Imagine strolling through a bustling mall but instead of just grabbing a pair of jeans, you are sipping artisanal coffee while trying on AR-enhanced outfits or joining a live cooking demo. This isn't a scene from a sci-fi movie, it's the new normal for India's retail landscape in 2025.
Once dominated by cramped kirana stores and sprawling department chains, retail spaces are evolving into hubs of experience, sustainability, and tech-savvy shopping.
With the market valued at a whopping USD 952 billion in 2024 and projected to grow at 11.4% CAGR through 2034, the transformation is fueled by rising incomes, urban migration, and a post-pandemic craving for real-world connections. Let's unpack how these spaces are shrinking, smartening up, and going green.
A Surge in Spaces: More Room for Growth
India's retail real estate is on fire. In the first half of 2025, leasing activity jumped 21% year-over-year, with 2.6 million square feet snapped up in Q2 alone across the top seven cities, a 17% rise from 2024. Bengaluru and Hyderabad led the pack, adding fresh malls and high-street spots that cater to the Gen Z crowd. By year's end, these cities could welcome nearly 9 million square feet of new retail space, eclipsing 2023 levels.
But here's the twist. The hottest spots aren't mega-malls anymore. Developers are betting on "shrinking" formats which are compact, neighborhood-sized stores that blend seamlessly into daily life. Think pop-up shops in trendy cafes or micro-malls in Tier-2 towns like Indore and Coimbatore.
This shift responds to urban crunch: with space at a premium, retailers are prioritizing efficiency over excess. Vacancy rates have dipped to historic lows, signaling rock-solid demand from fashion, beauty, and quick-service eateries. Rural areas aren't left out; offline trends like data-driven kirana upgrades are bridging the urban-rural divide, with phygital (physical + digital) models helping small shops compete.
E-Commerce's Double-Edged Sword: From Rival to Ally
E-commerce has been the elephant in the room or rather, the app on everyone's phone. With gross merchandise value hitting $60 billion in 2025 and hyper-value platforms like quick commerce exploding to $7.1 billion (up from $300 million in 2022), online shopping seems unstoppable. It's reshaping consumer habits, pulling 12% of e-retail sales toward budget buys and convenience. Traditional stores felt the pinch, malls saw footfall dips during lockdowns but savvy players adapted fast.
Enter omnichannel retail: the sweet spot where clicks meet bricks. Online-first brands like Nykaa and Myntra are flipping the script, opening flagship stores that double as content studios. In 2025, over 70% of e-tailers have physical outposts, letting customers "try before they buy" via seamless apps. Quick commerce giants like Blinkit and Instamart are even testing dark stores, warehouse-like setups in city basements that feed both delivery and walk-ins. The result? Physical retail isn't dying; it's hybridizing. E-commerce's net impact? A net positive, creating jobs in logistics while forcing stores to innovate. By 2030, e-retail could hit $170 billion, but it'll coexist with a robust offline sector, projected to reach INR 190 trillion overall.
Experiences Over Transactions: The Mall Makeover
Gone are the days of sterile aisles and impulse buys. Today's shoppers especially millennials and Gen Z, who make up 65% of the population, crave stories, not shelves. Experiential retail is the buzzword, with 78% of Indians prioritizing "feel-good" moments over mere products in a $2 trillion market. Malls are morphing into lifestyle playgrounds: think bowling alleys, escape rooms, and rooftop farms alongside stores. Over 70% of consumers now favor active entertainment like VR arcades over movies, turning weekends into full-day outings.
Premiumisation is key here. High-end zones in malls dedicate space to luxury pop-ups and interactive demos, fashion brands host stylist sessions, while gadget stores let you tinker with AI prototypes. In Delhi's Select Citywalk or Bengaluru's Phoenix Marketcity, dining and leisure now claim 40% of space, up from 20% a decade ago. This isn't fluff; it's strategy. Immersive setups boost dwell time by 30%, spiking sales. Even high streets are joining in, with street-food festivals and artisan markets drawing crowds to forgotten corners.
Green is the New Gold: Sustainability in the Spotlight
As climate worries mount (92% of Indians fret over global warming) retailers are ditching plastic for purpose. Green stores, with solar panels and recycled materials, guzzle 20% less energy than old-school ones. Brands like FabIndia and Biba are leading with vegan lines and upcycled fabrics, while malls install rainwater harvesting and EV charging stations. Shoppers? They're voting with wallets: 73% will pay extra for eco-friendly picks, fueling a homegrown sustainable fashion wave.
Government nudges, like anti-greenwashing rules, ensure authenticity, no more hollow claims. Refill stations and return programs are popping up, turning one-off buys into loyal loops.
By 2030, India could boast 60.9 million square feet of new mall space, the biggest expansion ever. But success hinges on balance: blending tech like AR try-ons with human touches, and eco-practices with profitability. Tier-2 cities will shine as growth engines, while quick commerce evolves to include premium deliveries (20-30% of orders by 2025).
