Also Read: Number of ghost malls rising in India, Delhi NCR tops the list
The National Capital Region (NCR) recorded the highest inventory of ghost shopping centres, with 5.3 million square feet, marking a 58% year-on-year increase. Mumbai and Bengaluru followed closely, with 2.1 million square feet (up 86% year-on-year) and 2 million square feet (an increase of 46% year-on-year), respectively. Hyderabad, on the other hand, witnessed a 19% decline in its ghost shopping centre inventory, reducing it to 0.9 million square feet in 2023. The report analyzed data from 340 shopping centres and 58 high streets across 29 Indian cities.
Are Indians deserting shopping malls?
The trend may suggest that people are deserting shopping malls, probably preferring to buy online rather than shop with their feet. But the Knight Frank report has another set of data that suggests people might be preferring online buying or storefronts to visiting lower-grade shopping malls but when it comes to high-grade malls they are not staying back.
Grade A mall stock, consisting of 82 assets with a gross leased area (GLA) of 58.2 million square feet, boasts enviable occupancy, strong tenant mix, good positioning, and active mall management, the report reveals. These Grade A shopping centres contribute 47% to the overall shopping centre space in the country. Grade B shopping centres, with decent occupancy and tenant mix, account for 31% of the total space, with 39.7 million square feet. Grade C stock, characterized by high vacancy rates, makes up the remaining portion.Shishir Baijal, chairman & managing director of Knight Frank India, has highlighted the contrasting performance of different grades of malls. “Grade A malls have notably excelled, maintaining robust occupancy, foot traffic, and conversion rates, thereby delivering value to their customers. Conversely, Grade C assets and those classified as ghost shopping centres are lagging, prompting landlords to take action to rejuvenate or divest such properties,” he said.What’s behind the high-grade mall spree?
The reason why high-grade shopping malls are thriving could be the new retail trend of premiumisation also sweeping through the malls. Another related trend behind the decline of lower-grade malls and the rise of high-grade ones could be the emphasis on consumer experience.
Retailers across categories are opening bigger bricks-and-mortar stores along with expanding their existing stores as consumers are increasingly looking for a better experience in physical retail. According to data from real estate services firm Anarock, the share of stores smaller than 2,000 square feet declined to 52% in the first half of 2023-24, as against 61% a year ago. The share of stores sized 2,000-5,000 sq ft increased during this period, to 21% from 19%, as did that of those sized 5,000-10,000 sq ft (11% from 9%) and 10,000-15,000 sq ft (13% from 9%).
“Store is now more about experience than merchandising. Brands have realised that, and by expanding the store they are expanding the offering,” Pankaj Renjhen, COO and joint MD, Anarock Retail, had said.
Mall developers are now focusing on building larger-sized malls to offer better shopping experience. The average size of mall developments that got completed in 2023 has increased by 41% from 276,800 sqft in 2022 to 389,900 sq ft., Rahul Arora, Head of Office Leasing Advisory and Retail Services, India, JLL, had told ET in February. Developers are coming up with bigger malls to offer elevated experience to the shoppers, be it entertainment, food & beverages (F&B), or fashion.
The new supply of retail space in shopping malls increased 72 percent last year to 59.48 lakh square feet across eight major cities to meet rising demand from retailers, according to Cushman & Wakefield. In 2023, as many as 11 shopping malls became operational, covering 59,48,395 square feet of space across the top eight cities. In the previous year, nine malls came into eight markets, totalling 34,49,222 square feet area. Hyderabad witnessed the completion of three shopping malls, while Pune and Chennai had two each. One shopping mall each came up in the Mumbai Metropolitan Region, Delhi-NCR, Bengaluru, and Ahmedabad. No fresh supply was seen in Kolkata.
Malls are expected to attract investment of more than Rs 20,000 crore over the next 3-4 years as the country’s biggest mall developers, DLF, Prestige and Phoenix, have entered the next phase of expansion as almost all top retailers are expanding their store count, industry executives have told ET.
Realty major DLF has started construction of its new 26-27 lakh square feet shopping mall in Gurugram at a cost of around Rs 2,200 crore as part of its expansion plan, PTI reported last month. It is constructing a premium mall also in Goa measuring around 6 lakh square feet.
A new mall phenomenon
A new type of mall is set to witness a surge in India. At least half a dozen factory outlet malls are being planned in India, like in the US and UK, as developers of retail facilities attempt to fight ecommerce rivals in a market increasingly driven by deep discounting, ET had reported last year. While such retail spaces, where brands are offered on discount round the year, are popular globally, the segment is unorganised in India.
“Retail will not be limited to malls and high streets, but move to highways with more infrastructure being built. On highways, factory outlets mall along with F&B and recreational makes sense. In coming years, this is going to be a popular concept,” Susil S. Dungarwal, founder of Beyond Squarefeet, a shopping mall specialist company, had told ET.