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Retail real estate may attract up to $80M in PE funding in 2016: JLL
Retail real estate | Photo Credit: Shah Junaid/VCCircle

The retail sector can expect better investment momentum in 2016 thanks to recent government initiatives such as relaxation in sourcing norms for single-brand retail and improving macro-economic factors, real estate consultancy JLL India said in a report.

The report said that foreign direct investment (FDI) inflow in retail trading was $70.75 million between October 2014 and September 2015 as economic stability and improved consumer sentiment attracted investors.

Shoppers’ desire to use foreign brands due to increased brand awareness is helping, too. As more and more global brands realise this, they are expected to enter India in 2016, the report said.

“Retail real estate has been constantly evolving in response to changing consumer, brands and retailers’ preferences but the evolution is bound to become faster in the days ahead. This will lead to emergence of stronger retail real estate players, who may manage to get private equity investment in the coming years,” the report said.

PE investment has been largely confined to a few retail players in India. In 2015, PE investment into retail properties was $39 million. This could increase to around $75-80 million this year, the report said. It added that PE money may also go into select mall investments, especially in under-represented markets, or for buyout of mature assets. 

The report said that as quality mall space is coming up with strong pre-commitments, it indicates that retailers remain bullish about the long-term India consumption story. At the same time, the lack of quality retail space will continue to be seen in 2016. Retailers will have to redo their real estate strategy and have a flexible approach that is customised to different micro markets.

“Investment by both home-grown and international brands will strengthen in tier-II and tier-III markets as they expand beyond tier-I cities. Investment by large players will also be seen in 2016,” it said.

The pick-up in deal momentum can already be seen with Singapore’s sovereign wealth fund GIC picking up a 49 per cent stake in Viviana Mall in Mumbai. Blackstone, one of the biggest owners of commercial real estate in India, has added retail assets to its portfolio with its acquisition of Alpha G:Corp and is now actively scouting for deals to build a portfolio.

Analysts, however, feel it will take much longer for the pain in the retail segment to go away and only selected assets with strong footfalls will find takers.

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