The Numbers Behind the Boom
Recent data from the first half of 2026 paints a clear picture of resilience and growth in India's brick-and-mortar retail sector. According to a report from real estate services firm JLL, gross leasing across the top seven cities surged to a four-year
high of 6.27 million square feet, a 10.5% increase year-on-year. Another report from consultant CBRE noted a 20% year-on-year rise, reaching 3.9 million square feet of leasing. This surge happened despite a significant slowdown in new mall construction, indicating that demand is outstripping the supply of quality retail space and giving landlords greater negotiating power. Domestic retailers are overwhelmingly driving this trend, accounting for over 79% of leasing activity, a strong vote of confidence in India's local consumption story.
Fashion and Food Lead the Charge
The driving forces behind this leasing spree are clear: fashion and food. The fashion and apparel segment was the single largest contributor, accounting for approximately 40% of all retail space absorption. This includes everything from department stores and mid-range fashion labels to popular athleisure brands. Following closely in demand is the food and beverage (F&B) sector, which made up about 14% of leasing activity. Consumers are increasingly seeking out experience-driven destinations, and malls are responding by curating a mix that blends shopping with dining and entertainment. Entertainment venues themselves accounted for around 9% of leasing, with jewellery, homeware, and electronics also showing healthy demand.
Beyond the Metros: The Tier-II and Tier-III Story
While major metropolitan hubs like Mumbai, Delhi-NCR, and Bengaluru still anchor the majority of leasing volume, the most compelling growth story is unfolding in India's Tier-II and Tier-III cities. Retailers are aggressively expanding into markets like Jaipur, Chandigarh, and Kochi. In these cities, fashion and apparel brands are particularly dominant, making up nearly 70% of leasing in some cases. This expansion is fueled by rising disposable incomes, better infrastructure, and a growing class of aspirational consumers who are digitally savvy but still value the touch-and-feel experience of physical stores. These once-overlooked markets are now seen as the next frontier for retail growth, with brands recognizing that a significant portion of India's future consumption will come from beyond the traditional metros.
The Rise of the 'Phygital' Consumer
This trend does not signal the end of e-commerce; rather, it marks the evolution towards a more integrated 'phygital' (physical + digital) retail landscape. Even digital-native, direct-to-consumer (D2C) brands are increasingly investing in physical stores. In the first half of 2026, D2C brands accounted for around 28% of overall retail leasing, up from 23% the previous year. For these brands, physical outlets serve as powerful 'billboards', offering customers a tangible way to experience the brand, which in turn drives online sales. Retailers are learning that the modern consumer journey often fluidly moves between online discovery and offline experience. Success is no longer about choosing between online and offline, but about creating a seamless, convenient, and engaging experience across all channels.
