Real Estate

Emergence Of New Leasing Trends

<p style="text-align: justify;"><span data-preserver-spaces="true">The (retail) leasing industry has observed huge changes in the past two decades with the emergence of new-age brands and the entry of international players in the Indian retail market. In the early 2000s, brands preferred premium high streets for expansion due to a lack of quality shopping malls. There were a handful of brands that dominated the industry. In the Anchor category, this number was minuscule. Several changes have occurred in these two decades. The leasing industry has evolved with time, and leasing trends have undergone immense changes. </span></p><p style="text-align: justify;">&nbsp;</p><h2 style="text-align: justify;"><span style="font-size: 14pt;" data-preserver-spaces="true">Variations in Leasing Trends</span></h2><p style="text-align: justify;"><span data-preserver-spaces="true">India is a dynamic country with varied ethnicities, choices, demographics, and spending habits. The leasing trends differ throughout North, South, East, West regions; and Tier I, II and III cities.&nbsp;</span></p><p style="text-align: justify;"><span data-preserver-spaces="true">In South India, there are key local players in categories like Ethnic wear, Electronics, Furniture, Jewellery, etc. that dominate the market; however, these are more concentrated towards high streets. These brands come with their own loyal customer base; hence, the malls cannot ignore these formats while formulating their leasing plans. North India, on the other hand, is a brand-conscious market and more focused on international fashion and premium brands.&nbsp;</span></p><p style="text-align: justify;"><span data-preserver-spaces="true">Thus, we can say that there is no &ldquo;One size fits all&rdquo; philosophy in the retail leasing industry. Some of the biggest international brands have learnt their lessons in Indian market and accordingly modified their strategies. When brands like H&amp;M, Uniqlo, Ikea, and Zara entered India, they opened very large formats, but eventually understood that in the Indian scenario, it&rsquo;s the right size and the right offering that matters.</span></p><p style="text-align: justify;"><span data-preserver-spaces="true">In the fashion segment, the location defines the brand&rsquo;s strategy in terms of store size, offerings, and design. Brands prefer large formats in premium malls of one million sft or above; however, the same brands would go for a smaller format in small and mid-sized malls. The one category that has been redefined is value fashion.&nbsp;</span></p><p style="text-align: justify;"><span data-preserver-spaces="true">The emergence of new age value fashion brands like Zudio (Trent), In-Tune (Shoppers Stop), Style Union, Style Up (ABFRL), and Yousta (Reliance), etc. have changed the dynamics. Zudio will be clocking a revenue in excess of Rs.4,000 cr in FY23-24, and it has achieved this feat in the 8th year of its launch in the Indian market. This category is and shall continue to be one of the highest consumers of retail real estate space in India.&nbsp;</span></p><p style="text-align: justify;">&nbsp;</p><h2 style="text-align: justify;"><span style="font-size: 14pt;" data-preserver-spaces="true">Experiential Formats</span></h2><p style="text-align: justify;"><span data-preserver-spaces="true">The one trend that is clearly visible is that experiential formats are becoming more and more popular and diversified. This includes Food and Beverages, FEC formats, Pubs, night clubs, etc. This trend has emerged rapidly after the Covid period. The Pubs and restaurants are getting fancier, and Microbreweries are getting bigger. There used to be only one or two FEC formats in the malls, but now there are multiple formats that include Game zones, bowling, trampoline parks, go-karting, VR games, snow world, etc., all in one mall.&nbsp;</span></p><p style="text-align: justify;">&nbsp;</p><h2 style="text-align: justify;"><span style="font-size: 14pt;" data-preserver-spaces="true">Luxury Leasing</span></h2><p style="text-align: justify;"><span data-preserver-spaces="true">Luxury leasing (as a whole) has not come at a pace yet in the Indian scenario. Though, the footprints of luxury and bridge-to-luxury brands are prevalent in India, these are concentrated in very niche markets and will need some more time to expand. A handful of groups own luxury and premium brands like Reliance brands, Major brands and ABFRL. Although these groups are bullish about the luxury market in India, they are expanding their footprints cautiously considering the Indian consumer mindset that seeks value and variety in its purchase decisions.&nbsp;</span></p><p style="text-align: justify;">&nbsp;</p><h2 style="text-align: justify;"><span style="font-size: 14pt;" data-preserver-spaces="true">Conclusion</span></h2><p style="text-align: justify;"><span data-preserver-spaces="true">Hence, we can say that these are very exciting times for the retail and leasing industry. Many international brands have a very positive outlook towards the Indian retail market. Brands like Apple and Victoria Secrets have opened their exclusive outlets in some of the premium malls in India. Many others are in queue to enter the Indian market. This signifies that in the near future, the demand for quality retail real estate space will be very high. It will be very interesting to see how the developers address this demand and the way things shape up in the future.&nbsp;</span></p><p style="text-align: justify;">&nbsp;</p><p style="text-align: justify;">&nbsp;</p><p style="text-align: justify;">&nbsp;</p><p style="text-align: justify;">&nbsp;</p><p>&nbsp;</p><p><em>This article was contributed by our expert <a href="" target="_blank" rel="noopener">Rohit Singh</a></em></p><p>&nbsp;</p><h3>&nbsp;</h3><h3><span style="font-size: 18pt;">Frequently Asked Questions Answered by Rohit Singh</span></h3><p style="text-align: justify;">&nbsp;</p><h2><span style="font-size: 12pt;">1. How are luxury and bridge-to-luxury brands approaching leasing in the Indian market, considering consumer preferences?&nbsp;</span></h2><p>The luxury and bridge-to-luxury brands have presence in selective niche locations in India like DLF Emporio and Select Citywalk (Delhi); UB city mall (Bangalore); Quest Mall (Kolkata), Phoenix Palladium and Jio World Drive (Mumbai). The latest destinations for luxury brands are Jio World Plaza (Mumbai), Kopa (Pune) and Phoenix Mall of Asia (Bangalore).</p><p>The presence of this category is concentrated in the Tier 1 markets only. Thus, it&rsquo;s evident that the approach that this category is adopting in leasing is expanding in luxury destinations catering to the&nbsp;Uber rich segment. They prefer going in clusters than individually, to cater to a larger segment of audience. Also, since the capex for these categories are high, brands are also asking for a capex contribution from the developers who plan to create a luxury positioning for their properties.</p><h2><br><span style="font-size: 12pt;">2. What are the challenges faced by developers in meeting the demands of brand-conscious markets in terms of retail leasing?&nbsp;</span></h2><p>The biggest challenge faced by developers in meeting demands of brand-conscious markets is lack of supply of quality space. The retail market being so dynamic, needs to address to changing needs of consumers. In any brand-conscious market, the demand for latest trends and new entrants (brands) is always there, however developers find it difficult to accommodate new brands due to lack of premium space availability in their properties. Thus, many a times they miss out on new brands and trends. One way that the developers are addressing this challenge is having short term contracts of 3 to 5 years with minimal&nbsp;lockin period for Lessor and termination rights in case of non-performance.</p><h2><span style="font-size: 12pt;">3. What role do flagship stores play in the leasing strategy of luxury brands, and how do they differ from other retail locations?</span>&nbsp;</h2><p>Flagship stores of luxury brands, a concept not very prominent in the Indian context, are the larger-than-life stores that communicate the brand identity and positioning that the brand wants to establish in its customers minds. These experiential formats offer latest merchandise, premium store design and best-in-class customer service.</p><p>Recently Apple opened its flagship store in Jio World Drive and Select Citywalk Saket, giving the visibility of the brand that the customers have not seen in the re-seller formats. A flagship store can be differentiated from the other regular formats by the size, offering and overall experience.</p><h2><br><span style="font-size: 12pt;">4. What specific leasing strategies are developers implementing to accommodate the growing demand for experiential formats?</span></h2><p>With the growing demand of experiential formats, developers are now designing their floor plans to accommodate more F&amp;B formats, Restaurants, Pubs and&nbsp;FECs. Some strategies that developers are implementing are given below:</p><ul><li>Offering good ceiling height for multiple FECs on different levels.</li><li>Provision of services for F&amp;B formats not concentrated at one location but at various locations in the property.</li><li>Some malls have started a second food court on lower ground floor to help circulation.</li><li>Fine dine, pubs and breweries are given dedicated space in malls with a separate access to their exclusive clientele.</li><li>Some of the under-utilised areas in buildings like Terrace and parking are offered to FEC and F&amp;B formats. Trampoline parks, footsall, net cricket, Go karting, etc. are a few FEC formats which have gained prominence in such spaces. Microbreweries can occupy large area on the terrace and attract good clientele.</li></ul><p>&nbsp;</p><p>&nbsp;</p><p>&nbsp;</p>
KR Expert - Rohit Singh

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