India Tops Global Retail Development Index In 2017; Overtakes China
India Tops Global Retail Development Index In 2017; Overtakes China
August 17, 2017
More than USD 200 million invested by PE Firms/Wealth funds
New Delhi, August 17, 2017: CBRE South Asia Pvt. Ltd,
India’s leading real estate consulting firm, today announced the findings of
its latest India Retail MarketView Report – H1, 2017. According to the
report, in the recently announced Global Retail Development Index 2017, India
has topped the rakings, overtaking China. This is indicative of the growing
prominence of India as a preferred retail destination for global retail brands.
to the report, during the first 6 months of the year, there were 70 new
entries/expansions by global and domestic brands across the cities of Mumbai,
Delhi-NCR and Bangalore. Seven new global brands entered the country and investments
into the segment by PE Firms/Wealth Funds touched USD 200 million. Additionally,
several retail developments were completed across select cities resulting in
approximately 1.5 million sq.ft. of fresh supply entering the market. During
the first half of the year, demand for quality retail space remained robust
with a majority of this supply concentrated in Mumbai, Bengaluru and Delhi-
on the findings of the report, Mr. Anshuman Magazine, Chairman,
India & South East Asia, CBRE said,
“Our ranking on the 2017 Global Retail Index
for developing countries as well as continued investment by private equity
players is a demonstration of the sustained preference of international brands
to set up, or expand their operations in India. With several legislations and
policies in implementation mode, we are already seeing an increase in consumer
and investor confidence. This will have a cascading effect on the retail
segment. Overall, retail real estate will continue to grow and witness healthy
demand across tier I and II cities.”
d. said, “The fact that demand for quality space continues to outstrip the supply
is indicative that the retail real estate segment across key cities in India is
growing exponentially. While global brands continue to evaluate and consider
quality retail developments in the top cities, with growing globalization,
smaller cities are also gaining prominence and witnessing traction. While there
still remains some ambiguity around the highway liquor ban, resulting in
F&B operators being in wait and watch mode, the overall market sentiment
continues to be positive.”
the 1st half of the year, a number of international brands already
present in the country expanded their presence. Several hypermarkets too were in
expansionary mode including Big Bazaar which opened new stores in Mumbai,
Bengaluru and Chennai.Clothing
retailers such as Max and Pantaloons were also active during the review period.
per the report, rental trends continued to vary across key high streets in
major cities during the review period. While high streets such as Connaught
Place, Khan Market, and South Extension in Delhi and Park Street and Elgin Road
in Kolkata witnessed a rental appreciation, rentals in most other high streets remained
stable. At the same time, some high streets such as Linking Road in Mumbai and
MG Road in Pune saw a marginal dip in rentals.
Approx. 0.2 million sq.ft. of fresh supply entered the market
Fashion and apparel continued to dominate leasing activity
Noida witnessed healthy leasing activity, specifically in Mall of India
Low vacancy levels led to select micro-markets in the city witnessing rental appreciation for prime retail developments
Leasing activity was driven by domestic F&B operators and foreign retailers from various segments
Over 1 million sq.ft. of supply came into the market with the completion of Seawoods Grand Central Mall
Rentals on Linking Road recorded a minor correction while rental values across other high streets and organized retail developments remained largely stable
Steady leasing activity observed across high streets and shopping centers
Approximately 0.3 million sq.ft. of fresh retail supply entered the market
Rental values across high streets and shopping centers remained stable
In the coming quarters, sustained traction from both global and domestic brands could lead to rental appreciation in organized developments in the Central, Eastern and Western locations
Retail leasing witnessed upward momentum during H1, 2017
Demand was largely driven by the apparel, entertainment, electronics and F&B sectors
While no new supply entered the market in H1, 2017, the 2nd half of the year is expected to witness the completion of more than one million sq.ft. of organized retail space
Retails remained stable across several high streets while witnessing a 6-8% increase in central Hyderabad and 8-9% in Western Hyderabad on a half yearly basis
The city witnessed robust leasing activity across both high streets and shopping centers driven by the F&B, apparel, supermarket and jewelry segments
Rental values across key high streets and shopping centers remained largely stable during the review period.
Express Avenue Mall in Central Chennai, witnessed a rental appreciation in the range of 10 -12% on a half yearly basis
Leasing activity remained slightly subdued due to the government ban on sale of liquor around state and national highways
Leasing was concentrated across the emerging high street locations in the city while organized retail developments witnessed limited activity
Rentals across high streets and malls witnessed a slight dip due to subdued retailer activity
Demand for retail in the city was dominated by organized developments with the fashion segment leading transaction activity
Rental values across all micro-markets remained stable for organized retail space; a trend which is likely to continue in the short to medium term.
Sustained retailer interest resulted in rental increments in the range of 9-14% across the key high streets.
There is a healthy supply pipeline lined
up for the rest of the year, led by the Southern cities of Hyderabad and
Bengaluru. Demand for quality retail space will remain strong especially from
fast fashion, Department Stores and Sports & Leisure.
The completion of infrastructure
initiatives is going to play a pivotal role in deciding the rental trajectory
of markets. For example, the development and linking of the metro to South
Extension in Delhi, is expected to result in a revival of the high-street in
the coming months. this could lead to a surge in its rentals. However, rental
growth in most high streets across key cities is expected to be limited, as
they have already reached their peak.
With the GST having come into force in
July, the retail segment has seen some impact. While most essential items are
exempt from tax, FMCG goods are in the 5% tax bracket and most restaurants are
in the 18% bracket. Apparel which costs less than INR 1000/- and restaurants
with a turnover less than 50 lakhs, are in the 5% category. However, several
goods like luxury cars, amusement park tickets, movie tickets priced over a
certain amount and hotel tariffs over INR 7500 have been put in the higher tax
bracket of 28% which is indicative of the intention to tax luxury or similar
goods at a higher amount. From a leasing perspective, the service tax on
rentals by tenants has been replaced with a standard GST of 28%. However, with
retailers being able to offset this taxes on services (rent) against taxes on
goods, their overall occupancy costs could come down.
Going forward, to effectively operate
under the new GST regime, retailers would need to review their product pricing
based on market expectations, align their supply chain and procurement
strategy, rework their distribution channels, and ensure greater compliance to
laws to be more cost-effective. However, retailers who manage to judiciously
structure their margins based on output tax liability and increase of input tax
credit would be able to stay competitive and relevant for the consumers.
Neither CBRE nor its affiliated companies make any warranties or claims on the implied accuracy of the information contained herein.
About CBRE Group, Inc.
CBRE Group, Inc. (NYSE:CBG), a Fortune 500 and S&P 500 company headquartered in Los Angeles, is the world’s largest commercial real estate services and investment firm (based on 2016 revenue). The company has more than 75,000 employees (excluding affiliates), and serves real estate investors and occupiers through approximately 450 offices (excluding affiliates) worldwide. CBRE offers a broad range of integrated services, including facilities, transaction and project management; property management; investment management; appraisal and valuation; property leasing; strategic consulting; property sales; mortgage services and development services. Please visit our website at www.cbre.com.