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Retail sector leasing likely to touch 5.5-6 mn sq ft in 2023, highest level after the 2019 peak: CBRE Outlook

March 29, 2023 – CBRE South Asia Pvt. Ltd., on Wednesday announced the findings of its report, ‘2023 India Market Outlook’. The report highlights key trends and projections for the Indian real estate sector this year. 

According to the report, retail leasing is expected to touch 5.5 – 6 mn sq. ft. in 2023, the highest level after the 2019 peak of 6.8 mn. sq. ft. It is expected that primary leasing in newly completed malls will remain the key driver of retail space demand in 2023. The supply scenario is set to improve as not only a significant amount of pent-up supply lined up for completion during 2023, but several investment-grade projects launched by reputed players in the past 1.5 – 2 years are also expected to become operational in 2023. As per the report, it is estimated that supply would touch ~ 6 mn. sq. ft. in 2023, the highest in the past five years. 

The report further highlights that Indian consumers have remained optimistic about their personal finances, especially compared to other economies. This was reflected in CBRE India’s Live-Work-Shop consumer sentiments survey conducted in late 2022, wherein 77% of respondents revealed their confidence about their personal finances. 

Anshuman Magazine, Chairman & CEO – India, South-East Asia, Middle East & Africa, CBRE, said, “We believe that any impact of an expected slowdown on economic activity will be circumvented by strong macroeconomic fundamentals and domestic consumption. The government’s strong capex programme, with a focus on infrastructure development and capacity building across sectors, is aimed at driving investment. As the second-largest employment generator in India, the real estate sector will continue to be a focus area for these investments. 

Meanwhile, India’s strong domestic consumption would continue to strengthen the retail sector, which would see a strong supply pipeline in 2023, driving leasing activity.

Ram Chandnani, Managing Director, Advisory & Transactions Services, CBRE India, said, “Retailers must be prepared and consider strategic investments amid rapidly changing consumer behaviour. While global headwinds could impact discretionary retail spending, cautious optimism among consumers along with diversified location and omnichannel sales strategies of retailers are likely to help the sector navigate the next normal.

Five top trends expected to shape the Indian retail sector in 2023


  • Store will remain at the heart of business operations: Examining the products, support provided by a salesperson, real-time purchase and a layer of experience offered by brick-and-mortar stores remain some of the top reasons for engaging customers in an in-store shopping experience. 
  • Retailers will continue to carve out success in diverse locations:   Most of the brands have an existing customer base which is willing to explore locations where retailers have used innovative concepts to draw a crowd. Currently, this trend is mostly prevalent among F&B retailers, but other categories are also likely to adopt this approach to expand their footprint and existing customer base. In a bid to diversify their location strategies further, several international brands in the F&B and apparel segments are also opening stores along expressways or highways.
  • Leisure spend may be constrained: Compared to other economies, Indian consumers remained confident about their personal economic situation despite the current global outlook. Although household spending has held up so far, consumers are likely to keep a close eye on the inflationary pressures and their impact on the prices of commodities going forward. 
  • Retailers will become more active in untapped markets: Rising urban population, increase in per capita income, supply chain revamp after the pandemic and successful brand launches in tier-II, III and IV markets have led retailers and prominent developers alike to explore these emerging untapped markets. India’s transition into an organized retail market would be driven by the continued growth in these cities. It would, thus, become vital for retail stakeholders to harness the economic and development potential of these cities.
  • Increased awareness towards sustainability: Developers are not only promoting sustainable initiatives (recycling, waste management, etc.) across their assets but also sustainable brands. In a bid to become more sustainable, many retailers are re-evaluating sustainability credentials of their product / brand and directing their strategies towards investing in a sustainable and responsible growth.

Things to watch out in 2023

  • The social media flavour: The growing popularity of locally produced goods and smaller / independent brands can be traced to their social media presence, which has captivated young shoppers, especially late millennials. Most of these brands engage young audiences and broaden their reach through influencer marketing. The impact of their social media reach is such that these brands are now competing not only with big domestic names but also international ones.
  • Omnichannel retail strategies to evolve due to high cost of reverse logistics: Online returns cause enormous stress on distribution networks, and reverse logistics cost for an average return can go up to 66% of the original sales price of the item. Over time, online shopping penetrated deeper into the Indian retail story, with most e-commerce channels and online platforms of notable brands adopting a free returns policy. Fast forward to today, since the cost of returning items is significant for retailers, many brands and e-commerce channels now have a reverse logistics fee and / or they penalize customers for high return rates. However, the demand for online shopping will continue to grow and therefore retailers are likely to leverage store networks and adopt innovative omnichannel strategies to offset the high cost of reverse logistics.

CBRE OUTLOOK 2023 highlights


Post-pandemic resurgence in leasing activity to stabilize, steady supply pipeline expected in 2023

The resumption of economic activity in 2022 post pandemic relaxations led to the release of pent-up demand and a gradual acceleration of return-to-office (RTO) plans by occupiers, which in turn propelled leasing momentum. Office absorption in India touched 56.5 million sq. ft. in 2022, surpassing the 40.5 million sq. ft. leasing levels observed in 2021 by about 40%. Even though the full impact of the economic challenges on global corporates’ leasing decisions is yet undetermined, absorption levels may face downward pressures during the year.

  • There are indications of a slower pace in activity initially, but it would continue to pick up, especially during the second half of 2023.  
  • The technology sector is expected to continue to drive leasing activity in 2023. 
  • Amongst major cities, Bangalore, Delhi-NCR and Hyderabad would remain the biggest demand drivers, while sustained leasing activity is also expected in Chennai, Mumbai, Pune and Kolkata.
  • A steady supply pipeline of quality assets is expected to result in around 51-53 million sq. ft. of space getting delivered in 2023 – a marginal increase of 3-4%.

Top office sector trends expected to shape 2023

  • Hybrid working to continue with an emphasis on office; occupancies to attain a new equilibrium as occupiers ramp up Return-to-Office (RTO) plans.
  • Flight-to-quality wave towards modern, premium and sustainable spaces likely to continue in the medium to long term; sustainable building features and operations would be among occupiers’ most sought-after building attributes.
  • Occupiers’ appetite for high-quality assets with a perfect blend of technology, wellness and sustainability features is expected to remain strong.
  • In response to elevated fit-out costs, possible strategies for occupiers could include adjusting fit-out budgets for cost escalation, requesting additional fit-out periods from landlords, renewing leases in currently occupied spaces, seeking fully fitted spaces or considering flexible space options.
  • Workplace strategies would become key enablers of purpose-driven flexibility. To match new work styles, occupiers may revisit workplace design standards including the rebalancing of heads-down ‘me’ vs collaborative ‘we’ spaces and open vs enclosed collaboration spaces. Another emerging priority for occupiers would be DE&I initiatives in the workplace. These changes are likely to differ based on the chosen hybrid working strategy i.e., office-first, hybrid or remote-first.

Resilient occupier demand to drive leasing in 2023

Demand for I&L spaces is anticipated to be resilient in 2023 on the back of occupiers adopting a ‘multipolar’ supply chain strategy and the continued government impetus to improve infrastructure and investments. However, growth rates might stagnate as occupiers align their portfolio strategies with global headwinds. This would lead to absorption to range between 32-35 million sq. ft. with a growth rate of about 1-5% in 2023.

The demand is expected to be predominantly driven by 3PL and engineering & manufacturing occupiers. We also anticipate heightened interest from FMCG, retail and electronics & electrical firms.

  • Occupiers would prioritize prime locations for expansion, but non-availability of ready-to-move-in supply would shift their focus towards secondary locations which would enable them to leverage comparatively low rentals. 
  • Further, occupiers would also be keen to expand their supply chain linkages to tier-II and III locations where the growth of e-commerce is higher than established tier-I cities.
  • The I&L supply is forecasted to exceed 2022 levels and rise to 24-26 million sq. ft. in 2023. The stronger pipeline is due to the completion of pent-up supply. 
  • Forthcoming I&L parks are expected to feature standard specifications, including sufficient loading / unloading bays, power back-ups, ridge ventilators, thermal insulations and fire sprinklers as per FM II regulations.  
  • ESG plays a significant role in the I&L sector, with more corporates committing themselves to decarbonisation and CO2 neutrality. 
  • A majority of upcoming projects feature steel structures which can hold solar panels, Sewage Treatment Plants (STP) / Water Treatment Plant (WTP), daytime light / ridge ventilation, greening of facilities, etc.
  • Smart warehouse tech has seen rapid uptake in recent years, allowing occupiers to improve efficiencies, augment order-handling capacities and resolve labour shortages.

Top trends expected to shape 2023

  • Supply chain diversification to impact leasing in 2023. Demand centres would see more robust leasing as several occupiers prefer to locate their warehouses closer to consumption hubs to reduce transport costs
  • Multilevel warehouses to gain traction in suburbs of tier-I locations which would help solve the urban logistics (last-mile logistics) puzzle.

Mid-end, followed by affordable and high-end segments to drive momentum; investor sentiments to remain positive

Heading into 2023, we anticipate that the strong momentum seen in 2022 in both sales and new launches is expected to continue in the first half of the year. As in 2022, we expect apartment launches to remain robust this year as well, with Mumbai, Hyderabad, Pune and Delhi-NCR driving supply infusion in 2023. 


  • Projects categorized under two buckets (INR 45 lakh – 1 crore and INR 1 – 1.5 crore) have remained the preferred choice of buyers, and going forward as well, we expect demand for such projects to remain strong.
  • In the premium / luxury housing segment, we expect to see the strong sales traction to continue in 2023, against the backdrop of a depreciating rupee and significant wealth creation at the upper end of the income pyramid.
  • In addition to affordability, better quality property and surroundings have emerged as important reasons for selection of property for relocation.
  • New housing demand will be centred and driven around areas with good physical as well as social infrastructure.

Top trends expected to shape 2023

  • Product alignment with changing consumer demands; strengthening of wellness and safety features with focus on sustainability. 
  • Continued policy thrust and support from central and state governments.
  • Younger generation to have a say in homebuying decisions; demand for rental housing could strengthen in the right environment: the Live-Work-Shop survey revealed that almost 60% of Gen Z and more than 70% of early millennials displayed a greater appetite for owning a house.
  • Monetary tightening to have limited impact on residential sales: we believe that the latest 25 bps hike in repo rate would have a limited impact on mortgages, as home loan is a long-term commitment, which may see varying interest rate regime over the entire 15-20 years home loan cycle.
  • Adoption of technology to continue: We believe that homes of the future will be ‘smart’ with a greater adoption of tech tools such as voice-enabled devices, sustained smart homes, and matter-compliant devices.
Alternate segments


Steady office absorption by life sciences firms

The outlook for the sector would continue to be positive as office leasing activity by life sciences firms is expected to sustain going forward in 2023. Select companies would also consider leasing flexible spaces as part of their ‘core+flex’ strategies. BTS developments with plug-and-play features are expected to witness a higher preference, for which investors and developers may consider partnering with occupiers. 

  • Office and lab spaces conforming to ESG guidelines would become vital to life sciences occupiers’ ESG strategies in the medium to long term.
  • ‘Flight-to-quality’ leasing by occupiers in new-age upcoming and existing life sciences parks are likely to result in vacancies dipping in the medium to long term.


The need to support hybrid and distributed working would continue to drive demand for flexible spaces. Offering multiple location options and on-demand meeting & collaboration spaces to a dispersed workforce would thus be key motivators for occupiers choosing flexible spaces. 

  • We thus anticipate the flexible space stock in India to grow from close to 51 million sq. ft. in 2022 to more than 60 million sq. ft. by 2023.
  • For more efficient space utilization, occupiers may prefer flex centres, reconfigurable spaces and flexible features such as event spaces which can be used as meeting rooms, workstations, phone booths with wheels and completely Wi-Fi-enabled offices to reduce cable connections. 
  • Amenities and premium services such reservable workstations, automated parking, pleasing aesthetic designs, provision of retail stores inside the centres, on-call medical services, laundry collection and distribution, fitness and sports facilities, ergonomic and compliant furniture would also continue to be a major differentiating factor. 


The rollout of the 5G network, increasing internet penetration and continued growth in digitization are expected to further boost the DC segment during 2023. In addition, we anticipate sustained demand from various sectors, including technology, telecom, BFSI, media and Over-The-Top (OTT) services. Moreover, demand from public sector organizations, led by an increasing focus on e-governance, is likely to emerge as a key demand driver in 2023.

  • DC occupancy levels in India stood at about 80-85% by the end of 2022, which are likely to improve further during 2023. We expect large tech occupiers to continue their expansion / consolidation plans, albeit at a slow pace, owing to global headwinds and recessionary concerns
  • During 2023, the total stock in the country is expected to further increase by about 50% annually to touch ~1,020 MW, with planned supply addition of about ~340 MW during the year. 
  • We expect a majority of the supply addition in 2023 to be concentrated in Mumbai, Noida, Chennai, Hyderabad, Pune and Bangalore.  
  • To address concerns regarding power consumption and to meet occupiers’ ESG targets, DC operators would continue to seek ways to reduce their carbon emissions. This would include reducing their reliance on traditional, carbon-intensive fossil fuels and infusing more clean and affordable energy to attain their carbon neutrality goals. 
  • Operators are also expected to rethink how every DC is designed and managed, right through to end-of-life disposal of buildings and equipment. 

Inflows to remain steady

Overall investments are anticipated to remain steady in 2023 on the back of a strong acquisition pipeline.  In addition, the fact that the dry power targeting APAC real estate has reached a new threshold of USD 65.8 billion gives us more comfort. India could garner a good share of the pie, given that it would continue to be among the fastest growing large economies of the world.


  • Delhi-NCR, Bangalore and Mumbai are expected to experience similar traction in 2023 as well, with major focus expected on office, development sites and I&L assets.
  • We foresee select tier-II cities to gain further traction in 2023 specifically in the I&L and retail sectors. Growing e-commerce penetration, steady income growth and strong revival in consumption are some of the key factors driving interest in tier-II cities.
  • Capital flows are expected to continue to be led by development sites / land and the office sector, whereas the I&L and residential sectors could also see higher equity inflows.

Top trends expected to shape 2023

  • Sustainability factor to become more pronounced: 2023 could see a stronger emphasis on ESG practices, so much so that it would eventually become an integral part of the key decision-making process.
  • Data Centres high on investors’ radar: With the accelerated adoption of digitization post the pandemic and strong policy thrust from the government, we anticipate the investment momentum in DCs to continue in 2023.