Retail may continue to face dearth of quality space in 2016

Sharing this article which appeared in ET Realty

BENGALURU: Indian retail sector continues to witness dearth of quality retail space in 2015, a trend that is likely to continue in coming year too.

“Retailers will have to revisit their real estate strategy and have a flexible approach, customised to different micro-markets. Investments by both home-grown and international brands will strengthen in tier-II and tier-III markets as they expand beyond tier-I cities,”said JLL India in a recent report.

According to the property consultancy firm, the year 2015 saw consolidation of retail real estate by brands and retailers who focused on their profit-making stores and closed down loss-making ones, and

“The entry of institutional investors. Thanks to relaxation of sourcing norms, single-brand retail companies will find more reason to explore the Indian market and also be able to undertake e-commerce business independently,” the report mentioned.

In 2016, more mature investors will come in and buy built-up retail spaces. Once they have the relevant experience and foothold in India, they will start investing in ‘greenfield’ assets. Retailers are maturing as competition heats with the entry of bigger brands into the country. Stronger players will successfully attract private equity (PE) investments over the coming years. PE may also go into select mall investments, especially in under-represented markets or for mature assets’ buyout.

The report further mentioned That quality mall space is coming up with strong pre-commitments, indicating that retailers remain bullish about India’s long-term consumption story. Retailers will start experimenting with formats and sizes for the same brands, adapting to markets as they start moving up the value chain. 2015 saw food and beverage (F&B) emerge as a strong category, and this will continue in 2016. Entertainment options will also improve, and technology-led retail will start entering in the single-brand retail store category.

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