Healthy leasing activity in quality malls and high streets

• Improved mall footfall and sales kept retailer demand momentum intact as shoppers returned in large numbers. The festive season was also a big reason for the market activity during the quarter, as retailers had a good season with sales and footfall, both exceeding pre-pandemic levels in all key existing and new malls, as well as on high streets.
• The Falcon City Mall in the Suburbs submarket came on-stream with over 80% occupancy. More than 80% of its retail space was leased. LuLu Daily, Tridom, PVR, Shoppers Stop and Lifestyle are among the anchor brands that have leased space in this mall. Other prominent brands included Hidesign, Forest Essentials, Arrow, Indian Terrain and PMJ Jewels.

One new mall opens in 4Q22

• Forum Falcon City Mall on Kanakapura Road in the Suburbs submarket, with a leasable area of 0.8 million sq ft, was completed in the quarter. The city’s total retail stock reached 14.64 million sq ft.
• Four new malls (small and large) are expected to open in 2023. Prominent among them are VR Arena Mall and Phoenix Mall of Asia, all in the Suburbs submarket. These malls cover a total area of 2.5 million sq ft. By the end of 2023, the city’s retail supply is expected to be 17.1 million sq ft. 

Rents and capital values are rising q-o-q

• Overall city-level rents were lower q-o-q due to the stock-weighted impact of new completions in the Suburbs, which have lower rents. However, in all key operational malls, rents have strengthened and show upward movement as landlords have hardened their stance given the revival of demand in the retail segment.
• As investor interest returns and quality malls add to the retail market momentum, the city’s overall capital values are likely to rise faster than rents, with yields to show a 15-20 bps compression over 2023, driven by superior grade assets.

Outlook: Retail leasing is expected to remain robust in 2023

• Robust activity is anticipated in quality malls lined up for completion over the next 12 months, due to a strong rebound driven by pent-up demand. Malls like VR Mall and Phoenix Mall of Asia have already recorded between 50%-70% pre-commitment levels and will likely support healthy net absorption numbers going forward.
• Consolidation is expected to continue in 2023, along with an increase in demand and footfall polarisation, as quality malls remain relevant while others will likely struggle and either switch to neighbourhood mall formats or be repurposed.