Retail leasing moderates in Q1 2026 on supply constraints; demand holds steady across top Indian cities

India’s retail real estate market recorded steady demand across the top eight cities in Q1 2026, even as supply constraints weighed on overall leasing activity. According to Cushman & Wakefield’s Retail Market Beat Report, leasing stood at 1.95 million sq. ft (MSF) during the quarter.

Leasing activity declined 28% quarter-on-quarter (QoQ) and 10% year-on-year (YoY), primarily on the absence of new mall supply. The moderation follows a robust 2025, which saw leasing touch 9.21 MSF, the highest annual performance in the post-pandemic period, indicating that occupier demand remains intact despite near-term supply challenges.

Mall leasing strengthened during the quarter

Mall leasing strengthened during the quarter, accounting for 47% of total activity, up from 33% a year ago, highlighting a growing preference for organised and experience-driven retail formats. Main streets continued to anchor overall volumes with a 53% share, although this was lower than the 67% recorded in Q1 2025.

At the city level, Delhi-NCR led leasing activity with a 30% share (0.59 MSF), followed by Hyderabad at 22% (0.43 MSF) and Mumbai at 13% (0.25 MSF). Together, the three cities accounted for 65% of total leasing, underscoring their role as key demand centres.

Category-wise, fashion and food & beverage (F&B) segments remained the primary demand drivers, contributing 46% of leasing. Entertainment accounted for 11%, largely concentrated in malls, reflecting the increasing role of experiential retail. Department stores and furniture & furnishing segments contributed 10% and 5%, respectively.

Domestic retailers dominated leasing activity with an 87% share and expanded their presence in malls, where their share rose to 43% from 26% a year ago. Meanwhile, international retailers posted a 21% YoY increase in leasing, with nearly 78% of their activity concentrated in malls, signalling a clear preference for high-quality, institutionally managed assets.

Strong demand for premium retail spaces led to further tightening of vacancies and rental growth. Grade A mall vacancy declined to 5.7% in Q1 2026, while Grade A+ assets remained highly constrained at 2.6%. Prime high-street rentals rose 1.4% QoQ and 4.5% YoY, with gains largely driven by high-visibility locations.

Looking ahead, supply constraints are expected to ease, with around 5.88 MSF of new retail space slated for completion in 2026. The broader pipeline for 2026–2028 stands at 14.94 MSF, which is likely to support leasing momentum and further drive premiumisation in the sector.

Gautam Saraf, Executive Managing Director – Mumbai & New Business, Cushman & Wakefield, said the market remains demand-led, with occupier interest outpacing the availability of quality retail space. “While leasing volumes appear lower sequentially, this largely reflects limited supply. As new, premium supply enters the market, we expect stronger and more consistent leasing activity, supporting the continued institutionalisation of India’s retail real estate landscape,” he said.

City-wise highlights:

Bengaluru: Leasing stood at 0.21 MSF, up 13% YoY, led by main streets (57%).

Chennai: Leasing declined 19% YoY to 0.14 MSF, with main streets accounting for 89%.

Delhi NCR: Leasing rose 45% YoY to 0.6 MSF, led by Gurugram (54% share); malls dominated with 64%.

Hyderabad: Leasing at 0.43 MSF, down 26% YoY; main streets accounted for 64%.

Ahmedabad: Strong growth with leasing at 0.08 MSF, up 67% YoY, driven by main streets.

Kolkata: Leasing rose 69% YoY to 0.06 MSF, with balanced growth across malls and high streets.

Mumbai: Leasing declined 57% YoY to 0.25 MSF due to limited quality supply; malls led with 72%.

Pune: Leasing increased 8% YoY to 0.18 MSF, with high streets contributing significantly to growth.