India's retail property market is experiencing a significant metamorphosis. Influenced by urban growth, rising incomes, and demographic shifts, the sector anticipates notable expansion. The shopping preferences of India's youthful demographic favours an immersive experience that combines retail with recreation. In response to global brands entering the market, Indian retail real estate is upping its game too.
UNCOVERING THE DYNAMICS OF MARKET EXPANSION
India, celebrated for its diverse cultural tapestry and ancient trading locales, is now undergoing a significant expansion in its retail sector. The story of retail evolution, which was once confined to the major metropolitan cities such as Mumbai, Delhi, and Bangalore, is shifting focus to upcoming centers. In recent years, several cities and regions in India have emerged as the new hubs for retail growth, propelled by a convergence of factors that foster economic dynamism and consumer demand. Among these burgeoning locales, Tier-2 cities like Pune, Ahmedabad, Jaipur, and Chan- digarh stand out prominently.
The real estate market influences the rise of these new retail destinations significantly. Spatial constraints and high costs in metropolitan areas starkly contrast with these rising cities, which provide more space for retailers at lower costs. This enables the establishment of vast shopping complexes and malls designed to meet every desire of ambitious consumers. The IT sector's expansion and industrial growth are also transforming these towns into commercial spheres. A younger workforce, attracted by job prospects, constitutes a dynamic consumer base for both domestic and international stores aiming to tap into these fresh markets.
Additionally, government schemes to improve infrastructure in smaller cities further encourage retailers to explore beyond the already full metros. Enhanced connectivity and transportation facilities, along with policies conducive to business operations, have eased commercial activities remarkably. Digital outreach has equipped customers in these locales with information comparable to that of urban dwellers. Though online shopping has introduced brand consciousness, it is the tangible shopping experience that many seek—particularly in flourishing markets where shopping extravaganzas also serve as family leisure events.
As India's retail sector adapts and grows, so do opportunities within these nascent markets. With better access and evolving lifestyles, supported by government actions and technology advancements, the future of retail in these markets is exceptionally promising.
Shibu Philips, Director, Shopping Malls, Lulu Group India added, “In recent years, tier-2 and tier-3 cities have emerged as new hubs for retail growth. This shift is primarily driven by lower rental rates and operating costs, making it more feasible for malls to expand into these areas. For instance, in 2019, Lulu Group inaugurated its first neighborhood shopping center in a tier 3 town in Kerala, which has demonstrated exceptional performance. Building on this success, we expanded our presence by opening another mini mall in Palakkad in 2023. Encouraged by its positive reception, we are poised to launch 5 additional mini malls this year, reflecting the promising potential of these markets.”
Untapped growth opportunities arise in Tier II and Tier III cities due to urbanization and increased dispos- able income. Retailers and developers are beginning to explore potential expansion into these areas as the rising purchasing power of residents, along with job opportunities stemming from reverse migration, fuels the potential growth.
Retail real estate developers are effectively re- sponding to the escalating demand from luxury brands in India by strategically designing commercial spaces, particularly in Tier-2 cities now. These cities are evolving into vibrant retail hubs due to robust economic growth, improved infrastructure, and increasing affluence. The surge in e-commerce and enhanced connectivity further amplifies the appeal of these areas, reshaping consumer preferences. AlphaCorp, for instance is at- tuned to this evolving landscape and has strategically positioned its projects in cities like Meerut, Karnal, and Fatehabad, where there has been a noticeable surge in high-street developments, attracting renowned luxury brands.
Santosh Agarwal, Executive Director & CFO, AlphaCorp Development elaborates, “One of our upcoming endeavours, the landmark district centre in Karnal, exemplifies our dedication to meeting this demand. It comprises three major high-street com- mercial projects - Alpha Plaza, Alpha Plaza Annex 1, and Alpha Plaza Annex 2 - offering a wide range of amenities, including plotted SCOs & booths, spread across approximately 12.6 acres. Situated within the esteemed Alpha International City, Karnal (AICK), these projects leverage a strategic location. Additionally, AICK hosts another prominent high-street venture, Alpha City Walk, strategically positioned adjacent to Indri Road. The project caters to a sizable catchment area encompassing approximately 5,000 families residing in AICK and its surroundings. The strategic placement of these developments along National Highway 1 and State Highway 7 ensures seamless accessibility and heightened visibility for luxury brands. With diligent market analysis and mapping, we are strategically positioned to meet the high-street demand from luxury brands in India.
In the north, Meerut, Karnal, and Fatehabad are rapidly emerging as new hubs for retail growth, following in the footsteps of established centres like Jaipur and Chandigarh. These cities, once considered secondary markets, are now witnessing a transformative surge in retail activity driven by several key factors. A noticeable surge in investment opportunities is witnessed in these cities, driven by their robust infrastructural development and the rising trend of fractional ownership. The strategic expansion of transportation networks, including highways and railways is attracting investors keen on capitalizing on these evolving urban landscapes.
Moreover, the advent of fractional ownership models in commercial real estate presents a compelling avenue for investors to participate in retail developments with reduced financial commitments, thus democratizing access to lucrative investment opportunities. This innovative approach not only mitigates risks for investors but also stimulates the proliferation of retail projects, ranging from shopping complexes to high-street commercial ventures, fostering vibrant economic ecosystems within these cities. As a result, these emerging economic growth engines are increasingly becoming magnets for retail investors seeking high returns amidst their burgeoning infrastructural advancements and the democratization of ownership models, heralding a new era of growth and prosperity in these dynamic urban centres.”
REVAMPING HIGH STREETS
High streets across India have received upgrades to remain competitive with malls. This includes creating pedestrian-friendly designs, making aesthetic improvements, and enhancing infrastructure. Shibu Philips explains, “Developers are curating high street locations that offer a premium environment for brands to thrive. We are creating upscale shopping destinations that provide luxury brands with the prestigious and exclusive atmosphere they seek. Additionally, we’re prioritizing amenities and services that cater to the discerning clientele of luxury brands, such as valet parking, personalized shopping experiences, and exquisite dining options. By aligning with the needs and aspirations of luxury brands, developers are establishing high street destinations that resonate with affluent consumers and elevate the overall shopping experience.”
BRICK-AND-MORTAR REVAMP: RETAILERS’ TACTICS TO LURE SHOPPERS BACK TO STORES!
In the face of e-commerce's rapid expansion, retail real estate developers in India are deploying inventive methods to sustain and enhance visitor numbers to brick-and-mortar shops. One of the biggest trends in the industry is the move towards “click-and-mortar” experiences, which combine the convenience of online shopping with the tactile experience of in-person shopping. Santosh Agarwal agrees that the future of the retail industry is indeed moving towards the inte- gration of online and physical sales channels, known as the 'click and mortar' model. “This approach combines the convenience of online shopping with the advan- tages of in-person shopping, creating a seamless and enhanced shopping experience for customers. Retail- ers are embracing this strategy to adapt to changing consumer behaviours and expectations. By incorporating omnichannel integration, experiential zones, and smart technologies, the click-and-mortar model aims to provide customers with immersive and engaging shopping environments. This strategy aligns with the evolving preferences of modern consumers, offering a comprehensive blend of online and offline experiences to deliver a satisfying shopping journey.”
Shibu Philips too believes that the integration of online and physical store experiences—is indeed shaping the future of retail real estate. “With the direct-to-consumer market in India projected to reach $100 billion by 2025, the sector is witnessing a significant shift. While DTC brands initially had an advantage by avoiding wholesale to resellers, many are now recognizing the value of phys- ical stores. Brands like Sugar Cosmetics, Nykaa, Zivame, Juicy Chemistry, Lenskart, Mama Earth, Vilvah, Nicobar, Pepper Fry, Urban Ladder are successfully blending their online presence with brick-and-mortar locations. The pandemic further highlighted the importance of physical stores, as consumers sought unique shopping experiences and reliability. As a result, the growth in the number of active users for top online retailers halved last year, emphasizing the resurgence of brick-and-mortar shopping. This trend underscores the strategic importance of integrating both online and offline channels to meet the evolving needs of customers.”
REVENUE STRATEGIES TO DRIVE GROWTH & PROFITABILITY
According to Santosh Agarwal, retail malls employ diverse revenue models to drive growth and profitability, including rent from retail tenants, percentage of sales, advertising revenue, parking fees, vending machine commissions, property sales, and real estate appreciation. Additionally, advanced AI-powered solutions like Footprints AI are leveraged for enhanced customer analytics and predictive behaviour modelling, optimising revenue generation strategies. Shibu Philips, sharing their strategy stated, “We typically employ revenue models such as minimum guarantee or revenue share, opting for whichever yields higher returns.”
INDIA'S RETAIL EVOLUTION
India is witnessing a dynamic transformation in its retail landscape. The entry of global brands has spurred Indian retailers to upgrade facilities to international standards for discerning consumers. High Street Phoenix, Mumbai, VR Chennai Mall in Chennai, Select CityWalk, Delhi, The DLF Mall, Noida are just some of the examples. Lulu Group India retail portfolio consists of destination malls in Kochi, Bengaluru, Lucknow, Thiruvanantha- puram, and Hyderabad, catering to diverse consumer needs. Additionally, they've successfully established mini-malls in Palakkad and Triprayar.
AlphaCorp boasts of iconic retail ventures in its portfolio – AlphaOne in Ahmedabad, AlphaOne & Commercial Centre in Amritsar, Alpha City Walk, Alpha Plaza, Alpha Plaza Annex 1, and Alpha Plaza Annex 2 in Karnal. The AlphaOne, nestled by Vastrapur Lake in Ahmedabad, embraces the city centre concept, offering a versatile mix of shopping, entertainment, fine-dining, and hospitality options. Touted as one of the largest commercial hubs in Punjab, AlphaOne, Amritsar, spans 12 acres along GT Road, presenting a blend of retail, entertainment, and hospitality spaces crafted by renowned international architects. The company also has a Commercial Centre at Model Industrial Park (MIP) on Mehta Road, Amritsar, which is a retail centre offering the best shopping and entertainment options.
REDEFINING INDIA'S RETAIL EXPERIENCE
The retail landscape in India is undergoing continuous transformation. Consumer preferences are changing and technological progress is relentless. In response, retail businesses are rapidly adapting to remain competitive and maintain their relevance. Some of the most influential trends that are currently transforming the retail environment include:
Experiential Retail: Retail areas now focus on offering valuable experiences for customers in addition to transactions. Entertainment zones, food courts, play areas, and interactive displays are being incorporated to improve in-store experiences and attract more visitors. Retail real estate developers use technologies like virtual reality, augmented reality, and interactive digital kiosks for customer engagement. These technologies aid in personalizing shopping experiences and managing retail operations efficiently.
Sustainable Design: Retail construction is witnessing a rise in environmentally friendly building practices. This trend is influenced by customer awareness, preference for eco-friendly brands, and government incentives supporting green building. Sustainable measures involve implementing green prac- tices such as waste recycling systems and power-saving lighting setups to accommodate organic stores or those that specialize in eco-sustainable goods. This method cuts down operational expenditures while attracting eco-aware consumers.
New Development Formats: Mixed-use developments coming up comprise shopping spaces residential, office, and leisure spaces, in pursuit to create self-sufficient environments offering various consumer needs in one location. In addition, the merging of retail and entertainment, known as "retailtainment," is becoming popular. By hosting events, shows, and interactive experiences, retail locations aim to draw more visitors and establish a unique attraction. An increasing shift is observed towards adapt- able retail spaces that can be reorganized for pop-up stores or seasonal shops while meeting changing retailer requirements.
“The advent of fractional ownership models in commercial real estate presents a compelling avenue for investors to participate in retail developments with reduced financial commitments, thus democratizing access to lucrative investment opportunities.”- Santosh Agarwal
“Looking ahead, we're excited to unveil new mini-malls in Calicut, Kottayam, Tirur, Perinthalmanna, and Thrissur this year, expanding our footprint across various districts in Kerala. Furthermore, we have two ambitious destination properties in Ahmedabad and Chennai, each spanning 2.5 million sq ft, currently in the planning stage.” - Shibu Phillips
