Developers expect mall occupany to reach pre-Covid level by March
NEW DELHI | MUMBAI: Occupancy at malls have still not reached pre-Covid level even after reduced rentals and a Covid-19 triggered churn amongst clients that saw top retailers grab marquee properties across the country, said a report by a real estate consulting firm.
Vacancies at malls in NCR, Pune, Bengaluru, Chennai and Hyderabad have risen between 50 to 530 basis points now, compared to a year ago period, according to the latest data by ANAROCK Research.
Mumbai was the only exception which witnessed malls vacancy numbers go down by 390 bps.
The mall developers said they are hopeful of being completely occupied by March next year.
“The retail segment has been doing good post unlock and recovering faster than any other segment of the real estate sector,” said Abhishek Bansal, Executive Director, Pacific Group adding that about ten brands are on the verge of completing fit-out in 30-45 days which will take the occupancy to 97-98% in its three malls in Delhi-NCR.
Mall owners also have seen retailers renew their leases and a few who had vacated their premises now looking for space.
One major attraction for retailers is the new revenue-share model that they have switched to from rentals in which they paid a high fixed monthly sum to the mall owners.
“Some retailers are holding on to their leases because rather than starting afresh when the situation improves and spending more on set-up, they prefer to hold on and enter into win-win deals with the mall owners,” said Anuj Puri, Chairman – ANAROCK Property Consultants.
While malls reopened mostly since June, top markets – including Delhi and Mumbai – permitted that only a month later, which led to consumers shifting to online channels.
While consumers are increasingly preferring online purchases, the brands expect physical retail to bounce back to pre-Covid levels in the next few months.
As a result, top brands are proactively opening stores to exploit the low rental costs and less competition.
“Lot of top malls in metros and top cities corrected their portfolio by shrinking spaces as well as easing out low performing brands and reassigning it for top performing category leading brands like Levi’s which offer significantly higher revenue density and footfalls,” said Sanjeev Mohanty, managing director, South Asia, Middle East and North Africa, Levi Strauss & Co that has doubled and even trebled its store size in many cases while also relocating to better positions in the mall.
“This also led to higher and better realisation for mall developers since they shifted to strategic revenue share deals now as compared to high fixed rentals pre-Covid,” he added.
Also, mixed use property is gaining traction, said M3M, which signed up nearly 150 brands in its mixed use properties in Gurugram, leasing around 5 lakh sq ft of space.
“The model that provides all amenities to customers under one roof has emerged as a preferred model for the commercial segment owing to its self-sustainability. In the retail segment, high-street retail is gaining momentum as compared to malls,” said Pankaj Bansal, director at M3M.
In the initial months after lockdown, several retailers had to scale back expansion plans due to hurdles such as construction being held up because migrant labourers went home, landlords had municipal permissions delayed and project teams found it difficult to travel for store fit-outs.
“The only graph from there had to be upward. The market had to bounce back. Many brands have already reached 68% of their sales a few lucky who reached similar numbers that they had a year ago,” said Benu Sehgal, President-Retail, Omaxe Ltd.
Experts feel typical vacancies in high streets and malls are between 0 – 15 % as leases either expire or brands may not be performing well, or can’t sustain rentals and move out.
“We have retained all the brands in our Malls during Covid. In addition, we have leased close to 40,000 sq ft in Supertech’s various malls,” said Mohit Arora, MD , Supertech ltd.
There is also a factor of change the landlords want to bring in terms of fresh brands.
“This time, the primary objective was to make sure that brands were able to survive low sales. Also, it was clear no one was taking space in a hurry and there was fear of vacancy,” said Shubhranshu Pani, MD (retail services), JLL India.
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