59% increase in ghost shopping centers; low performing malls lock up value of ₹6700 crore

NCR accounted for the highest number of ghost shopping centers measuring 5.3 mn sq ft (rise of 58% Y-o-Y), followed by Mumbai with 2.1 mn sq ft (up 86% YoY)

There has been a 59% year-on-year increase in low performing shopping malls with approximately 13.3 million square feet of retail space categorized as 'ghost shopping centers', a report by Knight Frank India titled 'Think India Think Retail 2024: Shopping Centre and High Street Dynamics Across 29 Cities' has said.

NCR accounted for the highest number of ghost shopping centers measuring 5.3 mn sq ft (rise of 58% Y-o-Y), followed by Mumbai with 2.1 mn sq ft (up 86% YoY) (PTI)

As a result of the rise in ghost shopping centers, Knight Frank estimated the loss of value to be at ₹6,700 crore or $798 million in 2023, it noted. The report covers 340 shopping centers and 58 high streets across 29 Indian cities, conducted through primary surveys.

Ghost shopping malls are low performing malls with a vacancy of more than 40%. The number of such malls increased to 64% last year from 57% in 2022 across eight major cities. There was a  sharp increase in low-performing retail assets across eight major Tier I cities. 

As many as 64 shopping malls with about 13.3 million square feet of gross leasable area have been categorized as 'Ghost Shopping Centre' in 2023. This has increased by almost 59% from 8.4 mn sq ft in 2022.

Underperforming shopping centers were either demolished due to various reasons such as developers undertaking residential or commercial developments, or were permanently closed or auctioned, it said.

National Capital Region (NCR) accounted for the highest number of ghost shopping centers measuring at 5.3 million sq ft (rise of 58 per cent Year-on-Year), followed by Mumbai with 2.1 million sq ft (rise of 86 per cent YoY) and Bengaluru with 2 million sq ft (rise of 46 per cent YoY). Hyderabad is the only city to record a decline in the ghost shopping center stock by 19 per cent YoY to 0.9 million sq ft in 2023. The maximum increase in ghost shopping centres was recorded in Kolkata (237 per cent YoY), the survey showed.

Maximum number of ghost malls in Delhi-NCR

Of the total 64 ghost malls across top 8 cities, Knight Frank data showed that 21 such malls are in Delhi-NCR, 12 in Bengaluru, 10 in Mumbai, 6 in Kolkata, 5 in Hyderabad, 4 in Ahmedabad and 3 each in Chennai and Pune.

In tier 1 cities the total number of shopping centers have reduced in a period of one year. Despite the addition of 8 new retail centers, the total number of shopping centers reduced to 263 in 2023 as 16 shopping centers were shut down over the last year. Underperforming shopping centers were either demolished due to reasons such as developers undertaking residential or commercial developments or were permanently closed or auctioned, the Knight Frank survey showed. 

Think India Think Retail 2024 - Shopping Centre and High Street Dynamics Across 29 Cities, delved into the retail real estate markets beyond the top-tier markets. The study covered 340 shopping centers and 58 high streets across 29 Indian cities, conducted through primary surveys. 

Tier 1 cities witness 64 ghost shopping centers in 2023 

Shopping centers in distress grapple with ongoing hurdles, compounded by fresh additions worsening their already elevated vacancy rates. This surge has led to a rise in the count of shopping centers labeled as Ghost Shopping Centre stock. Such a scenario offers institutional investors the chance to explore avenues for repurposing or revitalizing their retail portfolios, while developers can seize opportunities to monetize these assets through repurposing or redevelopment efforts, the survey said.

According to Knight Frank Research, as of 2023, India has a total shopping center stock of 125.1 mn sq ft. The top 8 Indian cities constitute 75% of the total GLA, admeasuring 94.3 mn sq ft across 263 shopping centers while Tier 2 cities constitute 30.8 mn sq ft. Of the top 8 cities, NCR (31.3 mn sq ft), Mumbai (16.3 mn sq ft) and Bengaluru (15.6 mn sq ft) were the top three cities in the pecking order of GLA available in the shopping centers.

Amongst the tier II cities, Lucknow (5.7 mn sq ft), Kochi (2.3 mn sq ft) and Jaipur (2.1 mn sq ft) were the leading three cities in terms of GLA available in shopping centers. Lucknow has emerged as a key player with a share of 18% gross leasable area within Tier 2 cities.

Overall shopping center vacancy, across leading eight cities in India, has improved from 16.6% in 2022 to 15.7% in 2023, noting an 87-basis point reduction. The overall shopping center vacancy includes Ghost Shopping Centres. However, upon exclusion of Ghost Shopping Centres from the stock in the leading 8 cities, the shopping center health in India improves dramatically from 7.4% in 2023 due to the excellent performance of Grade A assets and reasonable occupancy in Grade B assets, it noted 

“The momentum of consumption, propelled by rising disposable incomes, a youthful demographic, and urbanization, tilts in favor of the organized retail sector. An enhanced retail experience remains crucial for shoppers, highlighting the significance of physical retail spaces. Grade A malls have notably excelled, maintaining robust occupancy, foot traffic, and conversion rates, thereby delivering value to their customers,” said Shishir Baijal, Chairman and Managing Director, Knight Frank India.

Conversely, Grade C assets and those classified as Ghost Shopping Centres are lagging, prompting landlords to take action to rejuvenate or divest such properties, he added.