Losing Sheen

It's a problem of plenty. While rents in glitzy malls dropped over the last quarter, prime markets continue to see high rates of vacancy even in well-heeled cities like Delhi and Mumbai. An extensive study of this conducted by real estate consultancy Cushman and Wakefield (C&W) revealed that mall vacancy rates have remained at an average of 16% across 7 major cities in 2008. Delhi and Pune had the highest ratio of vacancies in malls at 24% and 15% respectively, with the financial hub of Mumbai not too far behind at 10.2%. Chennai seemed to be the only one to beat the empty-quotient with approximately 1% of its mall space being left vacant. “From the retailers’ point of view, the preference is still largely for premium high streets over malls, further aggravating the situation,” says Rajneesh Mahajan, executive director, retail services, C&W India. “In cities like Delhi and Pune where the distribution of malls is fairly equitable, high vacancy levels are a result of inadequate quality of development which have deterred major retailers from venturing into these malls.” Kishore Biyani, CEO, Future Group feels that retailers are in a period of transition. “There is a higher degree of cautiousness at this time. Everyone is discovering what works best,” he says. “They are deciding where to invest right now so that they can get the best return.” Take the case of Delhi NCR, which has the highest amount of mall space in India and notched up another 12% increase in supply last year with 4.73 mn sq ft opening up across 18 mall projects. However, vacancy levels are also the highest at 24% of the existing mall stock of 14.6 mn sq ft being unutilised. “This is largely due to the fact that most of the new space is concentrated in specific locations, creating an excess in that micro market,” says Mahajan. “The concentration has been largely in satellite towns to Delhi like Gurgaon, Ghaziabad, Noida etc. where a large number of projects have been completed but are yet to see a corresponding uptake of space by retailers.” Some people, however, also believe that since many malls have not been able to attract enough footfalls, big retailers are cautious about taking up space there. “People have come out of the mall culture. That charm and craze is over,” says Ambeek Khemka, group president of Vishal Retail which has been operating successfully in the standalone format. “Moreover, the drop in rental retail values haven’t been across the board, so these rates are still not attractive enough. Also, a lot of mall developers don’t look at the right product mix which again acts as a deterrant for many top retailers.”