India’s retail real estate market closed 2025 on its strongest footing yet, with leasing activity touching a record 8.9 million sq. ft, according to data released by CBRE South Asia. The milestone underlines the sector’s resilience at a time when global macroeconomic volatility, trade tensions, and tariff-related uncertainties continue to cloud sentiment across markets.
Rather than slowing expansion plans, retailers doubled down on physical stores, signalling confidence in India’s consumption story and the enduring relevance of brick-and-mortar formats. The second half of the year was particularly strong, with absorption accelerating as new supply became operational across major cities.
Supply Additions Surge, Hyderabad Leads the Way
Fresh retail supply surged to 4.3 million sq. ft in 2025, marking a sharp 268 percent increase over the previous year. This spike in completions reflects growing developer confidence in organised retail, particularly in markets with improving infrastructure and rising disposable incomes.
Hyderabad emerged as the standout city, accounting for more than half of the total new supply added during the year. Mumbai and Delhi-NCR followed, reinforcing their position as mature retail markets with sustained demand. The strong pipeline of quality malls and high-street developments indicates that developers are increasingly prioritising well-located, experience-driven assets over sheer scale.
In the second half of 2025 alone, around 2.1 million sq. ft of new retail space became operational, helping push absorption levels higher and supporting leasing momentum.
Demand Broadens Beyond Traditional Strongholds
On the demand side, total absorption in 2025 reached 5.6 million sq. ft, with Hyderabad once again leading the pack. The city accounted for 34 percent of leasing activity, followed by Delhi-NCR at 20 percent and Chennai at 16 percent.
This distribution points to a broader trend in India’s retail landscape. While established metros continue to anchor leasing activity, cities such as Hyderabad and Chennai are emerging as strong alternatives, offering lower occupancy costs, a growing consumer base, and modern retail infrastructure. For retailers, these markets provide an opportunity to expand profitably while reducing over-dependence on traditional metro locations.
Fashion, Food and Jewellery Drive Absorption
Fashion and apparel remained the dominant driver of retail leasing, accounting for nearly 48 percent of total absorption during the year. The category saw a diverse mix of tenants, ranging from sustainable fashion labels and streetwear brands to ethnic wear, athleisure, luxury, and digitally native D2C players making their offline debut.
Food and beverage brands contributed around 12 percent of leasing activity, with a clear preference for large-format, experiential outlets in premium malls and prominent high-street locations. As dining out increasingly overlaps with entertainment and social experiences, F&B continues to play a central role in boosting footfalls and dwell time.
Jewellery accounted for about 8 percent of leasing, with lab-grown diamond brands gaining traction alongside traditional gold-led formats. This diversification of tenant profiles is helping malls attract a wider consumer base and reduce reliance on a single category.
Technology Reshapes Physical Retail
Technology is playing a growing role in shaping how retailers use physical space. AI-led tools such as virtual try-ons, generative styling engines, and predictive inventory models are enabling brands to personalise customer experiences, reduce returns, and improve space productivity.
Rather than replacing physical stores, these technologies are strengthening their relevance by making in-store experiences more engaging and efficient. Entertainment zones within malls are also evolving, integrating edutainment concepts, virtual reality, and gamified loyalty programmes. For landlords, such zones help monetise large floor plates while supporting higher rentals for adjacent food and beverage tenants.
Domestic Strength and Global Interest
Domestic retailers continued to dominate leasing volumes in 2025, but international brands also remained in expansion mode despite global trade and tariff pressures. D2C brands accounted for 27 percent of total leasing, reflecting their strategic shift toward offline presence to improve customer acquisition economics and build long-term brand equity.
CBRE noted that supportive domestic conditions, including relatively low inflation, income tax revisions, and GST rationalisation, helped underpin consumer demand in the second half of the year. Longer lease tenures and higher engagement levels are improving income visibility for developers and enhancing asset valuations, making retail real estate increasingly attractive to investors.
A Resilient, Experience-Driven Future
India’s record-breaking retail leasing performance in 2025 highlights a sector that continues to evolve rather than retreat in the face of global uncertainty. With Hyderabad leading both supply and demand, fashion and F&B anchoring absorption, and technology reshaping retail formats, the market is steadily moving toward a more experience-driven and diversified ecosystem.
As developers and retailers align around quality assets and long-term strategies, India’s retail real estate sector appears well positioned to sustain growth and adapt to changing consumer behaviour in the years ahead.
