Despite an 83 per cent drop in supply of organised retail space across key cities in the country, the year 2012 continued to witness an increase in transaction activity and retailer expansion. According to the findings of real estate consultant CBRE’s report Indian Retail Market View H2, 2012 , about 2.5 million sq ft of fresh retail space entered the market in 2012, mainly concentrated in Bangalore, Kolkata and Pune, as against over 15 million sq ft in 2011.
Though this is a significant drop in prime retail supply, the market witnessed leading brands and retailers pursuing expansion plans aggressively and increasing their presence in the tier I as well as tier II and III cities of the country. Developers remained focused on attracting tenants in completed properties and reducing existing vacancy levels, rather than focusing on launching new projects. Most of the supply pipeline is scheduled for completion in 2013; by when the existing vacancy levels might reduce.
Anshuman Magazine, Chairman and Managing Director of CBRE, South Asia Pvt. Ltd said, “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. This positive sentiment is indicative of retailers taking a long term view of the Indian economy despite the short term struggle. The Government’s bold and welcome move of allowing FDI in retail has further contributed to this positive sentiment.”
Retailer enquiries
In all the seven cities presented in this review, the retail real estate market appears to be promising with an increase in retailer enquiries. High street formats continued to dominate the retail landscape, while most luxury retailers preferred to operate from five star hotels and premium malls. New markets are also coming under consideration as international retailers expand their focus beyond the top three cities to include the likes of Hyderabad, Chennai, Kolkata, Pune and Chandigarh.
Major cities continued to witness steady expansion by international apparel and F&B retailers. Several well-established international mass market brands have also entered tier II locations, partly due to the lack of space options in tier I markets. Domestic retailers are expanding steadily in tier I locations but fierce competition with international brands for prime space in core locations is pushing some to tier II cities. Fashion remains the high growth sector, and leading apparel brands from the US and Europe continue to try and enter or expand in major markets across the country, including some tier II locations. International food and beverage (F&B) outlets are also expanding, both at the fast food and fine dining end of the market. Luxury retailers are entirely focused on tier I locations but continue to refine their strategy and product offering for India, which in selected cases has seen them consolidate and reduce the size of some stores. Among domestic retailers, home furnishers and supermarkets are expanding in metro cities.