Retail demand, especially for primary leasing, is expected to strengthen in India in 2025. This trend is supported by a robust supply pipeline projected to exceed that of 2024, with new developments scheduled for completion across multiple Tier-I cities. Moreover, India's real estate has transformed In recent years, mainly driven by changing consumer behaviours, economic shifts, and a growing demand for diverse shopping experiences, reshaping the retail real estate landscape.
As per Knight Frank India's primary survey, it has been observed that with the advent of some new shopping centres in India, the retailer preference for Grade A assets is at an all-time high. Consequently, as the new shopping centres opened, many retailers made a beeline to expand their presence. This led to high double-digit vacancy in Grade C structures as performance and operational metrics of better-performing malls improved. The high vacancy of such assets has invariably impacted the India vacancy percentage for the Tier 1 cities and provides a skewed picture despite an 87-basis points reduction in shopping centre vacancy from 16.6% to 15.7%.
To arrive at a precise estimate of shopping centre health, shopping centres with a vacancy of more than 40% are identified as ghost shopping centres. It is prudent to exclude such assets, as this stock does not attract widespread retailer interest due to constraints such as poor location, obsolete design, strata-sold arrangements, dilapidation, and the unattractiveness of structures.
Per the above analysis, if these are removed from the stock, the overall health of shopping centres in India improves dramatically. The differential vacancy arrived at after such exclusions, is a truer representation of shopping centre performance in top-tier markets. The pan-India vacancy in the top 8 markets, after this analysis, reduces from 15.7% to 7.4%, and all the cities under coverage represent a healthier picture.
Retail Space Leasing Trends
As per CBRE, domestic direct-to-consumer (D2C) retailers are expected to continue showing a growing inclination toward retail space absorption, with an emphasis on personalisation. India’s D2C market is anticipated to maintain its growth trajectory as brands focus on increasing access and sales through social media, quick commerce, repeat purchases, and improved inventory management.
The fashion and apparel category continued to dominate the retail market, accounting for approximately 38% of overall leasing activity in 2024. This was primarily driven by mid-range, value fashion, and athleisure brands.
City-wise Share in Retail Real Estate Activity
The cumulative share of Bengaluru, Hyderabad, and Delhi-NCR in retail space take-up in 2024 was 59%. Meanwhile, the cumulative share of Hyderabad, Bengaluru, and Delhi-NCR in leasing activity in Q4 2024 was 62%.
Indian Consumption Story Drives Mall Revenues
ICRA expects the rental income for retail mall operators to increase by 7–8% year-on-year in FY2025 and 8–9% in FY2026, driven by healthy occupancy levels, growth in trading values, and rental escalations. Across the top six cities in India, new supply of 9–9.5 million square feet is expected in FY2025 and FY2026, respectively. The vacancy levels rose to 21% as of December 2024 due to the recent operationalisation of higher new supply, which is yet to ramp up fully. ICRA expects occupancy levels to sustain at 79–80% as of March 2025 and remain at similar levels by March 2026.
"The consumption growth for ICRA’s sample set of retail mall operators is expected to moderate to 6–7% in FY2025, compared to 9% in FY2024, due to the slowdown witnessed in H1 FY2025 caused by the General Elections, heat waves, and extended monsoons. Consumption is expected to ramp up in H2 FY2025, driven by the festive and wedding seasons. In addition, segments like hypermarkets, food, apparel, accessories and jewellery are expected to drive consumption with recovery in family entertainment centres (FEC). Trading values are expected to witness 8-9% YoY growth in FY2026. However, the increase in digital penetration and continued threat from e commerce and q-commerce players, particularly in the retail (fashion) segment which is extending to some of the premium brands, is a major challenge for the retail mall developers," said Anupama Reddy, Vice President and Co-Group Head - Corporate Ratings, ICRA.
High Street Retail
Of the 82% stores located in the top 8 cities, NCR with 23%, Bengaluru with 18%, and Hyderabad with 15% account for the top 3 cities with the maximum number of stores, as per Knight Frank.
Mumbai comprised 13% share in the total number of stores in the top 8 cities. There is a certain kind of shopping experience that some high streets in Bengaluru, Mumbai and NCR provide, which shopping centres cannot match. Early advent of modern retail, participation in organised retailing and mega retailer expansion across the length and breadth of these cities offer a unique character to high streets in locations such as Brigade Road, Indiranagar, Colaba Causeway, Connaught Place and Khan Market.
These high streets are famous for their mix of regional and international showrooms and have a loyal customer base. In these three cities, the real estate footprint of international origin brands ranges between 13-15% — which is much higher compared to the other cities.
The Promising Outlook
Highlighting the retail's real estate growth, JLL India reported that the top seven Indian cities are set to see the addition of nearly 9 million sq ft of new retail space in 2025, with gross leasing volume expected to surpass 2023's 8.7 million sq ft. The seven cities include Mumbai, Delhi NCR, Bengaluru, Kolkata, Chennai, Pune, and Hyderabad. The report further added that the gross leasing volume in 2025 will surpass the 2023 levels of 8.7 million sq ft easily on the back of continued interest from international brands coupled with healthy space taken up by domestic retailers.
As per ANAROCK, the evolution of organised retail and malls has seen a shift from unorganised to structured retail formats, growing by 4% over the past five years despite strong growth in e-commerce. Trends in supply and demand for mall spaces indicate a post-pandemic rebound in leasing, now largely driven by experiential retail. Apparel and food & beverage sectors consistently contribute nearly 45% of demand, maintaining their position as top drivers.
"The Indian retail industry has grown significantly, and its market size is expected to be USD 2,500 billion by 2035, powered by several factors, such as rising disposable incomes, increasing urbanisation, a young and tech-savvy population, and a growing middle class. Today, the industry is a vibrant tapestry of innovations, which has led to sprawling malls, thriving e-commerce, influential marketing, a touch of technology through artificial intelligence as well as the traditional bazaars," says Anuj Kejriwal, CEO & Managing Director of Retail - ANAROCK.
Future trends point to hybrid retail models, smart malls, and improved consumer engagement strategies, ensuring malls continue to be central to urban life. As per ANAROCK report, the rise of direct-to-consumer brands and increased investments from global retailers reflect a shift in retail strategies. Malls are transforming into experience hubs, incorporating entertainment, dining, wellness, and digital innovation. By 2030, malls are expected to focus on premium, mixed-use spaces, sustainability, and omnichannel integration.
Tier II & III Cities Retail Boom
Tier II and III cities are experiencing a surge in new retail supply, with 25 million sq. ft of retail developments expected to come on stream in the next 5 years, according to JLL India. This expansion is driven by growing consumer demand, availability of land, and a lack of quality retail developments in these markets until a few years back. Developers are capitalising on these opportunities to meet the evolving needs of these emerging urban centres.
It is interesting to note that the upcoming mall supply in these cities will be of a significant scale, with a projected average gross leasable area of approximately 375,000 sq ft. Notably, four of these mall projects are particularly large-sized, each having a gross leasable area of 1 million square feet.
"In recent years, leading real estate developers have acquired land parcels in Tier II and III cities for retail development projects. Notable cities involved in these acquisitions include Jaipur, Lucknow, and Mohali in the northern region; Ahmedabad and Surat in the west; and Coimbatore in the south. Driven by growing consumer demand, established developers have acquired land in these emerging cities," said Rahul Arora, Head - Retail Services & Office Leasing Advisory, Senior Managing Director (Karnataka, Kerala), India, JLL.
Major domestic and international retailers are nourishing ambitious plans to increase their footprint in smaller towns and cities. This has resulted in a surge in supply of malls in the Tier II & III markets, which is estimated to be over 26 million sq ft by 2030.
The New Mall Experience in India
Over the last four years, malls in India have transformed from pure shopping destinations to multi-experience hubs, adapting to changing consumer behaviour.
- Rise of Experiential Retail: Brands are creating immersive stores with AR/VR experiences and personalised shopping. Interactive flagship stores and concept spaces are becoming popular.
- Entertainment & Leisure Boom: Indoor amusement parks, gaming zones (VR, escape rooms), and trampoline parks are drawing footfalls. Live performances, art exhibitions, and movie premieres are turning malls into cultural hotspots.
- Direct-to-Customer (D2C) Brands: Instead of local shopping centres, D2C brands are increasingly shifting their offline strategy from local stores to shopping malls, drawn by higher footfall, a premium customer base, and greater brand visibility. Malls enable immersive retail experiences through flagship stores, pop-ups, and interactive displays while offering better infrastructure, security, and consumer engagement. They also support omnichannel retail, serving as fulfilment hubs for click-and-collect services and returns.
- F&B Revolution: Food courts are evolving into gourmet food halls with artisanal brands, cloud kitchens, and curated culinary experiences. More theme-based restaurants, microbreweries, and chef-led pop-ups are being integrated.
- Wellness & Lifestyle Spaces: Fitness centres, yoga studios, and wellness retreats inside malls cater to health-conscious visitors. Dedicated co-working spaces within malls serve professionals and freelancers.
- Tech-Enabled Smart Malls: AI-driven navigation apps, smart parking, and digital concierge services enhance convenience. Contactless payments and personalised promotions via mall apps are now common.
- Community & Social Engagement: Malls are hosting seasonal festivals, farmers’ markets, and sustainability initiatives to engage local communities. Pet-friendly zones and open-air event spaces are becoming common.
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