Shopping centres are evolving into community centres where people gather not only for shopping but also for entertainment, relaxation, and socializing. This shift underscores the importance of malls in our communities as they were not affected by the online commerce.
The physical stores still continue to hold the ground in terms of offering experiential shopping and fostering social connections. And the proof for that is the entry of 24 new global brands into the Indian market including cities like Mumbai, Delhi NCR, Bengaluru, Hyderabad, and Chennai. As of H1 2023, the operational retail space in these cities totals 89 million square feet. With the presence of a burgeoning Gen Z demographic, a robust workforce, increasing purchasing power, and a growing GDP, the timing appears favorable for investors considering investments in shopping centers.
Retail real estate in India is experiencing a resurgence, with global brands increasingly eyeing the market. Despite the challenges posed by the COVID-19 pandemic and economic uncertainties, mall retailers in Tier 1 and Tier 2 cities have shown remarkable resilience and growth over the past two years. This resilience has sparked interest among investors looking to reinvest in shopping centers.
Mall retailers in India’s Tier 1 and Tier 2 cities (urban and suburban areas included) have flourished in the last two years, defying post-COVID speculations. Displaying a resilient retail market and enjoying strong performance, shopping centres have prospects to innovate and repurpose real estate, thereby making themselves profitable to investors. Amid an imminent economic downturn, investors are considering when to reinvest in shopping centres.
Keeping these points in mind Bengaluru, India, hosted a two-day event where industry leaders, experts, and enthusiasts convened to examine the investment opportunities in the shopping centers sector. The Shopping Centres Next 2023 event, held on October 3, 2023, provided valuable insights into India's changing retail landscape and the growing attraction of global brands.
The first day of the event brought forth a wealth of insights into the evolving landscape of shopping malls in India, highlighting their transformative role as hubs of community, technology, and growth.
Speaking about the key to extracting value from shopping centres at the Masterclass, Rajendra Kalkar, President - Malls & Whole Time Director, the Phoenix Mills Ltd., said, “When you sell an asset, you realise the value instantly. For the retail space players such as hotels, hospitals and upcoming annuity businesses like data centres or warehousing, there are twin benefits. One is the capital which can double, triple, etc. depending on the land prices in the location and various socio economic factors. The second benefit is annuity income (inflationary income). The moment one builds a good shopping centre, runs it well and ensures consumption, retailers can do fabulous business and make money from their turnover rent. There is an art to making this turnover rent income. Today, hardly 100 malls in India have been able to achieve this. There is enough potential for this.”
India beats China in GDP Growth
Citing the purchasing power and volume of purchasers in the country, he projected that with India beating China in GDP growth last year, this trend is set to grow at least for the next 10-15 years. “Also, the earning age of customers itself is a key factor to consider investing in shopping centres in India and reaping benefits from it,” he added.
Further elaborating on the need to make sure that the shopping centre becomes a part of the community and vice versa, it is important that investors plan to integrate social connections at the starting stage of mall design planning itself. “For Gen Z, shopping centres are where community building begins; that is the heart of their needs to meet, dine, socialise, refresh and spend time. There are ample ways to build on these needs such as organising health awareness programmes, wellness and fitness programmes, art projects, etc.”
Sharing his thoughts on the scope for retail real estate investments in Tier 2 and 3 cities in the country, Jayen Naik, COO, Nexus Malls, said, “There is enough consumption demand in Tier 2 and 3 cities, especially where we are present. Our mall in Bhubaneswar is among the best and as good as the other malls in the other metros. The median age of the population is 28-30 years. Which means, more than half the population will be consumers for tomorrow. Given the rising economy, large skilled population and disposable income growth, consumption is bound to grow. Good real estate can be built with the right amount of research and planning and we hope a lot more interesting spaces come up across all state capitals, smart cities and places regardless of tiers.”
The recent Shopping Centres Next 2023 event in Bengaluru served as a platform for industry leaders, experts, and enthusiasts to explore the promising prospects of shopping centers for investors. The event's discussions shed light on the evolving landscape of shopping malls in India, emphasizing their evolving role as multifaceted hubs for community engagement, technology integration, and economic growth.