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In the final quarter of 2023, there was a substantial surge in retail space availability, reaching 5.9 million square feet across the top eight cities, with Bengaluru and Hyderabad taking the lead. This data was given by real estate consultancy firm Cushman and Wakefield in its report based on cities including Mumbai, Delhi NCR, Kolkata, Bengaluru, Chennai, Hyderabad, Ahmedabad, and Pune.
As per the report, the fourth quarter witnessed the inclusion of 3.1 million square feet (msf) of Grade A malls, notably led by Bengaluru and Hyderabad with 1.2 msf and 1.02 msf, respectively. Grade A malls, characterized by a gross leasable area (GLA) exceeding 5 lakh sq ft, experience consistent foot traffic.
In 2023, Mumbai experienced no increase in retail supply, while Delhi recorded 0.22 msf and Pune saw a notable addition of 1.43 msf. In the fourth quarter of 2023, the report indicated that rental rates for high streets in metro cities such as Bengaluru and Pune surpassed pre-pandemic levels, experiencing year-on-year appreciation of up to 20%.
High street denotes the central business area in a town or city. Prominent high street rents, which have been increasing over the past 4-6 quarters, persist in their upward trend across various markets. In general, the majority of retail space leasing activity in the top eight cities was dominated by high streets, signaling a scarcity of space in Grade A malls.
Consequently, high streets like Khan Market (New Delhi), Linking Rd. (Mumbai), Galleria Market (Gurgaon), Banjara Hills (Hyderabad), Adyar (Chennai), and several others witnessed rental rates approaching or surpassing pre-COVID levels earlier in 2023.
According to Saurabh Shatdal, Managing Director of Capital Markets and Head of Retail, India, certain well-known high streets in Bengaluru, such as 100 Feet Road in Indiranagar, are experiencing rentals ranging from Rs 300 to Rs 350 per sq ft. Interestingly, many retail malls in the city have not witnessed a similar level of appreciation.
Shatdal highlighted that post-Covid, there has been an unprecedented increase in rental rates. For instance, 100 Feet Road in Indiranagar saw a remarkable 20% year-on-year rental appreciation in 2023, followed by 80 Feet Road in Koramangala with a 14% increase.
Ahmedabad follows suit in terms of rental growth, with CG Road and Prahladnagar registering a substantial 19% year-on-year surge in rents. In contrast, high streets in Mumbai and Delhi NCR experienced a more modest rental growth, ranging from 9-11% and 3-5%, respectively.
High streets show an annual growth of 10-15% year-on-year. On an annual basis, noteworthy high streets throughout India have exhibited growth between 9-12%, with some even reaching 15-18% on average.
A mismatch between demand and supply is one of the factors contributing to the upward movement of rentals in high streets, bridging the gap with retail spaces in malls. Given that each retail mall occupies approximately 1 million square feet in a city, the overall area of high streets is considerably smaller. Also, the sizes of standard stores in high streets increase annually due to rising demand from offline consumers. This scarcity in space, coupled with high demand, propels the rental rates upwards.
Furthermore, the majority of retail spaces in malls come with a more extended lock-in period, typically lasting 3-5 years. This makes it challenging for mall owners to hike rentals. In contrast, high street rentals are associated with shorter lease terms, offering greater potential for annual adjustments.
Shatdal states that in Bengaluru’s HSR Layout, rental rates have already witnessed an 18% growth in the past year, and they anticipate further expansion in 2024.
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