India’s retail real estate market continued to gain momentum in 2017 with seven new global brands entering the country and investments in the segment by PE firms/wealth funds touching $ 200 million. During the first half of the year, there were more than 70 new entries/expansions by global and domestic brands across Mumbai, Delhi-NCR and Bengaluru. Additionally, several retail developments were completed across select cities resulting in approximately 1.5 million sq.ft. of fresh supply entering the market. Demand for quality retail space remained robust with a majority of this supply concentrated in Mumbai, Bengaluru and Delhi-NCR.
While the gateway cities continue to witness interest from global retailers, several southern cities are gaining prominence for domestic and international retailers looking to establish or expand their footprint in the country. Bengaluru, Chennai and Hyderabad witnessed robust leasing activity during the first half of the year.
While several international retailers chose these markets to expand their footprint in the country, domestic brands too expanded their presence here. In Bengaluru, international automobile brands opened their first outlets.
Domestic retailers too were not far behind with several brands across segments expanding their operations in each of the cities. This included hypermarkets, F&B brands, electronics brands and even entertainment chains.
Rentals in all the three southern cities remained largely stable during the first six months of the year.
With demand for organised retail continuing to grow in Bengaluru, going forward, rentals could witness an appreciation in certain micro-markets of the city. Increased interest of retailers for space in organised developments led to a 6- 7% increase in rentals in central Hyderabad and about 8-9% in western Hyderabad, on a half-yearly basis. In Chennai, the only exception to stable rentals was a mall in central Chennai, which witnessed a rental appreciation of about 10-12% on a half-yearly basis owing to limited space availability and sustained retailer interest.
The rest of 2017 is expected to be positive for the retail segment, with an increase in quality supply led by Hyderabad and Bengaluru. With fresh supply expected in Hyderabad, Bengaluru and Chennai, we are likely to see global and national brands execute their entry and expansion strategy in these cities. Despite this strong supply pipeline, the demand for organised retail space will continue to exceed the supply in most leading markets.
(The author is Head, Retail Services - India CBRE South Asia)
