Mall Leasing Surge: India's Top Cities Drive 2.24 Million Sq Ft Retail Expansion in Q2 2025

Industry reports revealed that India's retail sector demonstrated remarkable resilience during the second quarter of 2025, with leasing activity reaching 2.24 million square feet across shopping malls and high streets in the country's eight major cities, despite facing softer gift season sentiments that typically impact retail performance.

Steady Growth Amid Quarterly Fluctuations

Market analysts noted that while the Q2 figures represented a modest 5.4% quarter-on-quarter decline, the broader picture remained encouraging. The first half of 2025 recorded cumulative leasing of 4.61 million square feet, marking a substantial 17% year-on-year increase that underscored sustained confidence among retail occupiers in the market's long-term prospects.

Metropolitan Markets Lead the Charge

Three major metropolitan centers emerged as the primary drivers of retail leasing activity during the quarter. Hyderabad topped the list with approximately 0.76 million square feet of space leased, followed by Mumbai with around 0.52 million square feet, and Delhi-NCR contributing 0.30 million square feet. Together, these three markets accounted for more than 70% of the total quarterly uptake, demonstrating the continued dominance of tier-1 cities in India's retail development landscape.

Other significant markets also registered healthy activity levels during the period. Pune secured 0.23 million square feet, Bengaluru recorded 0.18 million square feet, and Chennai contributed 0.16 million square feet to the overall leasing volume. Kolkata and Ahmedabad rounded out the list with 0.05 million square feet and 0.04 million square feet respectively. Notably, Mumbai and Pune exhibited particularly strong year-on-year volume growth, with increases of 1.6 times and 1.5 times respectively.

Experience-Led Retail Gains Momentum

The quarter witnessed a notable shift in leasing patterns, with experience-focused retail formats gaining significant traction. Shopping malls contributed 45% of the quarterly leasing volume, approximately 1.01 million square feet, representing a substantial 42% increase from the previous quarter. This trend aligned with the broader consumer preference for experiential shopping destinations that offer more than traditional retail experiences.

Supply Constraints Drive Vacancy Reduction

Despite the absence of new mall completions during Q2, the retail sector benefited from earlier developments. Grade A mall completions totaling 1.3 million square feet in the first half of 2025 helped address some supply constraints. The lack of new supply during the quarter, combined with sustained demand, resulted in significant tightening of vacancy rates across mall formats.

Overall mall vacancy rates experienced a dramatic reduction of approximately 77 basis points, settling at 8.16% by the end of Q2. Premium Grade A+ malls demonstrated even tighter market conditions, with vacancy rates dropping to just 4.28%. This tightening of available space strengthened the negotiating position of landlords and property owners across major metropolitan markets.

High Street Retail Maintains Stability

Main street leasing accounted for the majority share of quarterly activity, representing approximately 55% of total leasing volume at 1.23 million square feet. This segment demonstrated remarkable stability throughout the period, with average rental rates remaining steady on a quarter-on-quarter basis while still achieving a healthy 6% year-on-year increase.

Supply Pipeline Promises Continued Growth

Industry experts emphasized that high street locations continued to dominate leasing activity due to the combination of constrained Grade-A mall supply and intense demand for curated, premium retail environments. Looking ahead, market projections indicated that nearly 4 million square feet of new Grade A retail space could come online during the second half of 2025.

This anticipated supply addition across key metropolitan markets including Mumbai's evolving retail landscape, Delhi-NCR, and Hyderabad was expected to sustain momentum through the remainder of 2025. The upcoming supply would likely help address current market constraints while supporting continued growth in retail leasing activity.

The robust performance in Q2 2025, combined with the positive outlook for new supply additions, reinforced market confidence in India's retail real estate sector. As the country's major cities continued to witness significant mall expansion projects, the sector appeared well-positioned to maintain its growth trajectory through the second half of 2025.