India's retail landscape is witnessing a renewed focus on malls as high street leasing activity experiences a notable decline. According to a recent report by Cushman & Wakefield, leasing on high streets in India saw a 26% quarter-on-quarter (q-o-q) drop in the second quarter of 2025.
Shifting Retail Dynamics
The decline in high street leasing coincides with a resurgence in mall leasing. Malls accounted for 45% of the total leasing volume in Q2 2025, marking a 42% increase compared to the previous quarter. This represents the highest share malls have commanded in the last five quarters, signaling a growing preference for structured retail formats that offer experience-driven environments.
Despite the quarterly decline, high streets continue to hold a dominant position, contributing 55% of the total leasing activity with 1.23 million sq ft. This dominance highlights a persistent undersupply of quality mall space across major cities in India.
Vacancy Trends
The absence of new mall supply in Q2 2025 has led to a decrease in overall mall vacancy rates. Vacancy levels dropped by approximately 77 basis points to 8.16% in Q2 2025. Premium Grade-A or superior malls are experiencing even tighter vacancy rates, hovering around 4.28%. This tightening of vacancy underscores the increasing demand for high-quality retail assets and strengthens the negotiating power of landlords in prime locations. Superior malls continue to maintain strong occupancy, with vacancy levels remaining exceptionally tight, often between 1-2%.
Rental Trends
While mall vacancies are decreasing, average main street rents have remained stable compared to the previous quarter, demonstrating a healthy 6% year-on-year increase. Key high street locations like Khan Market and Connaught Place have not experienced any impact on rentals, with the market remaining tight due to low mall vacancies.
H1 2025 Overview
The first half of 2025 witnessed a 17% year-on-year growth in leasing volumes, reaching 4.61 million sq ft, reaffirming strong retailer confidence amidst stable consumer demand. However, overall retail leasing activity across India's top eight cities experienced a 6% year-on-year decline in Q2 2025, with a total of 2.24 million sq ft leased. This figure also represents a 5.4% decrease compared to the previous quarter, although it aligns with the average leasing volumes observed over the past year.
City-Specific Trends
Hyderabad led retail leasing in Q2 2025 with approximately 0.76 million sq ft, followed by Mumbai at 0.52 million sq ft and Delhi-NCR at 0.3 million sq ft. These three cities collectively accounted for over 70% of the total leasing activity during the quarter. Mumbai and Pune experienced significant year-on-year growth in leasing volumes, increasing by 1.6 times and 1.5 times, respectively, indicating strong performance in western India. Retail leasing in Delhi-NCR saw a drop of 26% q-o-q and 41% y-o-y.
Categories in Demand
Food and beverage, along with fashion brands, continue to dominate leasing demand across both mall and high street formats. In Q2 2025, these categories accounted for over 50% of the leasing activity, reflecting consumers' growing preference for lifestyle-driven retail and experiential offerings. The wellness category has also shown substantial growth, capturing 8% of the leasing volume, marking a two-fold increase year-on-year.
Future Outlook
Looking ahead, the Indian retail sector is expected to maintain its growth momentum, driven by both international and domestic brands. Approximately 4 million sq ft of new Grade A supply is anticipated in the second half of 2025, particularly in key metropolitan areas such as Mumbai, Delhi-NCR, and Hyderabad. This new supply is expected to further fuel the growth of the retail sector and cater to the increasing demand for quality retail spaces.
