Commercial real estate in India has been witnessing major growth over the last few years, driven by factors like increasing demand and the return to normal livelihoods after the COVID pandemic. With this growth, it is important to examine the financial aspects in the sector, such as commercial property ROI and factors that impact it. Location and design are two of the most important factors that impact the commercial rental yield in India, especially for retail spaces. Keep reading to understand in detail how design and location affect the ROI of retail real estate in India.
Retail Real Estate and ROI
Any space used for the purpose of selling goods and services directly to consumers is a part of retail real estate. This includes shopping spaces located on high streets, malls, shopping centres and even independent shops in residential areas. Most such spaces are built for the purpose of selling, renting or leasing in order to gain profits. These profits are indicated by a value called ROI (Return on Investment). Expressed as a percentage value, this number indicates how much money was gained as profit against the total amount spent on constructing or buying the space. For calculating retail real estate Returns on Investment, several aspects like land price, cost of construction, selling price and/or rental yield and operational costs are considered, giving a comprehensive understanding of the building’s finances.
Retail Real Estate Market Trends and Overview
India’s retail sector is currently undergoing massive growth. It was valued at ₹82 lakh crore at the beginning of 2025 and is expected to grow to ₹190 lakh crore by 2034. According to a report by IBEF, the area of retail properties for lease reached a 5-year high of 3.1 million sq ft in the first half of 2024. Luxury brands in India also saw a significant expansion in 2023, leasing over 600,000 sq ft of retail space across various formats, marking a 170% increase.
Tier-I cities, such as Mumbai, Delhi-NCR, Bengaluru, Chennai, Hyderabad and Pune, saw particularly steep growth in commercial retail space investments. These are due to increased demand, the development of urban fringes, and better infrastructure, connectivity, and accessibility in these cities.
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How Does the Design of Retail Spaces Affect ROI?
Several design and construction factors affect how profitable a retail space might be. These factors include:
Store Planning and Layouts in Retail Real Estate
Large as well as small retail spaces significantly benefit from optimised store layouts. Features such as high ceilings, open floor plans (with minimal obstructions by interior columns), flexible interior layouts and adjustable lighting features are some of the elements that can be adopted to attract more renters and/ or buyers. Apart from these, a well-planned retail space has the following features:
- Demarcated zones for different kinds of stores, i.e, shopping, food, entertainment, etc.
- Clear walking pathways and easy navigation.
- Good visibility for every shop in a shopping center (this assures retail renters/ buyers that their space will be frequently visited by consumers).
- Maximised floor space with easy access to lifts, escalators, parking spaces and toilets.
- As per a report by The Flagship, retail store tenants prefer spaces that are well-lit, visible from the main road and easy to access. Wide entrances, adequate signage and parking spaces also appeal to renters.
Store Visibility and Facade Design
Facades form the first impression on consumers of retail spaces. Retail spaces with well-designed facades attract more customers as well as investors and renters, thus increasing profitability. Facade designs can include features like large heights, extensive and frameless glass panelling, smart systems, parametric designs or other striking elements that make them unique. Some of the benefits observed with well-designed retail facades are:
- According to a report by Integrated Smart Engineers, properties with distinctive, architecturally significant facades command 8-17% higher prices than comparable properties with standard exteriors and rental premiums increase by 12 – 18% with innovative facade approaches.
- Commercial property values can increase by upto 15% by having a professionally designed and maintained landscape near the front of the building, as per a report by Saludahill.
- A study by Sage Journals indicates that an average rise of 6% in rental prices can be observed by boosting the visibility value (which includes increasing the storefront area and glazing) of retail stores.
Incorporating Green and Smart Building Features
Green building practices, such as building automation systems, energy efficient features, Intelligent Building Management Systems (IBMS) and smart lights, can reduce operational costs by 20 – 50% and maximise commercial property rental yields. Transforming into Net Zero Energy Buildings (NZEB) can completely nullify expenditure on energy bills. Reduced operational costs mean increased profits and ROI. For instance,
- According to a report by ISE, biophilic facades reduce HVAC costs by 23 – 30%, buildings with smart facades have 27% higher tenant retention, and the use of digital twins for building management reduces operational costs by 18%.
- As per a report by Gitnux, green building features can increase the lifespan of buildings by 20-50%, reducing the need for and expenditure on renovations. Green building certifications can also increase property value by 20%.
- Including EV charging stations can increase property value by 3 – 10% as per a report by Realty+.
Including Innovative Concepts in Retail Properties
To remain profitable and maintain stable rentability, retail shops need to keep updating and incorporating new and innovative operational concepts. For example:
- Mixed-use developments—which integrate different activities like shopping, working and eating—are on the rise. As per a report by JLL, mixed-use spaces are expected to take over 78% of purely retail store spaces by 2028. Mixed-use spaces can achieve 85% revenue stability, as compared to 45% by single-use retail spaces, according to a report by BHG Real Estate Concierge.
- Other concepts like pop-up stores and immersive mall experiences are also gaining popularity as they typically witness high foot traffic and are thus more attractive to renters or buyers. Incorporating such design thus increases rental yields and profits.
How Does Location Matter in Retail Real Estate?
City Level Commercial Retail Space Dynamics
Every city in India has varying populations and economic conditions, impacting the ROI of commercial property values. Tier I cities such as Mumbai, Delhi NCR, Bengaluru and Hyderabad have higher populations and average incomes, meaning that users are typically willing to spend more in retail stores, thus increasing profits.
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However, many tier II cities such as Mangaluru, Bhubaneswar, Lucknow and Chandigarh are also witnessing a high demand for retail real estate. The presence of a higher number of international retail brands can be observed in these cities, showing an evolution in consumer expenditure trends.
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Local Retail Commercial Real Estate Dynamics
Retail spaces can be classified into three major types based on their location within a city:
- High Street Shops: These are small to medium-sized shops present in bustling, central areas of cities, such as MG Road in Bengaluru. Such shops have been studied to provide the highest average return on commercial property.
- Shopping Centers/ Malls: Generally consist of shops ranging in size from tiny kiosks to large anchor stores. The commercial property rate of return here typically depends on the mall’s popularity and footfall. However, it is typically lower than that of high street shops.
- Local Stores/ Kirana Shops: Such shops are present in every residential area as small, family-owned businesses. They generate low to mid-level rental yields and returns, but also require lower initial investments.
Within every large or small city, each type of retail store and each locality has differing rental values. For example, a commercial shop to rent on MG Road in Bengaluru may cost anywhere between ₹350 – ₹400 per sq ft per month, while a small shop on rent in residential areas may cost ₹25 – ₹100 per sq ft per month. These rental values are largely driven by demand and supply in the local areas. In busy commercial areas, larger shops and brands are also prevalent, indicating that people tend to spend more money in these areas, which in turn increases profitability and the commercial real estate returns on investment.
Infrastructure and Connectivity for Commercial Retail Properties
Stores that are located in areas with good connectivity via public and private transportation are more accessible and witness higher footfall. Retail spaces that have good road connectivity and offer parking facilities are more popular. A study by IJSRED indicates that 5-7% of annual growth in ROI for commercial property can be observed when infrastructure development is consistently prioritised.
Retail Real Estate ROI for Different Designs and Locations in India
As per reports by Knight Frank and Anarock, the following ROI and retail rents have been observed in different cities in 2024:
Mumbai
- High-street retail (Bandra, Lower Parel, Linking Road): ROI of 11-14% with rents around ₹500-₹700 per sq ft per month.
- Large, experience-based malls (Phoenix Marketcity, High Street Phoenix): ROI of 8-10% with rents around ₹750-₹850 per sq ft per month.
- Mixed-use developments (Lower Parel integrated retail-office complexes): Commercial property ROI around 9-11%.
Delhi NCR
- High-street retail (Connaught Place, South Extension): ROI of 12-15% with rents around ₹500-₹1000 per sq ft per month and premium rents going up to even ₹10,000 per sq ft in prime zones.
- Large malls (Select Citywalk, DLF Promenade): ROI of 8-11% with rents around ₹725-₹800 per sq ft per month.
- Mixed-use developments in emerging micro-markets (Gurgaon, Noida): ROI around 9-12%.
Bengaluru
- High-street retail (MG Road, Brigade Road, Indranagar): ROI of 10-13% with rents around ₹350-₹400 per sq ft per month.
- Experience malls (VR Bengaluru, Orion Mall): ROI of 8-10% with rents around ₹500-₹600 per sq ft per month.
- Mixed-use developments in tech corridors (Whitefield, Electronic City): ROI around 9-12%.
Hyderabad
- High-street retail (Banjara Hills, Jubilee Hills): ROI of 10-13% with rents around ₹500-₹700 per sq ft per month.
- Large malls (Inorbit, GVK One): ROI of 7.5-9.5%.
- Mixed-use developments (HITEC City): ROI in the 8.5–11% range.
Chennai
- High-street retail (Khader Nawaz Khan Road, Nungambakkam, T Nagar): ROI of 9.5-12% with rents around ₹200-₹250 per sq ft per month.
- Large malls (Express Avenue, VR Chennai): ROI of 7-9% with rents around ₹400-₹500 per sq ft per month.
- Mixed-use developments in OMR corridor: Yields around 8-10%.
Pune
- High-street retail (Jangali Maharaj Road, FC Road, Koregaon Park): ROI of 9-12% with rents around ₹275-₹300 per sq ft per month.
- Experience malls (The Pavilion): ROI of 7.5-9% with rents around ₹450-₹575 per sq ft per month.
- Mixed-use formats in Hinjewadi, Baner: Yields around 8.5–11%.
Retail ROI in Different Cities
| City | High Street ROI (%) | Mall/ Shopping Centres ROI (%) | Mixed-Use Developments ROI (%) |
| Mumbai | 11 – 14 | 8 – 10 | 9 – 11 |
| Delhi NCR | 12 – 15 | 8 – 11 | 9 – 12 |
| Hyderabad | 10 – 13 | 7.5 – 9.5 | 8.5 – 11 |
| Bengaluru | 10 – 13 | 8 – 10 | 9 – 12 |
| Chennai | 9 – 12 | 7 – 9 | 8 – 10 |
| Pune | 9 – 12 | 7.5 – 9 | 8.5 – 11 |
Despite these high ROI values, the annual retail turnover growth has reduced over the last two years, as per a report by KPMG. However, the growth is expected to increase again in 2025, driven by increasing demand and better economic conditions.
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Key Insights
From the above data, the following key insights can be obtained as a summary:
- Design factors such as store visibility, accessibility and interior layouts can have a large impact on ROI on commercial real estate. Including innovative concepts along with new technologies and amenities can increase sales and profits by 10 – 40%.
- Retail store spaces on lease and sale in tier I cities such as Mumbai, Bengaluru, Delhi NCR, Hyderabad and Pune typically have very high ROI, especially in high street formats. ROI ranging from 7 – 13% can be expected in these cities.
- Many tier II cities such as Mangaluru, Lucknow, Chandigarh and Bhubaneswar are also undergoing a massive retail real estate boom. Profitability and ROI are expected to increase significantly in the upcoming years in these cities.
- Within each city, factors such as location and accessibility have a large impact on commercial property returns on investment. For example, rental yields within a city itself can vary from ₹50 – ₹10,000/ sq ft per month, depending on the location and demand.
Ensuring the Best Retail Property Design to Maximise ROI
Commercial real estate investing is generally a large financial undertaking and requires the assessment of several factors. Store design and location are two of the most important factors that affect profitability. Brick & Bolt, a leading residential and commercial construction company in India, provides services that help maximise ROI through efficient designs. End-to-end construction services with customisable floor plans ensure that maximum profits can be obtained even with low initial investments. To get the best design and construction services in retail real estate, reach out to Brick & Bolt today!
Apoorva H P Achar