In sync with global economic slowdown, the retail sector in India also witnessed signs of sluggish activities including low rental values for malls and high streets and slower consumer demand across the cities in India.
According to the latest report by global real estate services firm Cushman & Wakefield (C&W), the so called traditionally strong retail high street locations reported significant slide in rental values in the third quarter of 2008. The Linking Road and Kemps Corner in Mumbai witnessed 20 per cent fall in rentals, while Karol Bagh in NCR witnessed 18 per cent, Ganesh Khind Road in Pune and Cathedral Road – RK Salai in Chennai each witnessed 13 per cent decrease. This is, as the report says, prominently due to caution in expansion plans of the retailers.
However, the retail markets in cities like Bengaluru, Hyderabad and Kolkata remained stable with certain mall locations even seeing an appreciation in rental values. Again Ahmedabad, situated on the other side of rental spectrum, experienced the highest fall in rental values of 20 per cent in Kankaria Lake.
The report also said that the expected mall supply for 2008 has been reduced by approximately 36 per cent to 10.57 million square feet from its corresponding previous year quarter estimates of around 16.77 million square feet. The report pointed out that the drop in the estimated supply is largely due to delays in project completion.
The report further listed the locations in which the rental values of malls have shown corrections ranging as widely as 2 – 20 per cent in various micro markets. In Mumbai, all the suburban locations including Mulund, Goregaon, Vashi and Ghatkopar witnessed around 8 – 11 per cent low rental values in a period of three months. With the exception of Vashi, where the reason was essentially fresh supply of malls space, all the other locations witnessed a drop due to an alignment of rentals to the business potential of the locations.
Releasing the report, Rajneesh Mahajan, director, retail services, C&W, said, “The third quarter of 2008 has been significant for the retail real estate sector as for the first time in recent past many established locations saw correction of values both in mall as well as high streets.”
“In the short run, we may continue to see restrained activities from the retailers, resulting in further reduction in rental values,” added Mahajan.