India’s commercial real estate market is witnessing a peculiar trend – the rise Ghost Shopping Centres. According to ‘Think India Think Retail 2024 – Shopping Centre and High Street Dynamics’ report by Knight Frank India, there has been a sharp rise in low performing retail assets with approximately 13.3 million square feet (mn sq ft) of retail shopping centre space categorised as ‘Ghost Shopping Centres’.

The report says there has been an increase of 59% year-on-year (YoY) in Ghost Shopping Centres by Gross Leasable Area (GLA) since 2022 in prime markets. As a result of the rise in these retail spaces, Knight Frank India estimates the loss of value to be at Rs 67 billion (Bn) or Rs 6700 crore (USD 798 million) in 2023. And no one is profiting from this locked up value in these centres!  

Knight Frank India has classified shopping centres having more than 40% vacancy as ghost shopping centres. These retail spaces do not attract widespread retailer interest due to various constraints such as bad location, obsolete design, strata sold arrangements in addition to dilapidation and unattractiveness of structures.

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Cities with most Ghost shopping centres

National Capital Region (NCR) has the highest Ghost Shopping Centre stock measuring at 5.3 mn sq ft (rise of 58% YoY). It is followed by Mumbai with 2.1 mn sq ft (rise of 86% YoY). Bengaluru comes third with 2.0 mn sq ft (rise of 46% YoY). Interestingly, Hyderabad is the only city to record a decline in the stock of such centres by 19% YoY to 0.9 mn sq ft in 2023. The sharpest rise in such centres has been recorded in Kolkata (23.7% YoY), albeit at a lower base.

In tier 1 cities, the total number of shopping centres have reduced in a period of one year. Despite new addition of 8 new retail centres, total number of shopping centres reduced to 263 in 2023 as 16 shopping centres were shut down over the last year. The report says underperforming shopping centres were either demolished due to reasons such as developers undertaking residential or commercial developments or were permanently closed or auctioned.

The report provides a comprehensive study of 340 shopping centres and 58 high streets across 29 Indian cities, conducted through primary surveys.

Why Ghost shopping Centres are rising?

The report says shopping centres in distress have to grapple with ongoing hurdles, compounded by fresh additions worsening their already elevated vacancy rates. This surge has led to a rise in count of shopping centres labelled as Ghost Shopping Centre stock. This scenario, however, offers institutional investors a chance to explore avenues for repurposing or revitalizing their retail portfolios, while developers can seize opportunities to monetize these assets through repurposing or redevelopment efforts.

According to Shishir Baijal, Chairman & Managing Director, Knight Frank India, Grade A malls have notably excelled, maintaining robust occupancy, foot traffic, and conversion rates, thereby delivering value to their customers. However, Grade C assets and those classified as Ghost Shopping Centres are lagging, prompting landlords to take action to rejuvenate or divest such properties.

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Not so bad news!

Even as there has been an increase in Ghost shopping centres, overall shopping centre vacancy has increased across leading eight cities in India. The overall shopping centre vacancy has improved from 16.6% in 2022 to 15.7% in 2023, noting an 87-basis point reduction. The overall shopping centre vacancy includes Ghost shopping centres.

Interestingly, upon exclusion of Ghost shopping centres from the stock in the leading eight cities, the shopping centre health in India improves dramatically from 15.7% to 7.4% in 2023. This is due to excellent performance of Grade A assets and reasonable occupancy in Grade B assets.