News & Views on Indian Real Estate

Monday, July 14, 2008

Mall scare: Correction in realty sector hits retail too

Just sometime back, the ‘shop till you drop’ mantra of Indian consumers spelt nirvana in terms of business for real estate developers. But now, with boom time having become a thing of the past, the correction in the realty sector has hit the retail space too. According to latest figures, the top eight cities in the country are witnessing a 20% vacancy across 40 million sq ft of operational mall space. The twin reasons for this huge vacancy is rising rental values and lack of quality space. SundayET, along with global real estate services firm Cushman & Wakefield, conducted a survey in 112 malls across the top eight cities which have more than 8.5 lakh sq ft of vacant space. The study found that all the retail space that has been developed in the last decade has not been able to get the desired retailer patronage. Most of the supply has come in the same micro-markets targeting the same catchment and created an over-supply within respective neighborhoods. Of the 112 malls across these cities, only a handful is recognized as successful mall developments, the survey stated. Leading the pack of vacant malls is Ahmedabad — where there is 34% space vacant. Mumbai and Delhi follow with 23% and 22% vacant space, respectively. It seems Chennai is still a hot destination as far retail space is concerned, as it has no vacant retail space. With the influx of international retailers and growing urbanization in the country, the demand for retail real estate continues to remain strong. However, now it is focused on premium high streets and promising developments. Industry sources say initially most malls in the same micro-market had similar rental rates. But as they became operational, the rentals started to get aligned with revenues and footfalls.

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