Big Malls Make a Comeback

Published: June 12, 2009

The global financial meltdown and its concomitant effect on India’s real estate industry had forced developers to defer supply of mall space in 2008. However, in what could be seen as early signs of revival of retail real estate, as many as 100 malls, spread over 30 million sq ft, are expected to come up in 2009 and 2010, according to a report. Though this figure is much lower than what was projected a couple of years ago, analysts say this is finally a positive development, realtors are now more keen on matching supply with demand, placing themselves in strategic locations and offering greater differentiation. An additional 31,846,504-sq ft of mall space will be created across India, according to a report, Mall Realities India 2010, released by retail research group Images in association with the Shopping Centres Association of India, Jones Lang LaSalle Meghraj and Cushman & Wakefield (C&W) India.

The north zone would see the development of 14,790,000 sq ft, of which, Delhi NCR alone is expected to account for 7,645,000 sq ft of mall space. This translates into 45 malls expected in the north zone with 24 in Delhi NCR itself. “The NCR region is huge in terms of area, and residential areas give way to markets. Malls nowadays are not just about shopping. They are leisure centres, with cinema halls, restaurants, beauty parlours and other entertainment avenues. Only malls with a multi-faceted role to suit every pocket will survive,” says Rajeev Talwar, group executive director of New Delhi-based real estate firm DLF. West zone is expected to supply 7,438,504 sq ft through 47 malls. South and east zones would account for 29 malls over 5,865,000 sq ft and 13 malls over 3,753,000 sq ft, respectively.

Says Vikas Oberoi, managing director of Oberoi Constructions, “I think any mall above half a million sq ft will be the order of the day in future. On the outskirts of the city, the size could be over one million sq ft. The advantage of big size is that one can have everything under one roof — food, cinema, fashion, home wear and personal care. Customers would get a wider choice and they would consider it to be a destination mall.” In 2008, 54 per cent of expected mall supply was deferred to 2009-10. Of the proposed 74 malls at the beginning of first quarter of 2008-09, only 34 were delivered by the year-end. At 9.7 million sq ft, Delhi NCR had the largest share of this supply. The credit crunch hit the developers hard, forcing them to put their mall development plans on hold.

“Construction was put on hold because of lack of funding, but as long as there is demand for residential units, there will be a demand for malls. It’s all about the location and positioning of the mall,” explains Snehal Mantri, director (marketing) of Banglaore-based Mantri Developers. The country’s retail sector as a whole has been experiencing significant pressures in terms of cash crunch and depressed sentiments. “Lower or negative revenue growth over last year on same store basis and high rental costs of the stores added in 2007-08 have forced brands/retailers to take a re-look at their real estate portfolio. The main challenge for the sector over the past few quarters has been sustainability,” says Tanuja Pradhan, national head (research services), C&W. Malls across the country have seen a drop of 25-30 per cent in footfalls and 10-15 per cent dip in sales. Mall operators and builders are looking at various options to push profits.

Big retail companies are forging revenue sharing arrangements with mall owners and developers. This is expected to be the model of business relationships between organised retail and property owners in the future. Spencer’s of the RPG group, the People Store chain of the Aditya Birla group and independent retailer Vishal have been able to win over developers who have now agreed to lower rents in lieu of a part of store revenues. Others are looking at various marketing ploys to boost revenues. Automobile company Bhasin Group’s real estate arm has announced a theme mall by the end of March 2010 year in Greater Noida (Delhi’s NCR). The mall, The Grand Venezia is to be built at a cost of Rs 500 crore. It recreates the ambience of Venice with Italian gondolas sailing through a canal located in the heart of the mall with each shop having access to it. It will have a 1.5 million sq ft shopping mall, an office tower, 2-lakh sq ft commercial tower, a 5-star luxury hotel, lifestyle clubs, gaming zone, multiplex and an amphitheatre. In Kolkata, Ambuja Housing Development is planning a mall with a 1,000-sq ft butterfly park on the second level, housing 40 species of butterflies.

Besides, there would also be a 4-screen cineplex, entertainment and food courts, banquet halls, 1,500-car parking area and around 200 small and big retail outlets. The mall will also have a 3-4 star budget hotel with 150 rooms to take advantage of the proximity to the airport, although no brands have yet been finalised. The built-up area of City Centre New Town is 6.8 lakh sq ft and the expected date of completion is September 2009. C&W’s Pradhan advises those looking at the retail sector to focus on 5 Ps — positioning for the brand, pricing for the right tenant mix, packaging for design and interiors, product for the perfect merchandise mix and promotion for malls and brands within malls. Dharmesh Jain, managing director of Mumbai based Nirmal Lifestyle, sums up the future of India’s mall growth, “At least 80 per cent reduction in mall space is because of slowdown and turmoil in real estate. People who want to enter the business will find it difficult to survive, because the existing ones want to grow bigger. However, I think there will be a shortage of mall space from 2011-12. The economies of scale will come in handy for big malls, the reason why people will be looking for big malls,” he says.

Source: Indian Realty News

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