Mumbai, 27 July: India’s retail space growth has hit a supply wall. While Indian shoppers spend, brands expand and retailers continue to chase high-quality locations, India’s is witnessing a chronic shortfall of Grade A mall space supply to keep pace. Latest ANAROCK Research data shows that in H1 2026, retail leasing once again outpaced new Grade A mall completions across India’s top 7 cities.
The top 7 cities witnessed gross leasing of approx. 4.1 Mn sq. ft. of Grade A mall space in in the first half of the year – against just 0.9 Mn sq. ft. new completions.
Anuj Kejriwal, CEO – Retail & CEO – Europe, Middle East & Africa, ANAROCK Group, says, “The supply problem is cumulative and escalating – data of India’s top 7 cities over the past 16 years shows a persistent mismatch between Grade A retail supply and leasing demand. While new mall completions fluctuated sharply from year to year, leasing demand has steadily absorbed available Grade A space, pushing vacancy rates lower. We now have a chronically supply-constrained market where retailers’ the biggest challenge is not drawing shoppers but finding the right spaces to serve them in.”
“This gap has deepened in the recent few years – in 2023, the top 7 cities added approx. 5.3 Mn sq. ft. of new Grade A retail supply against gross leasing of 6.5 Mn sq. ft. In 2024, new supply fell sharply to just 1.1 Mn sq. ft., while leasing stayed at 6.5 Mn sq. ft. – almost six times the newly added space,” says Kejriwal. “While new mall supply recovered partially in 2025 with 5.2 Mn sq. ft. of new completions, leasing surged to a record 13 Mn sq. ft.”
Demand-Supply Gap Widens in H1 2026
H1 2026 data indicate a further widening of the structural imbalance of demand and supply as geopolitical uncertainty delayed mall delivery and expansion decisions.
Gross retail in H1 2026 leasing stood at 4.1 Mn sq. ft. while new Grade A completions totalled only 0.9 Mn sq. ft. In short, retailers leased nearly 4.5 times the new space delivered during the period.
Both leasing and new supply moderated from exceptionally strong levels in 2025. Leasing declined by around 24% Y-o-Y, while new completions fell by approx. 57%. Geopolitical uncertainty in the first half of the year also prompted some retailers to defer expansion decisions.
Yet, even with this moderation, demand continued to substantially exceed new supply. City-level data reveals that Delhi-NCR was the only top market to record new Grade A mall completions in H1 2026. It added approx. 0.9 Mn sq. ft. of supply – but leasing of approx. 1.26 Mn sq. ft.
Other major markets – Hyderabad, Mumbai, Bengaluru, Pune, Chennai, and Kolkata – recorded leasing activity, but virtually no new Grade A mall space in the period. Retailers were leasing from an existing and increasingly constrained stock of quality malls.
Grade A Mall Development – The Complexity Challenge
The shortage of Grade A mall space is not simply a function of developers failing to respond to demand. Building a successful large-format retail asset is considerably more complex than delivering other forms of real estate.
Grade A mall requires a large and contiguous land parcel in a strategically located catchment, significantly more upfront investment, detailed consumer and catchment analysis than other mall formats, high-grade anchor tenant commitments, and longer development and approval cycles.
“The availability of suitable land is itself a constraint in established urban markets, while rising land costs can make new projects difficult to structure,” notes Kejriwal. “Approval timelines, financing conditions and construction schedules can further delay project delivery. 2024 demonstrated how quickly supply pipelines can be disrupted – new Grade A completions fell to just 1.1 million sq. ft. that year, despite robust leasing demand.”
The 57% year-on-year decline in new completions in H1 2026 is aa sobering reminder that retail supply cannot be scaled up overnight in response to rising retailer demand.
Retail Sector: Demand-Supply Dynamics in Top 7 Cities
All-time Low Vacancy Levels
The tightening supply-demand equation is evident from vacancy levels in the last 16 years. They have fallen to the lowest since 2010, to 6.7% in H1 2026. Pre-pandemic, the highest vacancy in Grade A malls was seen in 2011 (21.5%). Post-pandemic, it was highest at 15.5% in 2021.
Grade B & C Malls – The contrast with lower-grade retail stock is striking. Grade B and C assets across the major cities continue to report substantially higher vacancy, ranging from around 8% to as much as 35%.
Clearly, India does not lack retail real estate in terms of total square footage – it lacks well-located, professionally managed, institutionally owned Grade A and A+ mall space that can meets large national and international retailers’ needs.
The Supply Side Opportunity – For developers and institutional investors, the combination of low vacancy, strong retailer interest and the continued expansion of experience-led consumption create a compelling case for high-quality mall development in India’s major consumption centres. The challenge will be particularly acute in markets where vacancy has already compressed to near-record lows.
Without a meaningful increase in new supply, retailers may increasingly face longer waiting periods for prime locations, higher occupancy costs, and greater competition for established malls.