In a recently completed study by JLL, one of India’s largest real estate service firms, retail supply in the next three years (2018 – 2020) is expected to be at 19.4 million sq. ft. (msf). In the same period demand will be approximately 15 msf. The study revealed that 2018 will see the highest supply since 2011.
| Year | New Completion | Net Absorption |
| (million square feet) | (million square feet) | |
| 2017 | 5.6 | 3.2 |
| 2018 (F) | 7.8 | 5.8 |
| 2019 (F) | 6 | 4.7 |
| 2020 (F) | 5.6 | 4.7 |
Source: JLL India Research
The steady growth of supply will be accompanied by an equally stable growth in demand which is also expected to be at around 15 msf in the period of 2018 – 2020. Further, it expects a parallel rationalisation of existing mall spaces which will help the market avoid an oversupply situation. As a natural course of events, it expects a few malls to close down or temporarily suspend their operations for repairs, renovation and upgrades. This will help the market create the necessary balance to maintain the rental values.
The total newly completed malls in 2017 was recorded at 5.6 msf which is expected to see an increment of close to 40 percent y-o-y and rise to 7.8 msf by the end of 2018. The largest contribution to this will be coming from the two southern cities of Hyderabad (2.2 msf) and Chennai (1.5 msf) which will see significant influx of mall supply. Delhi – NCR will be witnessing the highest supply of 2.3 msf of new mall space in 2018, albeit recording a decline of 28 percent y-o-y since 2017.
| New Compilation (million sqf) |
Mumbai | Delhi | Bengaluru | Chennai | Hyderabad | Kolkata | Pune | India |
| 2017 | 0.8 | 3.2 | 0.3 | 0.3 | 0 | 0.6 | 0.4 | 5.6 |
| 2018 (F) | 0.7 | 2.3 | 0.4 | 1.5 | 2.2 | 0 | 0.5 | 7.8 |
| -13% | -28% | 33% | 400% | NA | -100% | 25% | 39% |
Source: JLL India Research
While retail mall space has now started to see a rise in the market, we have also experienced some rationalisation in supply in the last year. 2017 saw withdrawal of nearly 5 msf of retail space with a closing down of 28 malls. Most of the rationalisation took place in the markets of Delhi – NCR and Mumbai owing to the fact that these markets have significant mall stocks with a considerable percentage of the same performing below par.
“The retail sector of India is going through a fresh period of growth which is backed by strong economic fundamentals. As we have seen an increase in interest from investors which was seen with investments of over US$ 750 mn in 2017. Encouraged by the urbanisation, young population and rising proportion of nuclear families in urban locations, over 70% of consumption growth in the next 15 years is expected from population aged 15-59 years, with increased per capita consumption. This along with the opening up of the FDI route for retail brands entering into India, will further boost retail investments,” said Ramesh Nair, CEO and Country Head, JLL India.
Despite an expected decline in Delhi – NCR, the city is expecting to see an addition of 2.3 msf of new mall space in 2018. Most of these malls will be in the peripheral regions and would be catering to the growing catchments of NOIDA, Gurugram and Greater Noida.
While Delhi – NCR already has the highest inventory, the growth of retail sector points out to the further possibilities of growth. In the same space, Mumbai which has in the past few years seen as slowdown in retail development activities will continue to witness remain cautious. 2018 will see a decline of 13 percent y-o-y in new mall completions, further maintaining the status quo in the market.
Chennai will experience a surge in new completion mall spaces with over 1.5 msf of new malls being added. Chennai has seen extremely restrained development activities over the last few years, mostly due to strong preference by retailers for traditional high street locations. Hyderabad is the other major market to see significant growth adding 2.2 msf of new mall supply in 2018.
This comes at the back that the city has not seen any new supply in the last year and has had a history of sporadic additions from time to time.
“Despite the onslaught of new retail formats like e-commerce, tele- marketing and others, we will continue to see a steady growth in brick and mortar form of retail as the sector is pegged to grow to INR 1 trillion by 2020, at a CAGR of approximately 15 percent. We expect the opening up of FDI will be instrumental in achieving and surpassing these growth estimates,” concluded Ramesh Nair.
