In the second quarter of the calendar 2009, mall vacancy increased to 19 per cent from 10 per cent during the first quarter because of slowdown in uptake of mall space and churn amongst the existing clients, according to a Cushman & Wakefield report released on Monday.
The supply of space in malls was marginally higher by 3 per cent from the previous quarter at 1.14 million square feet. The expected supply in malls for 2009 is currently 8.55 million square feet, which is half of what was originally envisaged. This reduced supply is due to delays in construction projects, deferment of mall space and withdrawal of previously announced retail projects.
A rising vacancy rate has resulted in more correction in the mall rentals. Ahmedabad recorded the highest vacancy of approximately 39.4 per cent due to existing retailers vacating space in established malls over the past two to three quarters. The surge in mall supply but a relatively slower absorption of malls space in the Delhi national capital region led to vacancy of approximately 26 per cent in Q2 2009. Mumbai continued to see similar vacancy of 9 per cent as in the previous quarter, while Chennai witnessed mall vacancy of only 1 per cent during the period due to no new mall supply and restrained churn.
Hyderabad witnessed the largest infusion of mall supply of approximately 450,000 square feet followed by Bangalore which saw an addition of 300,000 square feet of fresh mall supply. Kolkata (215,000 square feet) and NCR (175,000 square feet) were the other markets that saw addition of new supply to mall spaces. Many upcoming malls have been deferred to the future or in certain cases withdrawn given the rather lukewarm response from retailers.
The report adds demand for mall space across most micro markets remained slow because of lack of fresh supply, conservative approaches from retailers and overall slowdown in consumer demand. Slowdown in retail demand in many micro markets has led to rental values either remaining stable or correcting marginally in the range of 5 per cent to 10 per cent over the previous quarter. The sharpest decline in mall rental values were recorded in Ahmedabad, which corrected by 39 per cent over previous quarter, while Vastrapur saw a rental correction of 23 per cent. Chennai Central and Nagar Road (Pune) witnessed correction of 18 per cent over previous quarter, while Bund Garden road saw a drop of 17 per cent in rentals in the same period.
Jaideep Wahi, director, agency, retail services, Cushman & Wakefield, said, “We are likely to see further corrections.”
Source: The Financial Express