Buoyant year for retail real estate market

Backed by upbeat economic and consumer sentiments, and a pro-reform government, the Indian retail real estate market was marked by the foray of international brands, the launch of landmark retail developments, and an overall vibrant demand scenario in 2015.
The government has been targeting reforms at the right places, specifically for the retail sector. It has recently allowed Foreign Direct Investment (FDI) reforms and liberalisation for single brand retail trading and duty free shops. It has also been taking measures for easing FDI norms for the e-Commerce segment.
Although the government seems to be dedicated to sourcing FDI and improving ease of doing business in the country, the restrictive manifesto on multi-brand retail trading (which restricts a foreign investor's stake in an Indian multi-brand retailing company to 51 per cent) continues to be a deterrent for foreign retailers and overall retail market development in India.
On the positive side, the growth in retail space demand during 2015 was driven primarily by fashion and apparel, and F&B segments, with the Delhi National Capital Region (NCR), Bangalore and Mumbai witnessing the most absorption of investment-grade shopping centre space.
While domestic brands from segments such as women's ethnic wear, leather goods, and fashion accessories continued to expand their store portfolios across different channels and new markets, international brands were also aggressive in making their presence felt.
Leading global fashion brands, H&M and GAP, opened their first and second stores in India at Delhi's Select Citywalk and Ambience Mall, respectively, to long queues and much fanfare. In fact, both the brands have already secured prime retail spaces in existing and upcoming malls in major cities - bearing testimony to the fact that India has emerged as an important destination for international retailers.
Other global brands to mark their India entry in 2015 included Juicy Couture, G-Star Raw, Aeropostale, and BCBG Max Azria from the apparel segment, along with La Prairie, Bang & Olufsen, Villeroy & Boch, Montegrappa, and Motoplex by Piaggio from other retail segments.
Delhi NCR was, in fact, the most preferred point of entry for brands coming to India during this year.
With an increased appetite for newer concepts and cuisines among Indian consumers, along with the arrival of F&B centric developments such as DLF Cyber Hub at Gurgaon in the NCR and Epicuria at Nehru Place in Delhi, the F&B segment saw heightened activity in 2015.
Established players such as Burger King, Dunkin Donuts, Starbucks, and Nando's undertook significant expansion campaigns during the year; while Wendy's, Jamie's Italian, Pizza Express, Barcelos and Carl's Jr were among the new ones to enter the Indian F&B landscape.
Local players too continued to expand their restaurant chains with the likes of Soda Bottle Openerwala, Farzi Café, Social, Paradise Biryani, and Fatty Bao opening multiple outlets across major cities.
A significant gap, however, still exists in terms of quality retail real estate in key markets; and this continues to be a challenge for international retailers considering their India entry. Last year saw the launch of DLF Mall of India at Noida in the NCR (at two million square feet, it's touted to be the largest mall in the country) and Virtuous Retail's VR Mall in Bangalore.
Major shopping centre developments such as Garden's Galleria and Logix City Centre at Noida, Bharti's Worldmark at Aerocity, Delhi, and L&T Seawoods Mall at Navi Mumbai are scheduled to open in 2016, and a surge in shopping centre supply is indicated across the metro cities.
Given the rising popularity of online shopping, more and more retailers are adopting an Omni-channel strategy-by establishing online portals as well as strengthening their network of physical stores.
The e-Commerce boom has also led mall developers to re-imagine and enhance the 'offline' shopping and mall-going experience of customers. They are effectively bringing in a variety of international brands and offering a mix of vibrant entertainment and F&B options for shoppers.
The brick-and-mortar format of retail real estate is all set to compete with today's virtual shopping space as the former focuses on 'experience' and 'entertainment'.
Rentals for Grade A shopping centres across major markets in India witnessed a marginal rise as compared to last year due to steady demand and limited new supply. Meanwhile, high street rentals remained steady across most markets. The year 2015 saw increased interest from private equity players in completed retail assets.
While challenges still exist, specifically for FDI in multi-brand retail, 2016 is expected to be a buoyant year for the retail real estate market in India. With international anchor tenants increasingly willing to explore big-box formats in shopping centres as well as customised, smaller store formats on high streets, demand from global brands is expected to drive organised retail space absorption in 2016.
With premium developments focused on luxury retail planned in Delhi (Chanakyapuri) and Mumbai (Bandra-Kurla Complex), the luxury segment is also expected to bounce back stronger. In fact, the demand for retail space will most likely exceed supply, and further put an upward pressure on rentals for major high streets as well as investment-grade shopping centres.
As global brands pursue their India entry plans and domestic players continue to expand their footprints, the retail real estate market in India will be keenly dependent on a more open FDI policy regime and the timely delivery of quality space by developers to be able to reach its optimum potential of becoming a leading retail market in Asia. 
Anshuman Magazine is Chairman and Managing Director, CBRE South Asia Pvt. Ltd