India sees 59% surge in ghost shopping malls: Report

New Delhi: India is seeing a sharp surge in ghost shopping centres with underperforming retail space rising by 59% year-on-year to 13.3 million square feet in 2023, according to a report by real estate consulting firm Knight Frank.

These centers, defined as those with vacancy rates of over 40%, grew to 64 by the end of 2023, from 57 in 2022. 

The rise in these ghost malls —calculated basis gross leasable area (GLA)—reflects a massive ₹6,700 crore lost in potential sales in 2023, according to the 'Think India Think Retail 2024” report released Tuesday. 

Several shopping centers are struggling as an increasing number of consumers turn to online shopping and are shifting to larger centers for enhanced experiences.

“Shopping centres in distress grapple with ongoing hurdles, compounded by fresh additions worsening their already elevated vacancy rates,” the report said. “This surge has led to a rise in the count of shopping centres labelled as ghost shopping centre stock," it added.

The study covered 340 shopping centres and 58 high streets across 29 Indian cities. According to Knight Frank Research, India had a total shopping centre stock of 125.1 million square feet (msf) in 2023.

The National Capital Region led this rise with 5.3 msf of such space, a 58% jump year-on-year, followed by Mumbai with 2.1 msf (up 86%) and Bengaluru with 2 msf. Only Hyderabad reported a decrease. 

Underperforming centers were either demolished for redevelopment, closed permanently, or auctioned, it said.

“Such a scenario (rise in ghost shopping centres) offers institutional investors the chance to explore avenues for repurposing or revitalizing their retail portfolios, while developers can seize opportunities to monetize these assets through repurposing or redevelopment efforts,” the report said.

Shopping centre vacancies across eight Indian cities, however, improved from 16.6% in 2022 to 15.7% in 2023. 

Excluding ghost shopping centres from the stock in the top eight cities, the shopping centre vacancy in India improved dramatically due to the better performance of Grade A malls and reasonable occupancy in Grade B assets.

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“Grade A malls have notably excelled, maintaining robust occupancy, foot traffic, and conversion rates, thereby delivering value to their customers,” said Shishir Baijal, chairman & managing director, Knight Frank India. “Conversely, Grade C assets and those classified as ghost shopping centres are lagging, prompting landlords to take action to rejuvenate or divest such properties.”

“Retailer appetite for expansion has led to an increase in preference for Grade A assets at an all-time high, leading to the high double-digit vacancy in Grade C structures as performance and operational metrics of better performing malls improved,” he said. 

“Ahmedabad and Kolkata have witnessed a sharp rise in vacancy compared to the last review period, as there is scope for infusion of institutional-owned shopping centre stock and development of premium properties in these cities.”