Organised retail (shopping centres/mall) - the pulse of consumer spending and overall economic growth witnessed a sharp rebound post covid. The organised Grade A retail stock now stands at over 92 mn sq ft across the top 7 cities in India as of March 2023. The sector is expected to see an addition of 53 shopping malls encompassing a total retail space of approximately 20 million sq ft. from 2023-25 among just the top seven cities.
The existing retail stock across the top 7 cities of India offers a potential of ~45 mn sq ft of retail assets that are REIT worthy, of which more than half of these assets are in Mumbai and NCR-Delhi region. In addition to the progress witnessed in the top 7 cities, tier 2 and 3 counterparts are also rapidly emerging as growth corridors for the retail sector.
The strong growth prospects of the sector are clearly reflected in institutional investments in the retail sector being recorded at USD 862 million (excluding portfolio deals) since 2021. Various institutional investors have aggregated retail portfolios for listing through REITs. Nexus Select Trust, backed by Blackstone is India’s first retail assets-led REIT. The total size of the IPO is INR 3,200 crore with lower and upper price band of the IPO at INR 95 and INR 100 per unit respectively with minimum bids of 150 units.
Nexus Select Trust portfolio comprises 17 urban consumption centres with 9.8 msf of leased space, two complementary hotel assets (354 keys) and three office assets (1.3 msf) as of June 30, 2022. The portfolio has committed occupancy of 93.5% with a tenant base of 1,044 domestic and international brands with 2,893 stores. This would be the first opportunity for retail investors to own a stake in the retail asset class.
Small investors can now own a pie of rent-yielding retail real estate through this REIT which also broadens the investor base while adding variety to the REIT offerings as well. Listing of real estate assets through REITs has infused greater transparency in transaction and management structures. Retail space across the top seven metros and prominent Tier-2/3 cities provide an opportunity of 65-69 mn sq ft potential REITworthy assets in existing malls thus setting the tone for attracting more investment capital in this asset class.
REITworthy retail stock includes organised retail malls classified as Superior and Good, with leasable area of at least 100,000 sq ft and current vacancy levels of less than 20% as of March 2023. Malls are classified as 'Superior', 'Good Malls' and 'Average Malls' on the basis of tenant mix, quality of mall management, amenities, vacancy and ownership pattern (strata vs leased).