Subdued demand in retail landscape was coupled with a slow supply of mall space and stable rentals in the second quarter of 2012, says DTZ, a real estate research company.

High inflation levels sobered consumer spending. Also, slow economic growth and low sentiments have adversely hit retailers, who have put expansion plans on hold. The drop in demand for retail space has made developers go slow on several projects in the pipeline.

The retail markets such as NCR-Delhi, Mumbai and Bangalore witnessed a restrained supply of new mall space. Bangalore alone saw new mall supply of about 1.3 million sq. ft with no new supply in Delhi-NCR and Mumbai.

Cumulative vacancy levels in these locations were about 10 per cent of the total retail mall stock. While Delhi-NCR and Mumbai registered double digit vacancy levels at approximately 13 per cent and 10 per cent respectively, Bangalore was the lowest at 3 per cent.

Though major brands plan to set up new stores with an estimated 990 new outlets needed to feed the expansion, just about a fourth of this potential is likely to hit the market in the next one year.

DTZ described the overall retail market sentiment as largely “tenant favourable” across major cities. “Large upcoming supply across most markets coupled with high vacancy rates and restrained take-up levels helped retailers negotiate favourable deals from developers.” A press release quoting Anshul Jain, CEO, DTZ India, said, “Even as Indian consumers have exhibited a growing demand for luxury and high end imported brands, the steep depreciation in domestic currency value will adversely impact demand for imported products in the short term. However, most retailers are bullish on the long term growth potential of retail industry in the country. Moreover, the upcoming festive season in the second half of the year is likely to provide some stimuli to the retail landscape in the country.”