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Delhi-NCR dominates retail leasing activity in 2016 – Report CBRE

Delhi-NCR dominates retail leasing activity in 2016 - Report CBRE

In the year 2016, retail segment in the real estate sector witnessed a whooping investment of over 700 million and according to property consultant CBRE, expected influx from private equity firms and wealth funds could rise by up to 20 percent in 2017. According to the CBRE report, ‘’the retail segment in 2016 witnessed more than USD 0.7 billion of investment by PE Firms/wealth funds and saw the entry of more 19 new global brands into the country’’.

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The report further mentioned that private equity investments into the segment are expected to increase by as much as 20% in 2017, signaling that the overall market dynamics for the segment continue to be positive. In addition to this, in 2016, the 7 key cities (NCR, Mumbai, Kolkata, Chennai, Bengaluru, Hyderabad, and Pune) across the country witnessed a fall in retail space by 5 percent to 3.4 million sq ft from 3.6 million sq ft of organised supply in 2015.

According to CBRE, in 2016, majority of the supply that entered the market was concentrated in the National Capital Region (NCR), Bangalore and Mumbai.  Global retailers expanded their portfolio with multiple store openings; international apparel and domestic F&B players dominated demand.

‘’Rental trends varied across key high streets and malls during the year. While some micro-markets witnessed stable rentals, other saw varying levels of rental increments. The upward movement of rentals in these select micro-markets was due to constrained availability of retail space, amidst a scenario of robust demand’’, CBRE said

Assisted by the strong government policies and reforms, real estate sector has seen an upturn in the year 2016. The measures introduced with a view to improve transparency and accountability; thereby spurring investment and end-user activity in the sector.  Measures such as the relaxation of FDI norms in single-brand retail, e-commerce, and food products manufactured/produced in India; coupled with the expected easing in retail loan rates are likely to positively impact retailer entry into India and demand for consumer durables respectively.

‘’In the year 2016, the Indian economy saw quite a few legislations and policies being cleared which will have a positive impact on the retail real estate segment in the long run. The increased transparency as a result of these policies will lead to increased consumer and investor confidence. Another interesting trend that emerged last year was the increased interest of private equity players in retail malls. Several investment deals were reported during the year both in Tier I and Tier II cities by established players which is indicative of this positive sentiment’’, said Anshuman Magazine, Chairman -India & South East Asia, CBRE.

According to Vivek Kaul, Head, Retail Services –India for CBRE South Asia Pvt. Ltd., “India’s retail real estate market is maturing at a steady pace. Key cities and retail developments continue to be on the radar of international developers. Institutional investments in the retail real-estate sector are expected touch a new high in 2017’’.

According to the report, Bangalore observed steady retail leasing activity across both high streets and shopping centres and approximately 0.38 million sq. ft. of fresh retail supply entered the city in H2, 2016. While retail leasing activity in Hyderabad witnessed an upward momentum during the second half of 2016 driven by the apparel, entertainment, electronics and the F&B sector.

Retail leasing activity was strong in Chennai during the second half of 2016 with an increase in the number of store openings during the second half of the year, driven by the expansion activity of domestic retailers and entry of global brands. In Pune, strong demand for Grade A retail space was observed across prominent mall clusters and emerging high-street locations of the city. Kolkata also witnessed buoyant retail leasing activity with majority of the leasing being dominated by organized developments, during H2 2016.

During the second half of 2016, National Capital Region continued to be on the radar of domestic and international with fashion retailers and F&B operators being key demand drivers. More than 0.8 million sq. ft. of grade A retail space entered this market during this period. While in Mumbai strong demand for retail space was observed across high streets as well as prominent mall developments. Here leasing activity was driven mostly by domestic F&B operators and foreign retailers across various segments.

Hence in 2017, Delhi-NCR and Mumbai markets will continue to be the preferred points of entry for global retailers as both cities have the presence of the right target catchment as well as suitable real estate opportunities. While there is a strong supply pipeline expected in 2017, demand for organized retail space will continue to exceed the supply in most top markets. This will put an upward pressure on rentals at major high streets and investment-grade malls.

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