Gulam Zia, Senior Executive Director – Research, Advisory, Infrastructure, and Valuation, Knight Frank India speaks to IndiaRetailing on the evolution of highway retailing, the shape of things to come and the future of retail real estate in the country
Being in the Indian Navy, Daniel C (name changed) is frequently transferred. And he always prefers to drive 1000s of kilometres (km) to the place of his next posting, thanks to the improved road network and the facilities along the way.
In the last nine years, the length of the national highways in the country has increased by about 59% from 91,287 km in financial year (FY) 2013-2014, to 1,45,240 km in FY 2022-23, as per Union Road Transport and Highways minister Nitin Gadkari.
The improvement in road infrastructure is spawning a different kind of highway retailing than we were hitherto used to with new highway malls and other roadside amenities coming up. And more is yet to come with about 670 roadside facilities being developed along the national highways.
Leading international property consultancy Knight Frank is one of the two agencies (the other being JLL) working with the National Highways Authority of India (NHAI) for the development of wayside amenities along the upcoming national highways.
In an exclusive interaction Gulam Zia, Senior Executive Director – Research, Advisory, Infrastructure, and Valuation, Knight Frank India speaks to IndiaRetailing on the evolution of highway retailing, the shape of things to come and the future of retail real estate in the country. Edited excerpts…
With the infrastructure improvement malls have started coming up along highways. Can you share some insights on highway malls?
From a purely technical perspective, the concept of a highway mall is that it has to be away from a city, on a thoroughfare. Of what we have currently in the country, none qualify to be a highway mall. Take the example of malls in Mumbai. There are at least four malls on the Western Express Highway till Mira Road. Similarly, the Eastern Express Highway has about 9 malls. But since the highways are part of the city, they aren’t technically highway malls.
Of course, there are discount malls or food malls. But a typical combination of a roadside retail facility is petrol products, food, groceries, medical and a motel. Things are expected to change because there are multiple such malls opening.
The NHAI has put in almost 60 to 70 such properties on the market and between JLL and Knight Frank, at least 20-25 transactions have happened thus far in the last year or so.
To develop highway malls?
They are called roadside amenities. It could be a mall or a combination of facilities. Here, developers are asked to meet some minimal requirements like emergency health facilities and petrol bunks. Another example, which is not NHAI, is that of Samruddhi Mahamarg or the Mumbai-Nagpur Expressway—a 700-odd km stretch with one facility intended at every hundred km, both ways. So, tenders for 14 properties have been floated.
Can you please tell us a bit more about the nature of the facilities planned on the new highways?
The first mall or the first wayside amenity on the Samriddhi Expressway is going to be in Bhiwandi. You would reach the mall within 10 minutes of entering Bhiwandi. So, people from Bhiwandi, Thane, Kalyan and that belt will go there if you create a compelling reason.
Along the same route, you come across Shirdi, which experiences outstanding footfall being a pilgrim centre. So, the concept was to create a mall in Shirdi which could have shopping and a religious touch, and of course, a motel, where people could spend the night before entering the city.
Next is Aurangabad, which is a tourist spot and an important part of the Buddhist circuit with Ajanta and Ellora caves. Then comes Paithan, famous for Paithani Sarees.
Similarly, new concepts are emerging along the expressways that are opening up in UP and around Bengaluru.
Our concept of highways has transformed in the last five or seven years. And the trend will only grow in prominence.
Due to the improved road conditions, the mid to upper class is hitting the road like never before for the sheer pleasure of driving and that will change the whole perspective of highway retailing in the country.
What kind of players are developing these properties and what are the arrangements?
Most of them are regional players. The initial trend is they are all going to be on a low minimum guarantee, which means you’ll have revenue share. Established brands like McDonald’s may either give minimum guarantee or minimal fixed rental because they will drive the main footfall. But the biggest earning for such places comes from petroleum retailing. They are the ones who are jointly bidding in many cases.
Where is the maximum development happening?
The maximum planned development is happening in the North. The speed of infrastructure development happening there far, far outweighs what is happening in the rest of the country and that is reflected in the overall growth of the region. Development is also happening in the South. But I would say the North will rule the roost, lagged far behind by the South. East and West have a long way to go.
Also, the development is happening in tier 2, and tier 3 cities. Take the example of Meerut getting connected with NCR via the Delhi-Meerut Regional Rapid Transit System under the RAPIDX Project. From 180 minutes, the travel time will come down to less than an hour.
Suddenly, the tier 3 city will be close to Connaught Place. And that is what is happening in multiple places… around Bengaluru and Mumbai. These infrastructure developments will lead to a huge makeover of highway retailing in India.
This year saw the launch of some large malls from big players. Would you say big malls are back in business?
Absolutely. Between 2017 and 2020, including the COVID period, there was a big lull. During that time, these malls were either under design or in the early stages of development.
Look at it this way, Indian spending is just about beginning. The lower end is still untapped and now with most of these areas becoming accessible due to the rapid infrastructure development, rural areas will be penetrated. Real estate in these areas is relatively cheap. That’s when you can create something which is gigantic and that’s exactly what is going to happen.
If I take you to the Dubai Experience, when they started, they were outside the city completely. Now, the city has expanded. That’s exactly what is happening in India.
Which regions are doing better business for malls?
North is the highest in terms of spending in malls, led by the National Capital Region, Punjab, Haryana, and even parts of Uttar Pradesh… North Indians are known to be big spenders. The Southerners are cautious and not very open with their wallets. They make more need-based purchases. Of course, this is changing.
But in the South, high streets do extremely well. Look at T Nagar in Chennai…it’s still thriving.
You’re right. Last year, we did a report with the IMAGES Group focusing on high streets. And we realised that the spending on high streets is far more compared to malls because high streets mean serious shopping.
Shopping malls have multiple aspects like entertainment and food. But high streets offer only shopping. So, the conversions and the amount spent per person are far higher on a high street. That said, the availability of brands suffers a lot.
What is your overall perspective on retail real estate in India?
I am bullish. I feel Indian retail has to go a long way. Our wealth creation is just about starting. And the growth of our economy is unparalleled.
As the economy grows, we’ll be spending on multiple things including fruit vendors, cobblers and a whole lot of others. While it will take some time for the benefits of the growth of the economy to accrue to the lowest end of the society, it will happen, nonetheless. In the next half a decade to a decade, we will see a sea change and the biggest change will be seen in consumption which means retailing.
Today, mall players are putting up large malls, they have a vision, the understanding and the resources. They have capital and clarity on the future of India… that eventually, the monies will come to retail.
Indian retailing is on the cusp, and from here, it will only go through a blast. We are at the start of that blast, which we will experience in the next half a decade or so.
