Malls and Retail Real Estate

How India's shopping malls work economically, why some thrive while "ghost malls" sit empty, and how rents and anchor stores shape success.

India’s first modern shopping malls opened in the late 1990s and 2000s. Today, malls in big cities draw huge crowds. Yet some malls struggle, with empty shops and few visitors.

How malls make money

Mall owners earn mainly from rent paid by retailers. Rent can be:

Fixed: a set amount per square foot.
Revenue share: a percentage of the store’s sales.
Hybrid: a minimum rent plus a share of sales above a threshold.

Malls also earn from parking, advertising, events and kiosks.

Anchor stores

Big anchor tenants, such as department stores, hypermarkets, multiplexes and large fashion stores, attract crowds. Smaller stores benefit from the footfall. Anchors often pay lower rents because they bring visitors - an example of positive externalities within the mall.

Why some malls succeed

Location: easy access, dense population and good transport.
Tenant mix: a good balance of shopping, food and entertainment.
Management: events, maintenance and marketing.
Experience: food courts, cinemas and play areas that online shopping can’t replace.

Ghost malls

Many malls built during the 2000s boom, especially in smaller cities or poor locations, struggled with low footfall and high vacancy. Some were converted to offices or other uses.

E-commerce and malls

Online shopping reduced demand for some kinds of stores, but well-run malls shifted toward experiences: dining, entertainment and events. After the pandemic, footfall in top malls recovered strongly.

Investment

Top malls are attractive to investors. India’s first retail REIT listed in 2023, letting investors own a share of malls and earn rental income.

The cinema effect

A mall adds a large multiplex and a food court. Families come for movies on weekends, eat at the food court and browse stores. Shop sales rise, and the mall can charge higher rents to smaller tenants.

Thinking e-commerce will kill all malls

Malls offering entertainment, dining and experiences in good locations have continued to thrive.

Key takeaways

Malls earn from fixed, revenue-share or hybrid rents plus parking and advertising.
Anchor stores attract crowds and often pay lower rents.
Location, tenant mix and management determine success.
Ghost malls struggled, while experience-focused malls thrive.