The demand for retail space is projected to reach 5.5–6 million square feet in 2023 as a result of primary leasing in newly completed malls, according to a report by CBRE.
The supply scenario is set to improve during 2023, and several investment-grade projects launched by players in the past 1.5 -2 years are expected to become operational. According to the report, supply will reach 6 million square feet in 2023, the highest level since 2019 (6.8 million square feet).
“We believe that any impact of an expected slowdown on economic activity will be circumvented by strong macroeconomic fundamentals and domestic consumption. The government’s strong capex programme, with a focus on infrastructure development and capacity building across sectors, is aimed at driving investment. As the second-largest employment generator in India, the real estate sector will continue to be a focus area for these investments,” said Anshuman Magazine, Chairman & CEO - India, South-East Asia, Middle East and Africa, CBRE.
Top five trends
The report also identifies the major five trends that are expected to influence the Indian retail space in 2023: retailers will continue to succeed in a variety of markets; stores will remain at the centre of business operations; leisure spending may be limited; retailers will expand into untapped markets; and there will be increased awareness of sustainability.
For the office segment, office absorption in the country was up by about 40 per cent, which touched 56.5 million sq. ft. in 2022, surpassing the 40.5 million sq. ft. leasing levels observed in 2021 . Even though the full impact of the economic challenges on global corporates’ leasing decisions is yet undetermined, absorption levels may face downward pressures during the year, the report noted.
Industrial and logistics
Similarly, the demand for industrial and logistics spaces is anticipated to be resilient in 2023 on the back of occupiers adopting a ‘multipolar’ supply chain strategy and the continued government impetus to improve infrastructure and investments. However, growth rates might stagnate as occupiers align their portfolio strategies with global headwinds. This would lead to absorption ranging between 32 and 35 million sq. ft. with a growth rate of about 1--5 per cent in 2023.
The demand is expected to be driven by 3PL (Third-Party Logistics) and engineering and manufacturing occupiers. Other sectors that are expected to fuel demand include FMCG, retail, and electronics and electrical firms.