Cushman & Wakefield report highlights India's retail space crunch as brands expand store network

A recent report by Cushman & Wakefield has highlighted the critical challenge facing India's booming retail sector: a significant shortage of retail space per capita (RSPC). The findings reveal a pressing need for substantial expansion in retail infrastructure to accommodate the growing aspirations of both domestic and international brands.

India’s RSPC much lower that the US, China
National average RSPC: The report calculates India's national average RSPC stands at a mere 2.7 sq ft per person. While this indicates a growing retail sector, it remains significantly lower than global standards. Compared to global standards, in developed economies like the US the RSPC is around 20 sq ft per person. China stands at around 5 sq ft per capita. This stark contrast emphasizes the vast room for growth in the Indian retail landscape.

City-wise disparities: The report reveals significant variations in RSPC across Indian cities. While major metros like Delhi and Mumbai fare relatively better, with RSPC figures of 3.2 and 4.1 sq ft per person, respectively, Tier-II and Tier-III cities lag behind considerably however, rapid urbanization and rising disposable incomes in these cities are driving the demand for retail space, attracting both domestic and international brands. Meanwhile Mumbai’s high RSPC is attributed to its mature retail market, strong consumer spending, and the presence of numerous international brands. Anshul Jain, Managing Director, India & South East Asia, Cushman & Wakefield says, "India's retail sector is at an inflection point, with strong growth potential. The increasing RSPC in major cities is a testament to the sector's resilience and the rising consumer demand."

Table: Citywise RSPC in India

Tier 1 cities
Mumbai: 4.1 sq ft per person
Delhi NCR: 3.5 sq ft per person
Bengaluru: 3.2 sq ft per person
Chennai: 2.9 sq ft per person
Kolkata: 2.5 sq ft per person

Tier II & III cities
Pune: 3.0 sq ft per person
Hyderabad: 2.8 sq ft per person
Ahmedabad: 2.6 sq ft per person
Lucknow: 2.2 sq ft per person
Jaipur: 2.0 sq ft per person

The Cushman & Wakefield's analysis shows current RSPC constraints pose a significant challenge for both domestic and international brands seeking to expand or enter the Indian market. Limited availability of quality retail space is hindering their growth plans.

The report features several case studies illustrating the impact of limited retail space. For instance, the report notes that several international brands have been hesitant to enter India due to the scarcity of suitable retail locations. For example, despite its popularity, H&M's expansion in India has been slowed by the lack of suitable retail spaces, particularly in Tier-II, III cities. Similarly, while IKEA has successfully opened stores in a few major cities, its ambitious plans for pan-India expansion are facing hurdles due to the scarcity of large-format retail spaces.

The report projects that India's retail sector will continue rapid growth in the coming years. However, this growth will be severely constrained unless there is a substantial increase in retail space availability. The report estimates that India needs an additional 150-200 million sq ft of retail space to accommodate the growing presence of domestic and international brands. It underscores the urgent need for increased investments in the development of Grade-A malls and other retail formats across the country. This will not only boost the growth of existing brands but also create a conducive environment for international brands to establish a strong presence in India.