A report by international property consultants Cushman & Wakefield points to a paradoxical situation. There is demand for retail space in malls across major cities but nearly a fifth of the space lies vacant. The rentals, though, are stable and holding in specific markets. Despite major mall projects, the supply of space is likely to be low over the next two years as projects are being delayed due to various reasons.
The second quarter of 2008 saw the launch of just about a third of the planned launches in major cities. There was a supply of over 2 million sq.ft of mall space in major urban centres against a planned launch of 6 million sq.ft.
Most of the space during the second quarter has been created in the NCR, Mumbai and Kolkata, with nothing happening in Chennai, Hyderabad and Pune. The second and third quarters could see the supply of over 12 million sq.ft, according to a report by Cushman & Wakefield. The report, quoting Mr Rajneesh Mahajan, Director, Retail Services, Cushman & Wakefield, says that despite the low supply, nearly a fifth of the 40 million sq.ft of mall space is vacant. This is primarily because the businesses are targeting the same catchments resulting in oversupply within local markets. The focus is essentially on premium high streets.
Increasing input costs and global cash crunch have resulted in developers rescheduling project completion. New projects are also being held back in most cities in this quarter.
While quite a few planned mall projects are not likely to hit the market during the next year or two, the pressure for space on existing and emerging high streets will support rentals in prime high streets and prominent mall developments, according to the report.
In the next quarter Bangalore could see the supply of over 5.45 lakh sq.ft of mall space.
There is a pressure for space on the existing and emerging high streets in the city, which will continue to support the rents. Mall rentals have largely been stable across the markets, though some the traditional areas such as Commercial Street and Brigade have witnessed a 10 per cent appreciation in rents.
Mall rentals in Chennai are likely to strengthen because of poor supply. Major malls like Ampa and Coramandal which were to enter the market this year are more likely to start operations next year. Some of the planned mall space is likely to start in 2010. There is a clear dearth of quality real-estate solution to cater to the retailers' needs. "The prime cause for most of these delays is the hold on approvals coupled with construction delays. Indi mall, with approximately 170,000 sq.ft on Nelson Manickam Road, is the only mall expected to be operational during Q3 this year," says the report.
Hyderabad has not seen fresh supply of mall space during the second quarter. Rentals in select established main streets stabilised at the first quarter levels due to near-saturation in retail real-estate activity and absence of significant transactions. Most of the addition to the mall space has happened in the West and the North with Ahmedabad witnessing the launch of 3.50 lakh sq.ft mall on SG Highway. Retail development is happening actively on the western part of the city.
In Kolkata there has been a 50 per cent escalation in mall rentals over the last quarter at Rajarhat because of the lower price points vis-a-vis other areas and the potential development in the residential and commercial space in the vicinity. More than three-fourths of the addition to mall space is anticipated in Rajarhat. Over 3.70 lakh sq.ft of mall space has been added during the second quarter, the report said.
Mumbai will see the addition of 1.7 million sq.ft of mall space over the next six months across central suburban markets and Navi Mumbai.
Over 5.6 lakh sq.ft of mall space was added during the second quarter, when rentals remained stable with no change over the first quarter. In the NCR, mall space was primarily added in Faridabad and Gurgaon during the quarter when over 6.25 lakh sq.ft space was added. Mall and main street rentals have increased by over 24 per cent compared to the first quarter.
| Mall space | |
(sq.ft) | |
City | Estimated supply in 2008 |
Ahmedabad | 570,000 |
Bangalore | 813,000 |
Chennai | 170,000 |
Hyderabad | 700,000 |
Kolkata | 2,975,000 |
Mumbai | 3,870,000 |
NCR | 7,375,000 |
Pune | 300,000 |
(Source: Cushman & Wakefield) | |
August 3, 2008
Source: Hindu Business Line
