Track2Realty: The overall vacancy levels in malls declined by 0.6 percentage to 14.51% on account of consistent leasing activities while supply has been only 0.77 msf gets added in Kolkata and Pune, says a retail report by Cushman & Wakefield. Healthy transaction activity led to reduction in overall mall vacancy of Pune and Kolkata despite the addition of fresh mall space in both the cities.
Pune witnessed the opening of a new mall measuring 700.000 sf, while Kolkata witnessed the partial opening of a mall with only anchors and mini-anchor stores operational at 70,000 sf.
Increased leasing activities and lack of infusion of new mall space led to a 1.8 % dip in Bengaluru’s mall vacancy. Chennai and Ahmedabad witnessed marginal reduction in mall vacancy. Mumbai and NCR however recorded slight increase in vacancy levels due to ongoing churn in various malls.
As per Q2 2013 estimates, 9 malls were expected to be operational by Q3 2013. However, a total of 7 malls, admeasuring 2.62 million square feet (msf) were deferred. Bengaluru and Chennai witnessed deferment of two malls each totalling to 710,000 sf and 461,000 sf respectively.
In Bengaluru, one mall got deferred due to construction delays while the other went on hold due to liquidity issues. Out the two malls in Chennai, one got deferred to early next quarter due to delay in construction completion, while the other mall had to be deferred due to lack of sufficient demand from retailers.
Pune also saw postponement of 430,000 sf of mall space due to lack of demand from retailers mainly due to locational constraints of the project. Hyderabad witnessed deferment of 425,000 sf mall supply to early Q4 2013 due to construction delays. A mall space of 225,000 sf was deferred in NCR to later quarters because of delays in acquiring necessary regulatory approvals for operation.
According to C&W, mall rentals increased by 7-10% in Lower Parel (Mumbai), South Delhi (NCR) and Gurgaon (NCR), primarily due to high persistent and low availability of space. In South Delhi malls, the ongoing churn further propelled the rental appreciation. Whilst internal restructuring of a mall in Mysore Road (Bengaluru) led to 11% quarterly rental drop, 8% drop was noted in Hadapsar (Pune) owing to oversupply of mall spaces.
Ongoing metro work led to 7% rental decline in Chennai-CBD malls. The increased supply caused by churn coupled with limited demand led to 4-5% negative rental growth at malls in Mulund (Mumbai) and Koregaon Park (Pune).
Given the limited availability of retail space in Vashi’s (Mumbai) main street, the rentals steeply climbed up by 17% over the last quarter fuelled by high demand, especially from F&B retailers. For the same reasons, rentals inched northwards by 11% in Park Street (Kolkata), by 8% each in Usman Road –North (Chennai) and DLF Galleria (NCR) and by 6% in VIP Road (Kolkata) over the previous quarter. Main streets like South Extension I & II (NCR), Connaught Place (NCR), MG Road (Pune) and Koregaon Park (Pune) recorded 2-4% appreciation in quarterly rentals owing to the ongoing churn and newer transactions at higher price points.
Despite healthy enquiries, Bund Garden Road in Pune witnessed the main street rentals slumping by about 7% in a bid to ensure transactions being closed. Main street landlords in Velachery endeavoured to lure more retailers by reducing the rents by about 4% over the previous quarter.
Sanjay Dutt, Executive Managing Director- South Asia, Cushman & Wakefield India said, “Given the low availability of quality retail spaces, select established main streets continue to gain traction. International and national apparels, footwear, F&B and jewellery retailers seem to be expanding aggressively. Landlords are being sensible and in case of excess supply, they are reducing the rentals even in main streets. Is it premature to say that as a market we are witnessing mature real estate decision making? I hope investors and lender’s notice the positive scenario and the opportunity.”
He further adds, “The demand for quality mall spaces located in areas having good residential catchment is on the rise. Reduction in mall vacancy over consecutive quarters in the past, points towards healthy demand for such spaces from retailers. It is interesting to note that contrary to the trend, cities like Pune and Kolkata are seeing mall vacancy decreasing despite influx of fresh mall supply. Amidst the slowdown, retailers have become more conscious about the choice of their outlet’s location. This has led to little or no turn out in terms of occupier demand for certain upcoming malls, pushing their opening dates forward. The current economic woes have also led to liquidity crunch amongst developers of certain projects, forcing them to put their under construction malls on hold. At present, the market is going through mixed sentiments as many new and existing retailers are trying to cash upon the potentialities of Indian retail market while the pipeline for quality spaces is low. Resultantly, retailers are keen on growth in main street locations too.”
In Bengaluru, the rentals in main streets as well as malls maintained a status quo owing to the stable demand supply dynamics in the city, except for malls in Mysore Road micro market where due to restructuring of a mall and high churn rate, the quarter on quarter (q-o-q) rental drop was noted at11%. Retailers belonging to jewellery, apparels and home improvement segments showed considerable interest in established main streets like Kormangala 80 Feet Road, Jayanagar 4th Block and MG Road. Malls in Kormangala and Magrath road continued to witness churn with some apparels and F&B brands leasing out spaces in these prominent malls.
Malleshwaram and Whitefield mall micro markets also noted some transactions by F&B retailers in this quarter. There was no mall supply in this quarter and the overall mall vacancy of the city dropped by 1.8 percentage points from the previous quarter to around 10.2%. While the established main streets may witness a rise in rentals, the expected influx of 300,000 sf of mall space next quarter will keep the mall rentals steady.
Demand from national and international retailers remained buoyant in Chennai, drawing many enquiries for both main streets and malls. While rentals in most main streets remained steady, Usman Road – North witnessed a 8% q-o-q rise in rentals as apparel and footwear retailers vied for space. Velachery on the other hand, witnessed a 4% drop as landlords reduced the rentals to attract retailers to this main street.
Though malls in Chennai witnessed stable rentals in the third quarter, ongoing metro construction work in Chennai’s CBD caused lower footfalls in malls which led to quarterly price correction of 7% in this micro market. The healthy transaction level in malls led to a decline of 0.7 percentage points in the city mall vacancy, recorded at 5.4% in this quarter.
Established main streets of Usman Road – North and Nungambakkam High Road and emerging Pondy Bazaar noted enquiries from apparel, footwear and electronics segments, which may cause a rental appreciation in the next quarter. A new mall of around 300,000 sf is expected to be operational in the next quarter, thus pushing the city mall vacancy level upwards slightly.
Unlike the previous quarter, Hyderabad witnessed stable rentals in this quarter for both malls and main streets. Moderate demand from retailers, low vacancies and absence of lease renewals kept the rentals in main streets stable. Lack of fresh mall supply and stable vacancy of 1.4% in the city also kept mall rentals in check Local and national retailers in apparel and F&B categories have started showing significant interest in upcoming malls, situated in Madhapur and Kukatpally micro markets.
The infusion of 625,000 sf of mall space comprising of 2 malls will lead to a surge in transaction activity next quarter, although a large portion of the upcoming mall space has already been leased. Despite low vacancies, the rentals in malls and main streets are likely to be stable due to the uncertain political scenario in Hyderabad propelling most retailers to adopt a cautious approach.
Established main streets in Kolkata continued to witness buoyant demand from national and international retailers. Given the high demand and low vacancy level at Park Street, the rents appreciated by 11% over the last quarter. VIP Road in North Kolkata witnessed a surge in demand, leading to a 6% rise in rentals over the previous quarter. In this quarter, apparel, accessories and F&B retailers have been making enquiries for expanding in malls as well as main streets. The rentals in malls remained similar to those noted in the previous quarter. In South Kolkata, a mall opened partially, adding 66,000 sf of mall space to the city, having only the anchor ad mini anchor stores operational.
Some amount of leasing in the city led to a 0.2 percentage point drop in city vacancy level, which was recorded as 4.4% for this quarter. In the wake of considerable demand and low availability, established main streets like Park Street and Camac Street may witness rental appreciation. 440,000 sf of mall space is expected to be operational, with 95% occupancy, in the next quarter in south-central Kolkata. Despite the influx of fresh mall space, leasing activity is expected to rise in the upcoming the festive season, thus the overall mall vacancy level may decline further.
Mumbai witnessed stable rentals in main streets with the exception of Vashi which witnessed a steep q-o-q rental rise of 17%. Healthy demand from apparel and F&B retailers coupled with limited availability in Vashi has caused this surge in rentals. Other suburban and peripheral locations like Borivali and Thane have also witnessed healthy enquiries from apparel and F&B retailers. Linking Road witnessed steady transaction levels in this quarter, given the healthy demand, sufficient availability and competitive rentals.
Mall rentals in Mumbai remained stable largely with Mulund and Lower Parel being the exceptions. Whilst Lower Parel witnessed 10% q-o-q rental appreciation due to limited availabilities and high demand, some retailers relocated to Ghatkopar from Mulund, thus causing a drop of 5% in Mulund mall rentals.
The city mall vacancy rose by 0.3 percentage points and was recorded at 15.4% for this quarter. Given the high enquiry level and low availabilities in Malad and Goregaon’s malls and Linking Road mainstreet, the rentals may appreciate in the next quarter. Borivali and Thane may also witness some appreciation in wake of the increased demand from retailers.
Select malls and main streets in National Capital Region (NCR) witnessed a rise in rentals in this quarter given the healthy demand from apparel, accessories, jewellery and F&B retailers. While most main streets in NCR maintained stable rentals, DLF Galleria in Gurgaon and Connaught Place in Delhi witnessed q-o-q rental appreciation of 8% and 3% respectively due to buoyant demand from retailers.
Malls in Gurgaon and South Delhi recorded quarterly rental appreciation of 7% and 9% respectively due to low availability of quality space, high persistent demand and high level of churn – especially in South Delhi. Rentals in other mall micro markets remained stable. No fresh mall supply was witnessed in this quarter. Despite the healthy transaction level noted in malls, the ongoing churn in South Delhi malls has led to a 0.3 percentage rise in overall city mall vacancy, rising from 14.4% to 14.7% in the third quarter.
The churn in South Delhi’s malls and main streets micro markets of Connaught Place and DLF Galleria may cause a slight rental appreciation in the next quarter also. As no new malls are anticipated next quarter, the moderate transaction activity expected in the quarter is likely to cause a dip in the city mall vacancy in Q4.
Pune witnessed a mixed trend in mall and main street rentals. Rentals in Koregaon Park and MG Road main streets moved northwards by 4% and 2% respectively owing to the limited supply and increase in enquiry level. Bund Garden Road however, witnessed a 7% rental correction over the previous quarter because though the enquiry level from banks and jewellers was significant, no transactions were closed.
Though some apparel and footwear retailers leased some spaces in JM Road, the rentals were steady for the main street. Malls in Hadapsar and Koregaon Park witnessed 8% and 4% q-o-q rental depreciation respectively, due to increased supply and limited interest from retailers. Nagar Road’s malls witnessed leasing transactions by footwear and electronics retailers, while Hadapdsar noted leasing by apparel and F&B retailers.
Despite the infusion of 700,000 sf of mall space in Hadapsar and the re-opening of the Nagar Road mall, which had shut down due to fire last quarter, the city’s mall vacancy declined by 6.0 percentage points and was recorded at 20.7% in this quarter.
Mall vacancies may decrease further in next quarter as no new mall space is expected. Dearth of supply and high demand conditions may lead to rental appreciation in Aundh and JM Road main streets while Hadapsar’s mall may witness rental correction due to the ample availability of mall space.
In this quarter, Ahmedabad witnessed steady rental trend in malls as well as main streets. While the demand for main streets like C.G. Road and Prahladnagar remained high, retailers did not exhibit preference for mall spaces. Though some amount of churn was noted in C.G. Road, the transactions happened at similar rents, which kept the rents stable. S.G. Highway and Prahladnagar are witnessing significant enquiry level from F&B retailers.
Select national as well as local jewelers are aggressively expanding their footprint in the city and the enquiry level remains high. Some transactions were witnessed in malls on S.G. Highway and Ring road, but the high level of vacancy kept the rentals under pressure. . Ahmedabad noted mall vacancy of 28.8% in the third quarter, declining slightly by 0.4 percentage points owing to some leasing activity and absence of fresh mall supply in this quarter also. As there are no malls under construction in the city, prominent malls in Vastrapur and Drive-in Road are anticipated to witness some upward movement in rentals. Main street rentals at C.G. Road, Prahladnagar and Law Garden may rise owing to the low availability of spaces and healthy demand.
