Over 16 Million sq. ft. Mall Supply Expected in 2008
29 Aug, 2008, India
The second quarter of 2008 saw new mall supply of approximately 2 million sq.ft. across major Indian metropolitan centres vis-à-vis the 6 million sq.ft. anticipated. The majority of this expected quality retail space has been staggered to the latter half of the year as well as to the next year.
Retail rentals stabilized across most main streets and malls in all major cities this quarter, with the exception of the Rajarhat micro-market of Kolkata and Goregaon in Mumbai, which saw more than 50% growth in prime mall rentals over the last quarter.
Rajneesh Mahajan, Director of Retail Services at Cushman & Wakefield says, “Despite lack of quality space in the market, the top 8 cities in India are currently witnessing around 18% vacancy across the 40 million sq ft of operational malls. This can be attributed to the fact that most of the supply has come within the same micro-markets targeting the same catchments, thereby creating an oversupply within respective neighbourhoods.”
With influx of many international retailer and growing urbanization in the country, the demand for retail real estate continues to remain strong. However, the focus is essentially on premium high streets and promising developments.
Luxury retail made an uber chic entry this quarter with the country’s first luxury mall, The Collection, being launched in Bangalore. Another luxury mall (from DLF) is also expected to be fully operational by end of Q3 in South Delhi. Adds Rajneesh Mahajan, “Luxury brands are looking for quality real estate on high streets and malls, to reach out to a larger audience”.
The increase in input cost and global cash crunch has led developers to re-work construction timelines, forcing them to constrain supply by holding back new project launches in most cities this quarter. While quite a few planned mall projects would not be hitting the market before the next year or two, the pressure for space on existing and emerging high streets will in all likelihood continue to support current rentals in prime high streets and prominent mall developments.Over last decade the modern retail formats have been able to mark their presence in new various micro markets, this has lead to establishing consumer preferences and revenue benchmarks. In light of available revenue trends and consumer preferences we are witnessing correction in space demand, which may lead to rental rationalization across high streets and malls.
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