Understanding mall occupancy of leading Indian cities

Understanding mall occupancy of leading Indian cities

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In India, currently, only the top six cities have a mall stock of approximately 67 million sq.ft. Roughly 36 malls have become operational between 2012-2016. However, the last three years saw a slowdown in new malls being operationalised with developers holding back projects since they faced liquidity issues and retailers became increasingly choosy about spaces being offered on lease.

The nine malls that became operational in 2016 almost equal the number of malls seen in 2014 and 2015 put together. With the retail sector on an upswing and investors interest rising in this space, Images Retail attempts to ascertain in this study if a shift in tenant profile has taken place and how top tenants stack up across different cities.

The study across the top six cities reveals that the apparel segment is the largest occupier of space, followed by departmental stores and multiplexes and family entertainment centres (FECs). The apparel segment is particularly boosted by the entry of foreign brands such as , , Marks&Spencer, , Gap, etc.

While some companies such as H&M have entered the space through the FDI in single-brand retail channel, others such as Zara, Gap have entered the Indian shores though partnership with local retailers.

Departmental stores in India offer a one-stop destination for all needs, making them popular among Indian shoppers. Majority of the large departmental stores are domestic companies, baring a few such as . As malls evolve, developers are promoting their malls as one-stop destination centres where families and friends can spend an entire day entertaining themselves through various dining options, movies and activities for all age groups besides just shopping. In such a scenario, entertainment zones such as multiplexes, bowling alleys, and golf simulators, etc., keep customers engaged and generate incremental footfalls. As a result, currently the share of multiplexes and FECs stand at 16 per cent, closely behind that of departmental stores.

Top 10 Retailers in Delhi (All Categories)

Individually, the list of top 10 retailers by space in India is dominated by the departmental store segment as stores in this format typically require larger stores, owing to the wide range of products they offer across categories.

The top slot is taken by PVR, followed by the departmental stores of Lifestyle and Shoppers Stop The apparel segment accounts for the highest share in the top 10 tenants by number of stores, followed by the F&B segment.

The largest tenant by number of stores is apparel company , which is closely followed by McDonald’s. The burger chain is followed by United Colors of Benetton, albeit with a wider margin.

Top 3 Retailers – Segment Wise

The top three tenants across top categories show that while foreign brands dominate the F&B and apparel segments, supermarkets and departmental stores continue to be driven by Indian brands. This can be attributed to the lack of clarity in FDI in multi-brand retail, which has curtailed foreign companies’ entry into India in this sphere. On the other hand, single brands continue to flock to India – either with local partnerships or franchisees.

The top three brands in the F&B segment, namely McDonald’s, KFC and Pizza Hut account for 11 per cent of the total share occupied by the sector in malls across the six cities. Higher demand for apparel and changing tastes of consumers has led to greater traction among apparel retailers, especially driven by foreign retailers who have brought fast-fashion into India.

The top three tenants in the apparel segment, namely Marks & Spencer, Max and Zara account for 16 per cent of the space occupied by the apparel segment in the malls under study. Although a new entrant in India, H&M stands on the fourth place in terms of occupied space. The top three departmental stores, on the other hand, account for approximately 68 per cent of the total space occupied by the departmental store segment.

Outlook

As more global brands descend on India and malls increasingly become more professional designed and managed to become desti nation centres, Indian malls are expected to face better business prospects. With non-performing malls with limited footfalls and poor tenant profile withdrawing from the market, the industry is bound to stabilise and the business of performing malls slated to improve.

While the F&B segment accounts for 10 per cent of the share in occupied space as of September 2016, its share is likely to go up over the next few years. Mall developers are now looking to attract trendy cafes, premium restaurants to open up in malls, going beyond the already-existent quick service restaurant (QSR)
outlets.

Going ahead, the growth of departmental stores and supermarkets would hinge upon the Government’s stance on the FDI in multi-brand retail. Besides, the pace of entry of foreign retailers is likely to be hastened as the economic growth revives and purchasing power increases.

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11 DELHI NCR

Understanding mall occupancy of leading Indian cities

Share of Occupiers – Category Wise

Delhi-NCR has the highest mall penetration in India, accounting for 39 per cent of the total mall stock across the top 6 cities. A study of the malls in Delhi-NCR shows that the average store size in the capital city has seen a rise of 23 per cent over a period of 3 years, as retailers opt for better display to enrich the in-store experience. With malls being marketed as complete family destination for all age groups, developers have focused on bringing in quality entertainment centres that would cater to all age groups.

As of September 2016, the apparel segment continues to account for the largest share (27 per cent), followed by departmental stores (15 per cent) and multiplexes and FEC (13 per cent). On an absolute basis, the major categories of apparel, department store, food & beverage, entertainment centres (including multiplexes) and supermarket have seen an increase in space occupied across the malls. The steepest rise in space occupied has been witnessed by the supermarket segment, followed by multiplex & FEC, and departmental stores. This is in line with increasing churn in malls, as mall developers attempt to diversify tenant profile.

Top 10 Retailers in the City (All Categories)

On the basis of space leased by retailers across malls in Delhi-NCR, the sheer nature of certain sectors that required larger leasable area has pushed up the ranking of tenants from FECs and departmental stores. FEC brand PVR tops the tenant list by space leased, closely followed by departmental store Lifestyle. The list of top 10 retailers by total space occupied is led by the departmental stores, followed by FECs. Domestic companies rule the roost, accounting for almost 72 per cent of the occupied area of the top 10 tenants in the city.

In terms of number of stores operated across malls in Delhi-NCR, the top 10 tenants comprises of a healthy mix of different sectors. Apparel brand Levi’s leads the way in owning the maximum number of stores across malls in Delhi-NCR, with securing a close 2nd spot. The tenants from QSRs and apparel sectors continue to remain popular among shoppers. While the domestic brands dominates the top 10 listing within the large format stores, foreign brands have taken nine places in the top 10 occupiers by count of store.

Top 3 Retailers – Segment Wise

A study of some of the top brands show that despite a perception that apparel retailers are slowing down their expansion plans, they are, in reality, leasing higher space. Space occupied by the top two apparel brands and the top departmental store have increased in surplus of 70 per cent as of September 2016, compared to 2013. Spanish fashion brand, Zara, which entered India in 2010, has been expanding at a rapid rate as fast fashion gains popularity in India. Marks&Spencer’s and Zara together account for approximately 13 per cent of the total space occupied by tenants in the apparel segment as of September 2016. It is noted that the top brands, especially in QSR and apparel segments, prefer to be located on the ground floor of malls that gives them high visibility, thereby leading to higher footfalls.

Outlook

Going ahead, Delhi-NCR is likely to witness greater demand from both international and domestic F&B retailers as well as apparel retailers. With limited quality space available in the city, malls are likely to see higher churn of tenants in the coming years. Approximately 0.9 msf of mall supply is expected to become operational by 2017. As online retailers adopt an Omnichannel approach to increase their sales points, several offline stores are likely to be opened over the next few years, as developers aim to gain presence across different channels.

1. DELHI NCR

22 MUMBAI

Understanding mall occupancy of leading Indian cities

Share of Occupiers – Category Wise

Mumbai, which accounts for almost one-fourth of the total mall stock across the top 6 cities, has seen leasing activity strengthening since last year. Apparel segment continues to account for almost one-fourth of the total space occupied across malls in Mumbai, followed by departmental stores, and multiplexes and FECs. The average store size in Mumbai malls too have declined by 14 percent as of September 2016, as compared to 2013.

Space occupied by various segments in malls has changed marginally over the three years as very few malls have become operational in the city. On an absolute basis, only departmental stores and multiplex and FEC segments registered higher occupied space in 2016, compared to 2013, owing to closures of several underperforming malls. Space occupied by departmental stores rose by 25 per cent, while that of multiplexes and FECs increased by 13 per cent over the same time period. This has been driven by mall developers who have been focusing on bringing in FECs in different formats so as to promote the malls as a one-stop entertainment destination.

Top 10 Retailers in the City (All Categories)

In terms of total space occupied, departmental stores dominate the top 10 list of tenants owing to the sheer size required by stores in this format. Departmental stores were followed by multiplexes and FECs, and supermarkets, which too typically require large spaces. Shoppers Stop leads the way in total occupied space in malls in Mumbai as the company pursued solid expansion though new store openings, resulting in occupied space rising by 23 per cent between 2013 and September 2016. This was followed by , which although has seen only modest rise in occupied space since 2013, has the largest footprint in the supermarket segment.

As seen in other cities, F&B companies have the largest footprint in terms of number of stores across malls in Mumbai. Interestingly, Levi’s ranked second with the company’s stores, outnumbering that of stores in malls in Mumbai. Among the top 10 tenants by the number of stores, the apparel segment accounted for the maximum and remaining being from the F&B sector.

Top 3 Retailers – Segment Wise

McDonald’s and Barbeque Nation, which take the first two slots in F&B, have seen rapid expansion in their footprint over the last three years. The space occupied by these two tenants together form about 10 per cent of total space occupied by the F&B segment in Mumbai’s malls. Interestingly, these two tenants saw a surge of approximately 85 per cent in space occupied as of September 2016, compared to 2013. The top three tenants in the apparel segment are of foreign origin, with brands being a mix of value fashion, mid-segment and fast-fashion. In the supermarket segment, Big Bazaar is followed by and Star Bazaar. A comparison of the space occupied in 2013 shows that the supermarket segment is not only expanding at a slow rate, but some supermarket chains are also seen to be rationalising stores, owing to reduced margins that exist in this segment.

Outlook

Malls in Mumbai are witnessing increased interest from foreign apparel retailers as well as domestic F&B chains in the form of cafes and pubs. While the city has seen few malls getting operational due to a slowdown in the retail segment and low investors’ appetite, two luxury malls are slated to come up in Mumbai’s BKC sub-market over the next few years.

2. MUMBAI

33 BENGALURU

Understanding mall occupancy of leading Indian cities

Share of Occupiers – Category Wise

Accounting for approximately 13 per cent of the country’s mall stock, Bengaluru has seen moderate supply of malls over the last few years. Multiplexes and FECs account for the maximum occupied space in Bengaluru’s malls, followed by the supermarket and Departmental Store segments. Further, multiplex and FEC is the only segment that has seen the highest growth of almost two-fold since 2013, surpassing the apparel segment. While the apparel segment’s share in total space occupied fell to 15 per cent, total occupied space as of September 2016 increased by 9 per cent in absolute terms from 2013.

Top 10 Retailers in the City (All Categories)

PVR is the top tenant in terms of occupied space in Bengaluru’s malls and accounts for almost 40 per cent of total multiplex and FEC space. Although Total Super Store is placed 2nd, the gap with PVR is wide.

In terms of number of stores by brands, KFC leads the way in Bengaluru’s malls, followed by Levi’s and . KFC and McDonald’s together account for 9 per cent of the total number of stores in the F&B segment. Levi’s, although expanding at a tepid rate, continues to have a large footprint in Bengaluru owing to its expansion prior to 2013.

Top 3 Retailers – Segment Wise

In the F&B segment, the top three retailers account for approximately 9 per cent of the space occupied in malls. The space occupied by McDonald’s has increased by 22 per cent as of September 2016, compared to 2013. In the apparel segment, while Marks&Spencer is the largest tenant in terms of space occupied in malls, the brand’s expansion in malls has been slow over the three year-period. In the apparel segment, the top three slots are bagged by foreign retail companies, which together account for 18 per cent of segment’s total occupied space in Bengaluru’s malls. Among departmental stores, the top three departmental stores (by space occupied) account for almost 60 per cent of total occupied space as of September 2016.

Outlook

Bengaluru has seen gradual growth of malls over the years and is likely to sustain the same, with comparatively low vacancy levels in the city. Over the next few years, a higher number of e-commerce companies are expected to set up physical stores, as they look at adopting an Omnichannel approach in a bid to increase sales and visibility.

3. BENGALURU

44 CHENNAI

Understanding mall occupancy of leading Indian cities

Share of Occupiers – Category Wise

Chennai’s mall stock has remained stagnant over the last three years, with negligible supply infusion in the market. In 2016, the apparel segment accounts for the highest share in Chennai’s malls, followed by multiplex and FEC and F&B segments. When compared from 2013, it is seen that the electronics and consumer goods segment and F&B have occupied higher space, with the other segments seeing a dip in occupied space. On an absolute basis, the space occupied by the electronics and consumer segment rose 27 per cent as of September 2016, compared to 2013. Similarly, the occupied space by the F&B segment rose 19 per cent over the three-year time period.

Top 10 retailers in the City (All Categories)

In terms of total space occupied across malls in Chennai, multiplex and FEC and departmental store segments account for the major share among the top 10 tenants. Departmental store, Lifestyle, is the top retailer, in terms of the total space occupied in Chennai’s malls, followed closely by Satyam Cinemas. Interestingly, the top 10 tenants also include two regional companies- Satyam Cinemas and RmKV, a regional silk saree brand, showing the strength of homegrown brands in Chennai.

In terms of number of stores by brands, departmental stores lead the way, instead of F&B brands as seen in most other cities. The three departmental stores namely, Lifestyle, and Westside, together comprise of almost the entire segment in Chennai’s malls. Surprisingly and unlike other cities yet again, health and glow in the beauty and personal care segment, is also among the top 10 tenants by number of stores in malls.

Top 3 Retailers – Segment Wise

In the F&B segment, the top three retailers account for approximately 12 per cent of the total space occupied in malls. The top three tenants in the apparel segment comprise of regional and foreign brands with regional saree brand, RmKV, leading the pack, followed by Marks&Spencer and Max. Big Bazaar retains the top spot in the supermarkets segment, despite tepid expansion since 2013. The top three supermarket brands account for approximately 90 per cent of the total space occupied by the supermarket segment in malls in Chennai.

Outlook

Higher number of foreign brands are likely to enter the market owing to increasing purchasing power of the local population. Premium apparel brands in particular are likely to make a beeline to Chennai over the next few years. Brands are likely to get quality space owing to approximately 1.85 msf of mall supply that is likely to be operational by 2016.

4. CHENNAI

55 PUNE

Understanding mall occupancy of leading Indian cities

Share of Occupiers – Category Wise

Accounting for approximately 11 per cent of the mall stock, Pune is the fourth-largest mall market. Multiplexes and FECs are the largest tenants in the city’s malls, followed by the apparel and departmental store segments. On an absolute basis, departmental stores and multiplexes and FECs have the highest occupied space in the city’s malls.

Top 10 Retailers in the City (All Categories)

In terms of total space occupied, departmental stores and multiplexes and FECs dominate the top 10 list of tenants led by the large space requirement in these formats. In terms of total space occupied, Shoppers Stop is the top tenant and accounts for 36 per cent of the total space occupied departmental store segment in Pune’s malls. Shoppers Stop is followed by Cinepolis and Pantaloons.

In terms of number of stores by brands, F&B and apparel segments account for the majority share. McDonald’s has the maximum stores in Pune’s malls, followed by departmental store, Shoppers Stop. Apparel brand Max ranked third as it opened new stores in 2016.

Top 3 Retailers – Segment Wise

In the F&B segment, McDonald’s is the top tenant across malls, despite sluggish expansion in the city. In the apparel segment, foreign brands occupy the top three slots, with Max leading the way, spurred by 32 per cent higher occupancy over the last three years. The top three position for apparel brands are bagged by foreign retail companies, which together account for 23 per cent of segment’s total occupied space in Pune’s malls. However, when it comes to departmental stores, the top three brands (by space occupied) account for 77 per cent of total occupied space as of September 2016.

Outlook

Two malls are slated to come up in western Pune over the next two years, thereby catering to the submarket which has low retail penetration. Overall, while Pune’s retail market has been relatively sluggish with vacancy levels of approximately 20 per cent, increasing confidence in the retail sector by investors and developers would likely attract higher number of retailers.

5. PUNE

66 KOLKATA

Understanding mall occupancy of leading Indian cities

Share of Occupiers – Category Wise

Kolkata has the lowest mall penetration in the major cities of India, accounting for just 7 per cent of mall stock in India. The apparel segment accounts for the maximum share in space occupied in Kolkata’s malls, followed by departmental stores. On an absolute basis, supermarkets and electronics and consumer durables segments registered the steepest rise over the three years. While the share of departmental stores has declined in Kolkata’s malls, supermarkets have occupied higher share over the three years.

Top 10 Retailers in the City (All Categories)

On the basis of space leased by retailers across malls in Kolkata, supermarket Big Bazaar is the largest tenant, followed by Shoppers Stop and Spencer’s. The top 10 tenants by space occupied comprises of a mix of brands from various sectors, with most of them being domestic companies.

In terms of number of stores operated across malls in Kolkata, the top 10 tenants comprise of a healthy mix of retailers from different sectors. Electronics brand, Samsung, has the widest footprint in Kolkata’s malls, followed by Shoppers Stop and Adidas.

Top 3 Retailers – Segment Wise

The top three F&B brands account for roughly one-fifth of the total occupied space by the segment, with a domestic brand breaking into the top three league. The top three apparel brands account for 14 per cent of the total space occupied by apparel segment in the malls.

Outlook

The retail market in Kolkata is expected to pick up once newer malls become operational in the market, thereby offering quality space to retailers, especially in the F&B and apparel segments. Various apparel retailers are expected to enter the Kolkata market over the next few years.

6. KOLKATA
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