REALTY BYTES: 1.9 MILLION SQ. FT OF FRESH RETAIL SUPPLY ADDED DURING H1 2018

Indian retail real estate market witnessed continuous foray of international brands, launch of retail developments and sustained demand for space in H1 2018and added stability

•The first half of 2018 saw an addition of about 1.9 million sq. ft. of fresh supply across the seven key cities, led by Chennai, Hyderabad and the National Capital Region (NCR)

•Leading international brands such as Dyson, Molton Brown, Berluti, American Eagle, Antony Morato, Daniel Wellington and Bath & Body Works made inroads into India in 2018

Bangalore, September 4th, 2018:CBRE South Asia Pvt. Ltd,world’s leading real estate consulting firm, today announced the findings of its latest report titled ‘India Retail Market View H1 2018.’ As per the report findings, the first half of 2018 saw an addition of about 1.9 million sq. ft. of fresh retail supply across the seven key cities, led by Chennai, Hyderabad and the National Capital Region (NCR). The review period witnessed the launch of VR Mall (1 million sq. ft.) in Chennai, L&T Hyderabad Next and L&T Next Galleria (totaling 0.65 million sq. ft.) in Hyderabad, and 32nd Avenue (0.25 million sq. ft.) in Gurgaon-NCR. 

Leading international brands such as Dyson, Molton Brown, Berluti, American Eagle, Antony Morato, Daniel Wellington and Bath & Body Works made inroads into India with their first stores becoming operational during H1 2018. Looking at expansion trends, International brands such as Tom Tailor, Miniso, Taco Bell, Mango, Marks and Spencer, H&M and Starbucks continued to expand operations by entering new markets across the country.

Commenting on the findings of the report, Mr. Anshuman Magazine, Chairman, India & South East Asia, CBRE said: “The overall outlook for the Indian retail real estate market continues to bepositive at the back of various policy reforms, entry of foreign players and increasing urbanization.We foresee addition of close to around 4 – 5 million sq. ft. of supply during H2 2018 across most major cities such as NCR, Mumbai, Bangalore, Chennai and Hyderabad. With REITs in the offing,the focus on developing investment grade developments is likely to redefine the retail segment in India,” he added.

Bimal Sharma, Head, Retail Services, CBRE. Said, “The Indian retail sector stands at the cusp of transformation with the retailers increasingly adapting their store formats to address the needs of different customers / markets and locations. Digitally enhanced store experiences are becoming a reality and such technologies are expected to become a norm in the years to come. Brick & mortar stores & shopping centers will continue to flourish, however retailers & developers will have to realign their formats to deliver to specific expectations of the customers they service.”

On rental appreciation, trends varied across key high streets in major cities during H1 2018. Rentals appreciated in high-street markets such as Khan Market, DLF Galleria (NCR), Commercial Street, Jayanagar 11th Main 4th Block, Kammanahalli/HRBR Layout (Bangalore), Jubilee Hills Road No. 36 (Hyderabad), Linking Road (Mumbai), MG Road and Aundh (Pune). 

On the other hand, rentals remained stable in most of the other high-streets across the country. Rentals across organized retail developments also displayed a varied trend – mall rentals remained stable in some cities (Hyderabad, Mumbai, Pune and Kolkata), and increased in others (Bangalore, Chennai and NCR) due to growing demand from domestic as well as international retail brands, the report, said.

Among other trends, a move towards omni-channel retailing that provides consumers a unified experience across online and offline platforms, redevelopment of old properties/retail properties, adoption of shorter lease terms and an increased interest from institutional investors over the past two-three yearsshould also create upheaval in the business of retail real estate in future. 

City Highlights:

NCR

•Supply addition in NCR in the first six months of 2018 included 32nd Avenue, Gurgaon, a curated F&B and lifestyle destination spread over 0.25 million sq. ft. The development is a part of a larger, 2.5 million sq. ft. mixed-use development

•Both domestic and international players were active in the leasing landscape in H1 2018. Leasing activity was led by accessories’ retailers, followed by jewelry, electronics, furniture and toy companies

•The region witnessed appreciation in rent across key locations. Prime mall developments across all micro-markets in the region such as Saket District Center and those in Noida witnessed a rental increase of 5-8% on a half yearly basis however, locations such as Vasant Kunj and Gurgaon witnessed a steep rental increase of 8-15% on a half yearly basis, largely driven by limited vacancy and strong occupier interest in prime developments.On the other hand, rental values in the high streets of Khan Market and DLF Galleria increased by 8-17% on a half yearly basis

•Delhi-NCR continued to be the gateway for global players that were eyeing high streets to launch/expand their operations. Notable International brandBath & Body Works made foray into the city

Mumbai

•Leasing activity was a healthy mix of space take-up by domestic and international players, with most of the activity being driven by players in the apparel segment followed by sports’ retailers

•The city did not witness any addition of fresh supply during the review period. However, the second half of the year is expected to witness the completion of approximately 0.8 million sq. ft. of organized retail space in Bandra Kurla Complex (BKC)

•Fashion and apparel continued to dominate leasing activity

•Rentals remained largely remained stable; both across high streets and organized retail due to steady demand. However, limited availability of space led to a 16-18% increase in rental values across Linking road

Bangalore

•Leasing activity in Bangalore during H1 2018 was witnessed across organized retail developments such as VR Mall, Phoenix Market City Mall, Park Square Mall and Garuda Mall

•There was negligible addition of fresh supply as most developments are scheduled for completion in H2 2018

•The city witnessed the launch of several retail outlets such as Project Eve, Street Mama, HomeLane and Miniso.

•Rental values for high street locations of Commercial Street, Jayanagar 11th Main 4th Block, Kammanahalli /HRBR Layout appreciated by about 4-9%, owing to increasing demand for quality retail space. However, rentals for 100 Feet Road Indira Nagar and New BEL Road remained stable. Among organized mall developments, half-yearly rental increments in CBD/Off CBD, South Bangalore and ORR were in the range of 3-5%, however, East Bangalore witnessed an increase of around 11-13%. On the other hand, rental values for the mall clusters of West Bangalore remained largely stable

Hyderabad

•Retail leasing activity in Hyderabad was resilient during the first half of 2018 primarily led by the two newly operational malls. L&T Hyderabad Next and L&T Next Galleria – together spanning about 0.65 million sq. ft. became operational in H1 2018.

•The city witnessed the entry of American fast food retail chain Taco Bell, which opened an outlet in L&T Hyderabad Next mall in Punjagutta

•Rental values across high streets such as Jubilee Hills Road No. 36, Himayat Nagar witnessed an increase of about 14-16% and 8-10% respectively on a half yearly basis owing to increase in demand from retailers. However, rentals in Banjara Hills road no. 2 remained largely stable. Similarly, rental values in organized retail developments too remained predominantly stable 

Chennai

•Demand for retail space remained steady across high streets and prominent mall developments of the city. Leasing activity was driven by domestic apparel, electronics and F&B operators. Despite steady retail activity, rental values across high streets largely remained stable during the review period. Alwarpet and Adyar were exceptions as they witnessed a 3-6% half-yearly rise in rentals due to lack of quality retail space. In the organized segment, rental values in prominent malls such as Express Avenue, Phoenix Market City and Vijaya Forum mall appreciated by about 6-9% on a half-yearly basis. However, rentals in other malls remained stable during the review period

Pune

•Strong demand for retail space was observed across high streets as well as prominent mall developments in the city

•Leasing activity was driven by both domestic and international F&B operators

•The city witnessed negligible supply addition during the review period

•Pune also reported the entry of new F&B players such asThe Daily,Tea Villa, Autobahn and Social 

•Growing enquiries for quality space across high-street locations led to a rental appreciation of 8-10% at MG Road and 11-12% in Aundh during the review period. However, rental values in the organized retail segment remained stable

Kolkata

•Kolkata continued to attract interest from retailers in the first half of the year, however, the city did not witness any new space addition during the review period

•The high street segment led transaction activity in the city, followed by activity in organized retail

•Apparel and F&B players dominated leasing activity

•The review period marked the foray of leading international brands in the Kolkata market.

•Rental values remained stable in both organised and high street retail segments


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