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New mall space rises by 40%

Feb 21, 2018
New mall space rises by 40%

In a recently completed study by JLL India’s largest real estate service firm, retail supply in the next three years (2018 – 2020) is expected to be at 19.4 million square feet (msf). In the same period demand will be approximately 15 msf. The study revealed that 2018 will see the highest supply since 2011.

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, we expect a parallel rationalisation of existing mall spaces which will help the market avoid an oversupply situation. As a natural course of events, we can expect 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 per cent 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 per cent y-o-y since 2017.

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 per cent 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.