Retail Brands Eye High Streets & Tier II Cities for Expansion

Pankaj Renjhen, COO & Joint MD - ANAROCK Retail What are the reasons for high street shopping attracting retail chains? High street markets have been doing very well in these post-pandemic times and we are seeing many retail brands eye these lo

BY Realty Plus
Published - Thursday, 10 Jun, 2021

Retail Brands Eye High Streets & Tier II Cities for Expansion

Pankaj Renjhen, COO & Joint MD - ANAROCK Retail What are the reasons for high street shopping attracting retail chains? High street markets have been doing very well in these post-pandemic times and we are seeing many retail brands eye these locations as part of their expansion strategy. Well-capitalised retailers with established business models are using their competitive advantage to negotiate good deals to expand their footprint and gain a larger market share. High streets offer a good opportunity with attractively low start-up time, lower cost of operations and less dependency on immediate adjacencies. High streets already have a considerable base of footfall traffic. In metro cities, some retailers are also willing to take well-located, road-facing spaces within good catchments rather than sign up at expensive high streets. In a calibrated post-pandemic move, leading retail brands across categories are zeroing in on high street markets for expansion across India. Between April 2020 and May 2021, some of these brands closed over 120 lease deals at prominent high street markets across Indian cities and towns. The deal sizes ranged for areas as low as 400 sq. ft. and went all the way up to 35,000 sq. ft. Some Quick Service Restaurants (QSRs) within the F&B category (Starbucks, Pizza Hut, KFC, etc.), apparel brands and even large format stores like Pantaloons, Westside, Zudio, Reliance Trends and Max (typically anchor tenants in malls) are now getting more serious about their high streets presence. Of the categories which closed high street leases, apparel had the largest share of deals with an over 23% share, followed by F&B with a 15% share, and jewellery with 12%. Hypermarkets and supermarkets mostly leased large high street spaces in smaller towns and cities. The top cities where leading brands expanded in this period include Bengaluru, Pune, Hyderabad, Delhi, Chennai, Mumbai and Gurgaon. The prominent tier 2 & 3 cities include Lucknow, Ahmedabad, Chandigarh, Patiala, and smaller towns in Uttar Pradesh and Madhya Pradesh (Indore, Bhopal, Gwalior). What are the factors encouraging retail realty growth in Tier 2 & 3 Cities? Prominent hypermarket and supermarket brands are penetrating deeper into tier 2, 3 and 4 cities. Many of these smaller towns and cities offer high revenue-growth potential for these brands. Previously, most of the smaller towns and cities depended on mom-and-pop stores for their daily grocery needs. During the period, brands such as MORE Retail Ltd. mostly leased large areas in smaller cities like Agra, Faizabad, Muzaffarnagar, and Sitapur in Uttar Pradesh and Bhubaneshwar in Orissa – spaces ranging between 14,000 sq. ft. to 30,000 sq. ft. in area. What are the future trends in this segment? There is aggressive demand from retailers - particularly large corporate retail chains - particularly in high streets of tier 2, 3 and select tier 4 cities. This demand is backed by the increasing resilience of non-metro customers. With lack of quality retail centres in most of these cities, demand has got focused on high streets. Additionally, the cost of operations in tier 2 and 3 city high streets is more competitive for retailers while for consumers, the familiarity and location convenience of high street retail adds up well. Going forward, with limited quality retail stock coming up and in smaller cities' convenience as a key parameter, high streets are a viable solution for retailers to bridge the gap. Except in a few large cities, large-sized retail centres will be difficult to sustain as the pandemic has shrunk the retailer category - both in terms of the number of players and store sizes.

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