Malls seeing healthy rate of pre-commitment, occupancy
India Head, JLL
After a three-year lull, malls are experiencing healthy rate of pre-commitment and occupancy, thanks to favourable policies that have boosted retail space offtake.
The main reasons attributed for the surge in space offtake are the recently policies announced in favour of the retail sector — 100 per cent FDI in single brand retail, relaxation of sourcing norms for multi-brand retailers, 100 per cent FDI in marketing of food products and the revised Model Shop and Establishment Act (that allows shops to remain open 24x7). After witnessing a dull period in terms of new supply of Grade-A malls during the last three years, 2015 saw a remarkable jump in completions,” said Anuj Puri, Chairman and Country Head, JLL India.
The major completions coincided with the festival season in India and included the Mall of India and Gardens Galleria in NCR Delhi, VR Mall in Bengaluru and Acropolis Mall in Kolkata, among others.
“This time around, malls were experiencing healthy rate of pre-commitments and as a result, their occupancy during commencement is remarkable. Despite rise in completions, vacancy rate fell across major cities of India,” said Puri.
Rents mostly stagnant
“Rents at the mall were mostly remained stagnant for most part of the 2012-14 period. However, after May 2014 when the elections happened and results were declared, rents started to go up marginally as enquiries from retailers went up,” he added. As availability of retail eased, tenants now prefer superior malls. This is witnessing a key transition in the organised retail space across major cities.
“Retailers are now looking for malls that can be classified as quality structures — modern design that promotes good brand visibility, reasonably large floor-plates with ample open areas, professional mall management practices, good upkeep, suitable tenant profile and a good catchment. These factors helped the market to characterise mall properties into three buckets — superior malls, average malls and poor malls,” Puri explained.
Over the years, the best retail tenants started to approach only the superior malls, leaving some average malls and poor malls behind in the new cycle of resurgence in retail.
Consequently, the vacancy rate in superior malls was under 10 per cent as of year 2015, while average and poor malls saw vacancy in the range of 15-40 per cent on an average.
Period of transition
Puri said in terms of rental values, the superior malls witnessed a sharper rise, while the average and poor malls saw a drop in a few cases. The retail real estate market was in a period of transition where mall quality, average footfalls and trading densities were given higher importance than merely having a retail structure at the right location.