Retail sector records strongest H1 leasing in 5 years as luxury brands look to make a mark in India

India’s retail sector is demonstrating strong growth, drawing the interest of foreign retailers including luxury brands looking to establish footholds in strategic locations throughout the country. This has led to retail leasing in the first half of 2024 reaching a 5 years high, with 3.1 mn sqft leased across 8 cities. international luxury brands such as Maison Margiela and Time Vallée forayed in the country in the first half of 2024 due to evolving lifestyles and increased global aspirations, resulting in heightened demand for luxury goods.

Other international brands, such as the Swiss luxury watch brand Breitling and the American luxury fashion brand Michael Kors expanded in Chennai and Pune, respectively. In addition, the Japanese homeware brand Daiso Japan and the skincare and cosmetics brand ILEM Japan also opened stores in Chennai.So

Charles Tyrwhitt and Franck Provost also entered the Indian market by opening their first stores in Mumbai and Bengaluru, respectively.

“Retail absorption increased in the first half of the year on an annualized basis. The ongoing introduction of quality supply is expected to continue stimulating an uptick in overall space take-up in the coming quarters. Going forward, ongoing infrastructure development and rising passenger traffic unlock a significant opportunity for nationwide transit retail expansion”, said Anshuman Magazine, Chairman & CEO – India, South-East Asia, Middle East & Africa, CBRE.

Notably, there has been sustained strong demand for fashion and apparel products in the first half of 2024, primarily driven by mid-range, value fashion, and athleisure brands, accounting for approximately 39% of the market share. Additionally, the entertainment sector with around 13% and homeware and department stores at around 11% share have been significant drivers of leasing activity during this period.Tier-II cities like Chandigarh, Jaipur, Lucknow, Indore and Kochi witnessed an overall space take-up of 0.4 million sq. ft. in H1 2024, with the absorption being dominated by Indore and Kochi, accounting for a joint share of 56% share, followed by Lucknow and Chandigarh, each with 17% share.“Steady retail leasing activity was witnessed in Q2 2024 on a quarterly basis. However, the ongoing introduction of quality supply is expected to continue stimulating an uptick in overall space absorption in the coming quarters. A growing number of direct-to-consumer (D2C) brands are recognising the importance of establishing a physical presence to complement their online operations. Developers are closely monitoring these brands with robust online customer bases and exploring opportunities to integrate them into physical retail formats”, said Ram Chandnani, Managing Director, Advisory & Transactions Services, CBRE India.

In the first half of 2024, about 0.5 million sq. ft. of retail space was added across tier-I cities. However, CBRE expects an increase in supply in the second half of 2024 as a few investment-grade malls are set to begin operations in cities such as Bengaluru, Hyderabad, Mumbai, etc. These malls are projected to add 3 – 4 million sq. ft. of new retail space in the second half of 2024

The ongoing leasing activity is anticipated to persist, with the sustained demand for high-quality malls depending on the availability of new properties. Leasing in strategically advantageous locations is expected to remain stable, featuring a diverse mix of primary and secondary leasing continuing at a steady pace. However, as vacancy levels in most key malls across most Tier I cities remain negligible, the entry of investment grade supply will dictate primary leasing trends.

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