In all key cities of India, supply of organised retail space dropped 83 per cent in 2012, according to a report released on February 13 by real estate consultancy CB Richard Ellis (CBRE) South Asia. Approximately 2.5 million sq ft of fresh retail space entered the market in 2012, mainly in Bangalore, Kolkata and Pune, compared with over 15 million sq ft in 2011, according to the Indian Retail Market View report.
However, 2012 continued to witness an increase in transaction activity and retailer expansion, the report stated. Despite the significant drop in prime retail space supply, the market saw retailers pursuing expansion plans and increasing their presence in tier I as well as tier II and III cities.
The easing of retail foreign direct investment (FDI) norms bolstered demand for prime real-esate locations in top cities, said Anshuman Magazine, Chairman and Managing Director of CBRE, South Asia. He said that despite the large dip in prime retail space supply across key cities last year, the good news is that retailers continued with their expansion plans.
The government’s bold and welcome move of allowing FDI in retail has further contributed to this positive sentiment. Subsequently, real-estate developers remained focused on attracting tenants in completed properties rather than launching new projects.
Most of the supply pipeline is scheduled for completion in 2013. Across the top seven cities of Delhi NCR, Mumbai, Chennai, Bangalore, Hyderabad, Kolkata and Pune, retailer inquiries increased.
In Mumbai, for instance, premium international brands continued to focus on affluent southern parts of the city and the lack of quality retail space remained a challenge. Brands such as coffee chain Starbucks and women’s clothing brand Elle opened their first outlets in Colaba and Bandra in Mumbai.
New upcoming supply in the National Capital Region (NCR) will allow businesses to operate in an organised retail environment. High-street formats continued to dominate the retail landscape while most luxury retailers preferred to operate from five star hotels and premium malls. The Delhi NCR region continued to be the preferred destination for international brands launching their flagship outlets in the country, across categories such as fashion, food and beverage and luxury, the report suggested.
Additionally, demand for prime high-street locations in Mumbai is likely to increase in the coming few months due to the increasing interest of internatonal brands. In Delhi and Mumbai, the demand for quality space from existing and new retailers is likely to create an upward push in rental value in the near term in certain pockets.
