India’s small shopping centres turning into ghost malls, says Knight Frank

India’s small malls are increasingly turning into ghost malls as consumers move towards online purchases and bigger shopping centres for a better experience, a consultancy report said on Tuesday.

Mall properties with a vacancy rate of more than 40% have been termed ghost malls.

While there was a 238% year-on-year increase in the Gross Leasable Area (GLA) of all shopping centres in prime Indian markets in 2023, the number of ghost malls rose to 64 from 57 in 2022, said real estate consultancy Knight Frank India.

Industry analysts said this reflected weak consumer demand and could lead to job losses and economic dislocation, particularly for small retailers and service providers.

Private consumption, accounting for 60% of India’s gross domestic product (GDP), has remained weak, rising 3.5% year-on-year in the last quarter of 2023 while the economy grew 8.4%.

“Many of the small shopping malls are on the verge of closure,” said Gulam Zia, director of Knight Frank after the release of the “Think India Think Retail 2024” report based on a survey of 29 top cities.

There has been a sharp rise in low-performing retail assets with 13.3 million square feet of shopping space remaining vacant, resulting in the loss of 67 billion rupees ($802.5 million) of revenue for developers in 2023, the report said.

Unable to match the convenience and diversity of large shopping centres, many small mall owners are caught in a downward spiral of declining revenue, Zia said.

Among small shopping centres, with an average leasing area of 100,000 square feet, 132 are on the verge of turning into ghost malls – with the vacancy rate rising to 36.2% in 2023 from 33.5% in the previous year, the report said.

However, among bigger shopping malls, with an average leasing area of 500,000 square feet, the vacancy rate remained at 5%, and at 15.5% among middle-level shopping malls, it said.

In the top eight cities, including Delhi, Mumbai and Bengaluru, the total number of shopping malls declined to 263 in 2023, with eight new retail centres added but 16 shut down.