Home Shopping Centres Overall Mall Vacancy Maintains Status Quo at 14.5 Percent

Overall Mall Vacancy Maintains Status Quo at 14.5 Percent

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Amongst the top eight cities, Pune witnessed sharpest decline of 2.5 per cent points due to healthy leasing activity and no new mall supply. Ahmedabad, Chennai and Bengaluru also recorded drops of 0.4 per cent point each due to moderate demand for quality mall spaces from apparels and food and beverages (F&B) retailers. Hyderabad witnessed a rise of 1.1per cent, in mall vacancy in the same period.

Q2 2014 saw the addition of 370,000 sq.ft.. of new mall space, which was similar to that received in the previous quarter. The supply comprised of 250,000 s’.ft. in one mall in NCR and the residual 120,000 sq.ft. in an operational mall in Kolkata. As many as 6 new malls planned for Q2 2014 witnessed the deferment to the second half of the year, which together accounted for 2.33 million square feet (Kolkata). While 3 malls measuring 700,000 s’.ft. in total were delayed in Bengaluru due to approval delays, slower construction pace in tandem with low leasing led to deferment of one mall each in NCR, Pune and Hyderabad, measuring 700,000 s’.ft., 430,000 s’.ft. and 500,000 s’.ft. respectively.

City Mall Vacancy Q2 2013 Mall Vacancy Q1 2014 Mall Vacancy Q2 2014 Supply

Q2 2014

      (in million sq. ft.)
Ahmedabad 31.50per cent 31.58per cent 31.16per cent 0.00
Bengaluru 11.95per cent 7.50per cent 7.10per cent 0.00
Chennai 6.11per cent 6.24per cent 5.88per cent 0.00
Hyderabad 1.40per cent 7.11per cent 8.22per cent 0.00
Kolkata 4.54per cent 3.57per cent 3.64per cent 0.12
Mumbai 15.05per cent 15.29per cent 15.35per cent 0.00
NCR 14.42per cent 13.44per cent 13.50per cent 0.25
Pune 26.71per cent 27.48per cent 25.03per cent 0.00
TOTAL 15.04per cent 14.51per cent 14.47per cent 0.37

Sanjay Dutt, Executive Managing Director, South Asia Cushman & Wakefield, said, “The retail and retail real estate markets are still going through a period of uncertainty. Currently, we are witnessing stagnation in the demand-supply dynamics as mall supply is being deferred and existing vacancies remain more or less stable. Whilst everyone is aware of the huge potential that exists for organized retail in India and domestic and international retailers are keen to expand their presence in the country, they are awaiting the conducive conditions to do so. The real estate sector has been maturing to provide better quality spaces and adopting best practices to cater to retailers’ needs. However, macroeconomic conditions and not just the sentiments need to improve further to encourage consumer spending and the Government needs to address the uncertainty that exists with respect to its policy stand on FDI in retail. The REIT’s for commercial properties post successful listings, would potentially open up for shopping center portfolio listings, giving much needed exit route to the developers & investors. This would encourage shopping centre developers to create much needed quality organized retail space at locations that matter. The overall infrastructure to support retail trade such as transportation and logistics too need to improve substantially for the sector to kick in to its next phase of growth.”

According to C&W, mall rentals remained stable across most cities except Bengaluru, Chennai, Mumbai and Pune where a few micro markets depicted rental variations. In Bengaluru, the sharpest rental decline of 13per cent was noticed in Mysore Road where lower trade densities impacted rentals adversely. Similarly, Cunningham Road in Bengaluru also witnessed lower demand leading to a 10per cent dip in rentals. On the other hand, Goregaon in Mumbai witnessed a 10per cent increase in mall rentals due to healthy demand from retailers. In Pune, Hadapsar also witnessed a positive trend in leasing leading to a 9per cent uptick in mall rentals. In Chennai, almost all mall micro markets witnessed a rental decline from the last quarter due to weakening demand. The sharpest rental dip of 9per cent came in Chennai-Western where lack of new mall supply hampered retailer demand for this location. Mall rentals in Hyderabad, Ahmedabad and Kolkata remained stable.

In Pune, JM Road witnessed the highest rental appreciation of 9per cent due to high demand from fashion and lifestyle retailers. Vashi in Mumbai also witnessed similar rental appreciation due to high interest from apparels and F&B retailers. In Chennai, lack of optimum sized retail spaces led to a 7per cent decline in main street rentals. Anna Nagar 2nd Avenue in Chennai also witnessed a 7per cent dip in rentals from last quarter as ongoing infrastructure projects curtailed footfalls. All main streets in NCR, Ahmedabad, Hyderabad and Kolkata recorded stable rentals during this quarter. Vittal Mallaya Road in Bengaluru witnessed a 4per cent rental drop in wake of dearth of optimum-sized retail spaces and already high rentals commanded by this established main street.

During H1 2014, Bengaluru witnessed no new mall supply; this was primarily owing to the delay in approvals, which led to the deferment of upcoming supply. Meanwhile, the city mall vacancy level registered a dip of 0.4 per cent point and was noted at 7.1per cent towards the end of Q2 2014 due to the absence of new mall supply and moderate demand from apparels, F&B, footwear and electronics retailers. Although most locations in main streets and mall micro markets recorded stable rental trend this quarter, select main streets and mall micro-markets registered a drop in rentals. Whilst Cunningham Road and Mysore Road mall micro markets witnessed a decline of 10-13per cent in rentals in the wake of weak trading activity; Bannerghatta Road mall micro market recorded a drop of 3per cent in order to keep rentals competitive and attract newer brands. Main streets of Brigade Road and Vittal Mallya Road observed a drop of 3-4per cent in rentals due to limited availability of options with optimum sized floor plates. Going forward, Cunningham Road and Mysore Road mall micro markets may experience further downward pressure on rentals. On the other hand, established main streets such as Indiranagar 100 Feet Road, New BEL Road, Kamanahalli Road and Koramangala 80 Feet Road may witness an upward rental bias owing to healthy enquiries from apparels, F&B, electronics and jewelry brands.

In H1 2014, Chennai did not witness any new shopping malls becoming operational and this led to a marginal decline of 0.4 per cent points in vacancy, which was recorded at 5.9per cent at the end of this quarter. Cautious sentiments and limited transactions led to a dip in mall rentals across all micro markets. Chennai-Western saw the sharpest decline with a 9per cent drop owing to the ongoing infrastructure projects, which curtailed footfalls and demand. Amongst main streets, strong demand from jewelry retailers for Usman Road- North and Usman Road- South led to a 4per cent rental appreciation for these locations. However, no availability of optimum sized floor plates in Cathedral Road-R.K. Salai led to a 7per cent rental dip for this micro market. Enquiries from jewelry retailers for select main streets near CBD remain high but Anna Nagar-2nd Avenue may witness a negative rental bias due to lack of demand caused by the ongoing metro work. Paucity of quality mall space and low demand may lead to stagnant vacancy levels and rental decline across most micro markets.

The mall stock in Hyderabad remained stable in Q2 2014, with 500,000 sf mall space deferred to the next quarter. Q2 2014 witnessed a rise in vacancy by 1.1 per cent points and was noted at 8.22per cent. Established main streets such as Himayathnagar, Banjara Hills, Jubilee Hills and Kukatpally witnessed an increase in demand from retailers, belonging to apparels, footwear and F&B categories. In the interim, enquiry level for electronic and apparels brands increased in peripheral locations such as Attapur and Kothapet. Whilst mall and main street rentals remained stable, next quarter the city is likely to witness infusion of 500,000 sf of mall space in Kukatpally micro market, which will put a downward pressure on the rentals.

Kolkata witnessed 120,000 sf of mall supply during the first half of 2014 and the overall city mall vacancy increased marginally by 0.07 per cent points. Limited transactions and moderate demand for retail space was recorded. Owing to lack of availability of quality retail space on main streets, malls witnessed more demand compared to main streets. Central and East locations continued to see majority of the leasing activity in both malls and main streets owing to churn and ready catchment. The first half of 2014 witnessed leasing activity predominantly from the apparels segment but rentals remained stable in both main streets and malls.

The first half of 2014 did not witness the opening of any new malls in Mumbai. Despite no new supply, churn in malls led to overall mall vacancies increasing marginally by 0.06 per cent points to 15.4per cent. During Q2, healthy demand led to mall rentals at Goregaon and Vashi appreciating 10per cent and 5per cent respectively while high vacancy levels in malls in Bhandup resulted in developers reducing rentals by 5per cent to attract retailers. Limited churn kept mall rentals stable in all other locations of the city. Main streets in Mumbai witnessed vibrant leasing activity with domestic and foreign retailers in the apparels and F&B segments actively expanding their presence at locations like Vashi, Lower Parel, Andheri and Linking Road. Owing to high footfall and thriving retail demand in Vashi, strong interest of retailers led to rentals appreciating by 9per cent. Mall rentals at select locations such as Lower Parel and Malad could appreciate due to higher demand for quality space. Main streets are also expected to witness improved leasing activity in the coming months. Increasing demand for space in main street locations such as Linking Road, Borivali and Thane could lead to increase in rental values.

Delhi-NCR witnessed one new shopping mall measuring 250,000 sf become operational with 60per cent occupancy levels in H1 2014. Amidst moderate interest among retailers to foray into new and emerging locations, developers continued with slow pace of construction deferring completion of malls. During Q2 2014, overall mall vacancy was recorded at 13.5per cent, which is 0.06 per cent points higher due to the influx of new mall space. With balanced demand supply conditions, rentals remained stable across all mall locations. H1 2014 witnessed continued interest from retailers in prominent main street locations such as Greater Kailash (I & II), Connaught Place, Lajpat Nagar, Karol Bagh, Khan Market and Defence Colony. The highest demand was witnessed from F&B brands followed by jewelry, apparels, electronics and lifestyle brands. Despite healthy demand, rentals across main street locations maintained status quo as both retailers and landlords exhibited sensitivity towards any rental change given the competitive retail landscape in Delhi-NCR.

Most of the transaction activity in malls of Pune took place in the micro markets of Hadapsar and Pimpri while few malls in Koregaon Park and Camp also witnessed an improvement in leasing activity. Though rental values in most mall micro markets remained stable, Hadapsar witnessed an increase of nearly 9 per cent due to high retailers’ interest. Though Pune witnessed 350,000 sf of mall supply in the first quarter of 2014, pick-up in leasing activity coupled with no mall supply in the second quarter led to a drop of 2.45 per cent points in vacancy levels, which is now at 25.0 per cent. Transaction activity in the coming months is expected to remain stable in malls. JM Road remained one of the most preferred main street locations, registering an 8.6per cent increase in rental values. Fashion and lifestyle brands contributed to majority of the transaction activity in main street locations. Outlook for JM Road, FC Road and Aundh continues to remain positive due to healthy demand for these markets.

Limited availability of quality mall space kept transaction activity low in Ahmedabad. A few transactions by local brands at S.G. Highway led to mall vacancies declining by 0.4 per cent points to 31.2 per cent. Given high mall vacancy levels and a high preference for main streets, Ahmedabad did not witness any mall supply and has no mall under construction. Despite high vacancy existing in some malls, landlords kept the mall rentals stable. Limited retail expansions were noted, which was concentrated in select main streets such as C.G. Road. Due to the attractive catchment and high footfalls, a few domestic brands opened their first stores on C.G. Road. Low transaction activity kept rentals stable across all main streets. Increasing enquiries, especially from apparels and lifestyle brands for locations such as C.G. Road and Prahladnagar could result in rentals increasing in the next quarter. Mall rentals in S.G. Highway could witness a correction due to existing high vacancy levels.

RETAIL RENTAL MOVEMENT IN Q2 2014 (QUARTER ENDING JUNE 2014)

City Category Micro market Average Rentals Q-o-Q per cent Change Y-o-Yper cent Change
      (INR/sf/month)    
Ahmedabad Mall Vastrapur 120 0per cent 0per cent
  Mall SG Highway 75 0per cent 0per cent
  Mall Drive-in Road 70 0per cent 0per cent
  Mall Kankaria Lake 60 0per cent 0per cent
  Main Street CG Road 150 0per cent 0per cent
  Main Street Law Garden 120 0per cent 0per cent
  Main Street Satellite Road 150 0per cent 0per cent
  Main Street Prahladnagar 130 0per cent 0per cent
  Main Street SG Highway 90 0per cent 0per cent
Bengaluru Mall Koramangala 420 0per cent 0per cent
  Mall Magrath Road 375 0per cent 0per cent
  Mall Cunningham Road 90 -10per cent -10per cent
  Mall Mysore Road 70 -13per cent -22per cent
  Mall Vittal Mallya Road 400 0per cent 0per cent
  Mall Whitefield 120 0per cent 0per cent
  Mall Rajarajeshwarinagar 85 0per cent 0per cent
  Mall Malleshwaram 280 0per cent 12per cent
  Mall Banerghatta Road 195 -3per cent -3per cent
  Main Street M.G. Road 240 0per cent 0per cent
  Main Street Brigade Road 320 -3per cent -3per cent
  Main Street Commercial Street 300 0per cent -3per cent
  Main Street Indiranagar 100 Feet Road 200 0per cent 0per cent
  Main Street Jayanagar 4th Block, 11th Main 330 0per cent 0per cent
  Main Street Sampige Road, Malleswaram 120 0per cent 0per cent
  Main Street Koramangala 80 Feet Road 125 0per cent 0per cent
  Main Street Vittal Mallya Road 270 -4per cent -10per cent
  Main Street New BEL Road 140 0per cent 0per cent
  Main Street Marathahalli Junction 125 0per cent 0per cent
  Main Street Kamanahalli Main Road 125 0per cent 0per cent
Chennai Mall Chennai – CBD I 225 -2per cent -6per cent
  Mall Chennai – CBD II 300 0per cent NA
  Mall Chennai – Suburbs (Western) 200 -9per cent -13per cent
  Mall Chennai – Peripheral (South) 220 -4per cent -2per cent
  Main Street Nungambakkam High Road 150 0per cent 7per cent
  Main Street Khadar Nawaz Khan Road 210 0per cent 5per cent
  Main Street Cathedral Road – RK Salai 140 -7per cent -7per cent
  Main Street Usman Road – South 130 4per cent 4per cent
  Main Street Usman Road – North 140 4per cent 8per cent
  Main Street Adyar Main Road 150 0per cent 0per cent
  Main Street Anna Nagar 2nd Avenue 130 -7per cent -7per cent
  Main Street Purusavakam High Road 110 0per cent 0per cent
  Main Street Pondy Bazaar 150 0per cent 0per cent
  Main Street Velachery 130 0per cent -7per cent
Hyderabad Mall NTR Gardens 125 0per cent 0per cent
  Mall Himayathnagar 150 0per cent 0per cent
  Mall Banjara Hills, Road No.1 260 0per cent 0per cent
  Mall Madhapur 235 0per cent 0per cent
  Mall Panjagutta 140 0per cent NA
  Mall Somajiguda 140 0per cent NA
  Mall Kukatpally 180 0per cent NA
  Main Street MG Road 110 0per cent 0per cent
  Main Street SP Road/Begumpet 110 0per cent 0per cent
  Main Street Raj Bhavan Road/Somajiguda 90 0per cent 0per cent
  Main Street Banjara Hills 130 0per cent 0per cent
  Main Street Abids 110 0per cent 0per cent
  Main Street Himayathnagar 135 0per cent 0per cent
  Main Street Punjagutta 155 0per cent 0per cent
  Main Street Ameerpet 125 0per cent 0per cent
  Main Street Jubilee Hills 130 0per cent 0per cent
  Main Street Kukatpally 140 0per cent 0per cent
  Main Street AS Rao Nagar 120 0per cent 0per cent
  Main Street Madhapur 100 0per cent 0per cent
Kolkata Mall South Kolkata 300 0per cent 5per cent
  Mall Salt Lake 400 0per cent 7per cent
  Mall Rajarhat 100 0per cent 0per cent
  Mall Elgin Road 600 0per cent 0per cent
  Mall Park Circus 600 0per cent NA
  Main Street Park Street (CBD) 500 0per cent 11per cent
  Main Street Camac Street (CBD) 450 0per cent 0per cent
  Main Street Lindsay Street 400 0per cent 0per cent
  Main Street Elgin Road (CBD) 320 0per cent 0per cent
  Main Street Theatre Road (CBD) 200 0per cent 0per cent
  Main Street Gariahaat (South) 200 0per cent 0per cent
  Main Street Shyambazar (North) 140 0per cent 0per cent
  Main Street Hatibagan (North) 140 0per cent 0per cent
  Main Street Kakurgachhi (East) 200 0per cent 0per cent
  Main Street VIP Road (East) 90 0per cent 6per cent
Mumbai Mall Lower Parel 600 0per cent 20per cent
  Mall Link Road, Andheri (W) 400 0per cent 0per cent
  Mall Malad 460 0per cent 0per cent
  Mall Goregaon 330 10per cent 10per cent
  Mall Ghatkopar 330 0per cent 3per cent
  Mall Bhandup 180 -5per cent NA
  Mall Mulund 210 0per cent -24per cent
  Mall Vashi 315 5per cent 5per cent
  Mall Thane 285 0per cent 2per cent
  Main Street Linking Road 750 0per cent 0per cent
  Main Street Kemps Corner/Breach Candy 450 0per cent 2per cent
  Main Street Colaba Causeway 700 0per cent 0per cent
  Main Street Fort/Fountain 375 0per cent 7per cent
  Main Street Lokhandwala Andheri 350 0per cent 9per cent
  Main Street Borivali LT Road 370 0per cent 0per cent
  Main Street Chembur 320 0per cent NA
  Main Street Vashi 305 9per cent 27per cent
  Main Street Thane 250 0per cent -4per cent
NCR Malls South Delhi 500 0per cent 0per cent
  Malls West Delhi 325 0per cent 0per cent
  Malls Gurgaon 375 0per cent 7per cent
  Malls NOIDA 380 0per cent 0per cent
  Malls Ghaziabad 200 0per cent 0per cent
  Main Street Khan Market 1,250 0per cent 0per cent
  Main Street South Extension I & II 725 0per cent 0per cent
  Main Street Connaught Place (Inner Circle) 750 0per cent 3per cent
  Main Street Greater Kailash I, M Block 550 0per cent 0per cent
  Main Street Rajouri Garden 190 0per cent 0per cent
  Main Street Karol Bagh 375 0per cent 0per cent
  Main Street Kamla Nagar 450 0per cent 0per cent
  Main Street DLF Galleria (Gurgaon) 650 0per cent 8per cent
  Main Street Sector 18 (Noida) 225 0per cent 0per cent
Pune Malls Camp 145 0per cent -3per cent
  Malls Bund Garden Road/ Koregoan Park 100 0per cent -17per cent
  Malls Ganeshkhind Road 120 0per cent -8per cent
  Malls Nagar Road 150 0per cent 0per cent
  Malls Hadapsar 120 9per cent 0per cent
  Main Street MG Road 320 0per cent 2per cent
  Main Street JM Road 380 9per cent 9per cent
  Main Street FC Road 250 2per cent 9per cent
  Main Street Koregaon Park 130 0per cent -4per cent
  Main Street Aundh 180 3per cent 6per cent
  Main Street Bund Garden Road 140 0per cent -7per cent
  Main Street Mumbai Pune Highway -PCMC 110 0per cent NA

Source: Cushman & Wakefield

About the Company:
Cushman & Wakefield is international privately-held commercial real estate services firm. Founded in 1917, it has 234 offices in 61 countries and more than 13,000 employees. The firm represents a diverse customer base ranging from small businesses to Fortune 500 companies.