From brick-and-mortar to click-and-collect, the landscape of the retail industry has undergone a sea change, clocking a remarkable growth to add momentum to the economic development of India. Moreover, the retail sector in India is characterised by a dynamic amalgamation of traditional formats and modern retailing concepts. With a growing economy, fast pace of urbanization, rising affluent middle class, and consumer preferences, the retail leasing market is overwhelmingly vibrant in the country. The pandemic catastrophe has profoundly rattled the retail sector by hastening e-commerce adoption. This major shift forced retailers to reconsider their physical presence, driving up demand for retail spaces.
Retailers are now more focused on delivering omnichannel experiences which combine online and offline shopping. This can be witnessed from the surge in click-and-collect services with the incorporation of digital technologies into brick-and-mortar stores. Furthermore, converting malls into mixed-use developments or transforming vacant storefronts into co-working spaces illustrates how developers adapt to match the needs of the present scenario. It provides an immersive and holistic experience, catering to the evolving demands of consumers who seek a sense of community in their shopping spree with entertainment and convenience.
The retail sector is holding its ground on expansion with projections of the addition of around 45 million square feet of retail space in the next five years, as per a JLL report. The period between Q2 2024 and the year-end of 2028 is expected to witness the completion of 88 new retail developments across India, including Delhi-NCR. Sensing the significance of engaging shopping experience, the average size of new retail spaces could, as the report suggests, increase by 30 per cent with the preceding decade’s average of 3,91, 099 square feet to 5,07,341 square feet in the coming time.
The year 2024 appears blissful for the retail industry. According to a CBRE report, retail leasing may sustain 6 to 6.5 million square feet in the current year. Delhi-NCR among other cities is likely to account for the maximum share. Moreover, foreign luxury retailers are making a foray into the Indian market, reflecting a renewed optimism in the country’s retail segment.
A broader economic landscape is very influential in determining retail leasing activity. The country’s economy has a major impact on the performance of the retail sector. It is expected that by 2024, the global economy will continue to recover with stable GDP growth and an improvement in employment rates which would be good for the retail business.
However, inflation remains a concern as it may eat into consumer purchasing power and also increase operational expenses for retailers. Despite this, there are positive indications for the economy overall. This includes higher consumer spending and confidence levels among shoppers that will drive rental activities within the industry. In addition, retailers are likely to expand their businesses or start new ones using more favourable economic conditions while implementing newer store formats.
Retail leasing plays an important role in the commercial real estate market, the growth of which is guided by emerging markets and demographics. Millennials and Gen Z are gaining more purchasing power, making them the most influential customers in the retail market. They are tech-savvy, socially aware customers, pushing for better and innovative retail strategies, and providing growth opportunities to retailers.
Sustainability and Environmental, Social, and Governance (ESG) aspects influence retail leasing. Many are today interested in constructing environmentally friendly buildings. Amongst the aspects the occupiers require for their practice are sustainable efficient places with features like green certification for their business sustainability plans. The rising value for ESG practices indicates the beginning of tomorrow’s retail leasing and the construction of environment-friendly facilities.
Looking forward, there will be new opportunities for retail leasing in 2024 owing to the favourable shifts in the economy and consumer habits, as well as the flexible approach to retail buildings. The market will transform as sustainability and ESG factors play a crucial role in the retail industry’s development. Associate markets and changing demography, therefore, will remain key drivers of the leasing business, which in turn will offer fresh prospects to retailers as well as landlords.
