, we expect quality supply to enter the market, led by the Southern cities of Hyderabad and Bangalore. Both domestic and international retailers continue to lead the expansion across Fashion and F&B categories. Additionally, the upcoming mall supply, coupled with recent announcements for FDI norms in retail, is expected to boost the entry and expansion of both global and national brands. Going forward, fashion anchors, hypermarkets, family entertainment centers and multiplex operators are expected to lead demand for space, with the average space uptake in terms of area to rise. Despite a strong supply pipeline, demand for quality retail space will continue to exceed the supply in most leading markets.
