India will take on more than 65 million sqft of new mall space by the end of 2022, according to a new report from real estate services firm Anarock.
The report shows the region’s top seven cities will account for 72 percent of the new mall space, while tier 2 and tier 3 cities will see 18.2 million sqft of new supply. Nearly two-thirds of the planned space (40 million sqft) will hit the market by next year.
“This new supply is also driven by the increasing interest of institutional investors – including private-equity players – who invested almost US$1.9 billion into Indian retail between 2015 and the first quarter of this year,” said Anarock Retail MD & CEO Anuj Kejriwal. “In fact, more than 60 percent of this investment was infused in the last two years alone, making these the best years for the Indian mall sector in recent times.
Notwithstanding the decline in deal activity in the second half of last year following the liquidity crisis, the retail segment attracted investments of almost $115 million in just the first quarter of this year.”
The report also maintains that real estate investment trusts (REITs) can be a viable tool for mall developers to raise funds, but this fund-raising instrument still needs to mature sufficiently. Also, the retail REIT structure and performance may not be directly comparable with the commercial office sector.
The report also showed the Indian retail industry has moved from long-term leasing to short-term leasing tenures (three to five years) to enable constant updating of the brand mix within the mall. Globally, the standard lease term is still above five years.