Retail leasing continues to outpace Grade A mall supply in H1 2026: Report

Retailers leased 4.1 million sq ft of Grade A mall space across India's top seven cities in H1 2026, nearly 4.5 times the new supply delivered during the period, Anarock said

Retail leasing continued to outstrip the supply of Grade A mall space across India's top seven cities in the first half of 2026 (H1 2026), underscoring a persistent shortage of quality retail assets despite a moderation in both leasing and new completions, according to a report by property consultant Anarock.

 

Gross leasing of Grade A mall space stood at about 4.1 million square feet (msf) during January-June 2026, against just 0.9 msf of new mall completions, implying retailers leased nearly 4.5 times the space delivered during the period.

 

The report said the imbalance comes after a record 2025, when new Grade A mall supply reached 5.2 msf, while leasing surged to 13 msf.

   

"H1 2026 data indicate a further widening of the structural imbalance of demand and supply as geopolitical uncertainty delayed mall delivery and expansion decisions," the report said.

 

Anuj Kejriwal, chief executive officer (CEO), retail, and CEO, Europe, Middle East and Africa, Anarock Group, said the supply-demand mismatch has been building over several years.

 

"The supply problem is cumulative and escalating — data of India's top seven cities over the past 16 years show 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' biggest challenge is not drawing shoppers but finding the right spaces to serve them."

 

He added, "This gap has deepened in the past few years. In 2023, the top seven cities added approximately 5.3 msf of new Grade A retail supply against gross leasing of 6.5 msf. In 2024, new supply fell sharply to just 1.1 msf, while leasing stayed at 6.5 msf — almost six times the newly added space. While new mall supply recovered partially in 2025 with 5.2 msf of new completions, leasing surged to a record 13 msf."

 

Both leasing and new mall supply declined from the strong levels seen in H1 2025. Leasing declined 24 per cent year-on-year (Y-o-Y), while new completions fell 57 per cent amid geopolitical uncertainties and delayed decision-making.

 

Among the top seven cities, Delhi-NCR was the only market to witness new Grade A mall completions during H1 2026, adding around 0.9 msf of space, while leasing stood at approximately 1.26 msf. Hyderabad, Mumbai, Bengaluru, Pune, Chennai and Kolkata recorded leasing activity but saw virtually no new Grade A mall supply, with retailers relying on existing stock.

 

Anarock attributed the shortage to the complexity of developing Grade A malls, which require large contiguous land parcels, significant upfront investment, detailed catchment analysis, anchor tenant commitments, and longer approval and construction timelines.

 

"The availability of suitable land is itself a constraint in established urban markets, while rising land costs can make new projects difficult to structure," Kejriwal said. "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 msf that year, despite robust leasing demand."

 

The report noted that vacancy in Grade A malls declined to 6.7 per cent in H1 2026, the lowest since 2010. In comparison, post-pandemic vacancy had peaked at 15.5 per cent in 2021, while pre-pandemic the highest vacancy was 21.5 per cent in 2011.

 

In contrast, Grade B and C malls continue to report substantially higher vacancy levels, ranging from around 8 per cent to 35 per cent, highlighting the shortage of professionally managed, institutionally owned Grade A retail assets.

 

Anarock said the combination of low vacancy and sustained retailer demand presents a significant opportunity for developers and institutional investors. However, unless the supply pipeline improves meaningfully, retailers are likely to face longer wait times for prime locations, higher occupancy costs, and increased competition for established malls.