The Surprising Numbers
Recent data paints a clear picture of a brick-and-mortar resurgence. In the first half of 2026, gross leasing of retail space across India's top cities surged to a four-year high, increasing by over 10% year-on-year to 6.27 million square feet, according
to JLL India. Other property consultancies like CBRE reported similar momentum, with leasing climbing 20% to 3.9 million square feet, highlighting the aggressive expansion by retailers. This boom is happening despite a slowdown in new mall construction, leading to lower vacancy rates and proving that demand for quality physical space is outstripping supply.
Who Is Driving the Demand?
The charge is being led overwhelmingly by domestic brands, which accounted for more than 70-80% of the leasing activity. Fashion and apparel retailers have been particularly aggressive, snapping up about 40% of the total leased space. They are followed by significant activity in the food and beverage sector, which took up 14% of new leases, and entertainment venues like cinemas and gaming zones at 9%. This expansion isn't just confined to major metros; brands are increasingly pushing into Tier-II cities like Jaipur, Chandigarh, and Kochi, chasing the next wave of consumers.
Why Physical Stores Still Matter
The move back to physical spaces isn't a rejection of the internet, but an evolution of strategy. For one, India remains a predominantly offline market. Even with rapid e-commerce growth, online sales are expected to make up only about 13% of the total retail market by 2030, meaning the vast majority of transactions will still involve a physical store. Furthermore, rising digital advertising costs have made acquiring customers online increasingly expensive. Many direct-to-consumer (D2C) brands that built their empires online are now finding that physical stores can be more efficient tools for customer acquisition and building trust.
The New ‘Phygital’ Reality
Retailers are realizing the future isn't a battle between online and offline, but a blend of both. This “phygital” model sees stores serving multiple purposes. They are no longer just points of sale, but experience hubs where customers can touch, feel, and try products before buying. A physical presence builds brand confidence in a way that a website often cannot, especially in Tier 2 and Tier 3 markets. Stores also function as fulfillment centers for online orders, manage returns, and create a seamless experience where a customer might discover a product on Instagram, try it in a mall, and complete the purchase via an app.
A Calculated Bet on Future Growth
This wave of store openings is not just a response to current demand. In many cases, same-store sales growth has been modest. Instead, retailers are making a strategic bet on future consumption. They are expanding their footprint to be physically present where the next generation of consumers will emerge. As one expert noted, retailers are making sharper, more disciplined choices about expansion, which is building a more resilient long-term retail sector for the country. The high leasing rates are a tangible investment in this vision, proving that for Indian retail, the physical store is far from dead; it's being reinvented.
