Apparel sector emerges as primary catalyst for retail real estate recovery in India
15April 2026, Mumbai
Accounting for 25 per cent of total leasing across the top seven cities in late 2025, the fashion and apparel sector has consolidated its position as the primary catalyst for India’s retail real estate recovery, According to recent sectoral data, total retail space absorption reached 4.3 million sq ft during the second half of the year, with apparel brands leading the charge despite a tightening supply of Grade-A inventory. Chennai emerged as the regional frontrunner, where fashion occupants secured 34.1 per cent of available space, followed closely by Mumbai at 30.5 per cent. This aggressive footprint expansion reflects a strategic transition as domestic labels and international conglomerates prioritize high-visibility locations to capitalize on surging consumer demand.
Rental escalations and format evolution
Demand for premium ‘High Street’ locations has driven rental benchmarks to historic highs, with Delhi’s Khan Market commanding up to Rs 1,600 per sq ft, while Mumbai’s Linking Road reached Rs 1,500. To navigate these cost pressures, retailers are shifting toward mid-sized, efficient formats ranging between 1,000 and 5,000 sq ft, which offer a scalable balance between brand experience and operational overhead. The market is witnessing a decisive move toward quality-led, experience-driven growth, notes Anshuman Magazine, Chairman & CEO, CBRE South Asia. Retailers are no longer just seeking square footage; they are curating flagship environments that enhance customer dwell time and brand engagement.
Institutional supply constraints and future outlook
While the leasing momentum remains robust, the industry faces a significant hurdle: a constrained supply pipeline. Q1 2026 data indicates a 28 per cent Q-o-Q decline in new leasing activity, largely attributed to delays in mall completions. However, with approximately 5.88 million sq ft of fresh institutional-grade supply expected by the end of 2026, the sector is poised for a second-half resurgence. This new inventory is anticipated to support the expansion of D2C brands, which already contribute nearly 27 per cent of retail leasing, as they transition from digital-first models to comprehensive physical ecosystems to secure long-term market viability.
Market modernization and portfolio expansion
The organized retail segment in India is characterized by a rapid shift from traditional storefronts to experiential, brand-owned flagships. Key players focus on high-growth urban hubs and Tier-I markets, leveraging ‘Grade-A’ mall stock to drive premiumization. With a projected 11.38 per cent CAGR through 2034, the sector’s financial outlook remains strong, supported by the rise of athleisure, ethnic-fusion wear, and sustainable fashion labels seeking long-term lease stability.
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