The proliferation of ghost shopping centers, characterized by over 40 percent of vacant retail space, saw a staggering surge of 59 percent in 2023, reaching 13.3 million square feet (msf), according to the latest “Think India Think Retail 2024” report by Knight Frank, a leading real estate consultancy. The study, encompassing 340 shopping centers and 58 high streets across 29 Indian cities, highlighted a notable increase from 57 to 64 ghost shopping centers between 2022 and 2023, resulting in a value loss of Rs 6,700 crore.
The report underscores the need for proactive measures from stakeholders, emphasizing that approximately $798 million (Rs 6,700 crore) is tied up in the gross leasable space of these non-performing shopping centers. It suggests consolidation of retail asset portfolios by institutional investors and urges mall developers to consider repurposing or demolishing these structures, opening up opportunities for land monetization.
In Tier-I cities, the National Capital Region (NCR) leads the pack with the largest inventory of ghost shopping centers, totaling 5.3 msf, marking a substantial 58 percent increase from the previous year’s 3.4 msf. Mumbai and Bengaluru follow closely, with 2.1 msf and 2 msf of ghost shopping centers respectively. However, Hyderabad experienced a decline in ghost shopping center inventory by 19 percent, reaching 0.9 msf in 2023. Kolkata, on the other hand, recorded the sharpest rise at 237 percent, albeit from a low base of 0.3 msf in 2022, reaching 1.1 msf in 2023.
Despite the surge in ghost shopping centers, the overall shopping center vacancy rate in eight major Indian cities improved to 15.7 percent in 2023 from 16.6 percent in 2022, indicating a growing demand in the retail segment. Excluding ghost shopping centers, the vacancy rate in the segment improved to 7.4 percent. The report rationalizes this exclusion, citing various constraints such as poor location, obsolete design, strata-sold arrangements, dilapidation, and unattractiveness of the structures, which deter widespread retailer interest.
Looking ahead, shopping centers in 29 Indian cities hold the potential to generate $14 billion in revenue in the Financial Year 2024-25. However, this projection necessitates strategic interventions to address the challenges posed by ghost shopping centers, including innovative approaches to repurpose or redevelop these spaces, fostering investor confidence, and revitalizing the retail landscape.
In conclusion, the significant expansion of ghost shopping centers underscores the evolving dynamics of India’s retail sector. While presenting challenges, it also offers opportunities for transformation and growth, urging stakeholders to adapt and innovate to harness the full potential of the retail market.
