The number of “ghost shopping malls” – shopping centres with a vacancy of more than 40% – surged to 64 in 2023 compared to 57 in 2022, according to the latest report by global real estate consultancy Knight Frank. It analyses that the disparity between “well-performing shopping centres” and “shopping centres with high vacancies” comprising Grade C and ghost stock has emerged even more “starkly” in 2023. The number of ghost shopping centres is on the rise in key cities like Delhi-NCR, Mumbai, and Bengaluru.

“This stock (ghost shopping malls) does 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,” the report titled ‘Think India Think Retail - 2024’ says.

The primary survey by Knight Frank shows with the advent of some new shopping centres in India, the retailer preference for Grade A assets is at an all-time high. Consequently, as the new shopping centres opened, many retailers made a beeline to expand their presence. This led to high double-digit vacancies in Grade C structures as performance and operational metrics of better-performing malls improved, according to the data.

"The high vacancy of such assets has invariably impacted the India vacancy percentage for the Tier 1 cities and provides a skewed picture despite an 87-basis points reduction in shopping centre vacancy from 16.6% to 15.7%."

On removing these centres from the stock, the overall shopping centre health in India improves dramatically, says the report, adding that the differential vacancy arrived, after such exclusions, is a truer representation of shopping centre performance in top-tier markets.

"The pan India vacancy in the top 8 markets after this analysis reduces from 15.7% to 7.4%, and all the cities under coverage represent a healthier picture."

In contrast, as Grade A shopping centres’ operational metrics continue to improve, vacancy at an asset level has been trending lower than ever before. Similarly, the reverse is also true. “Shopping centres that struggled previously continue to face perennial trouble as retailers exit and the new assets add to their woes, sharply increasing their already high double-digit vacancy,” says the report.

The number of shopping centres making the cut for “ghost shopping centre” stock has increased, says the report, adding that it has improved mall health in the top 8 markets extensively as vacancy trends down. The report observes it is only a matter of time before such structures pave the way for newer, fancier and relevant shopping havens for buyers.

“As nearly USD 798 mn (INR 67 bn) is trapped in the gross leasable space of these non-performing shopping centres, consolidation of retail asset portfolios by institutional investors and proactive steps by mall developers to either repurpose or demolish these structures will provide new opportunities for interested players for land monetisation. “

Of the 82% of stores located in the top 8 cities, NCR with 23%, Bengaluru with 18%, and Hyderabad with 15%, account for the top 3 cities with the maximum number of stores. Mumbai comprised a 13% share in the total number of stores in the top 8 cities.

Overall, the North region boasts of the “largest gross leasable area” totalling 4.3 mn sq m, followed by the South and West regions with 3.5 mn sq m and 3.2 mn sq m. In contrast, the East region has the smallest footprint with 0.7 mn sq m.

Within tier 2 cities, Lucknow emerged as a “key player”, with an impressive share of 18.4% “gross leasable area” amongst its counterparts.

Follow us on Facebook, X, YouTube, Instagram and WhatsApp to never miss an update from Fortune India. To buy a copy, visit Amazon.