According to Cushman & Wakefield’s latest retail reports, the overall vacancy levels in malls dipped to 15.8% on account sustained leasing action in both main streets and malls. Despite the infusion of 1 million sq. ft. of mall space in this quarter in Chennai, the city witnessed the maximum q-o-q fall in mall vacancy levels by about 2% in the wake of healthy demand and upbeat transaction activity. Bengaluru and Kolkata followed closely, recording nearly 1% drop in mall vacancy. NCR was the only city to witness a marginal rise in mall vacancy level of about 1% over the quarter owing to increased in availability primarily in malls located in the peripheral locations. Whilst Ahmedabad and Mumbai recorded stable vacancy levels, a marginal dip in vacancy level was recorded in Hyderabad and Pune.
Jaideep Wahi, Director, Retail Agency, Cushman & Wakefield India said, “Foray of international brands into premium malls and main streets is a trend that is here to stay. Superior quality retail options with ample visibility and considerable frontage in malls and main streets alike will see strong transaction activity. Transaction activity in niche segments like luxury and jewellery will gather further momentum. Food & Beverages segment is another segment to watch out for; organic growth is likely to happen not only in prime, but also upcoming locations”
During this quarter no city except Chennai witnessed mall supply. Chennai’s Velachery micro market recorded the influx of 1 million sq. ft. of mall space as the biggest mall of the city became operational this quarter.
This quarter witnessed the deferment of 5 malls amounting up to nearly 1.73 million sq. ft. with Chennai witnessing the deferment of 2 malls amounting to 530,000 sf. While Pune witnessed the deferment of 1 mall of 700,000 sf mall space, NCR and Bengaluru witnessed the deferment of 1 mall each of 500,000 sf.
According to C&W, mall rentals were noticed to be steady across most cities except NCR, Mumbai and Bengaluru. Dearth of quality mall space availability coupled with high demand led to 10% rise in mall rentals at Noida, (NCR) over the last quarter. Owing to lease expirations and consequent churn in malls of the South Delhi micro market, a quarterly upswing of 2% in mall rentals was witnessed. Over the quarter, the mall rentals at Vashi and Ghatkopar appreciated by 6-7% owing to the limited space availabilities in quality malls at these locations.
Ongoing road widening activity in Mysore Road in Bengaluru prevailed on the mall rentals, which depreciated by 10% over the last quarter. Weak residential catchment and lower footfalls caused a dip in the mall rentals of Rajarajeshwarinagar micro market in Bengaluru.
Select main streets of Chennai (Usman Road – North, Khadar Nawaz Khan Road, Nungambakkam High Road), Hyderabad (SP Road/Begumpet, Banjara Hills), NCR (Connaught Place) and Pune (FC Road, Aundh) witnessed an escalation in rentals over the last quarter. Prime main street of Connaught Place in NCR recorded the maximum rise of 12% in rentals owing to supply constraints coupled with renewed interest from international brands. Whilst SP Road/Begumpet and Banjara Hills, the prominent main streets of Hyderabad also witnessed rental appreciation of 8 -10% in the wake of persistent demand from retailers, upcoming locations in Hyderabad also garnered substantial enquiries. Given the surge in demand at Usman Road-North in Chennai, the main street rentals appreciated by about 9% over the quarter. Established main streets of Nungambakkam High Road and Khadar Nawaz Khan Road in Chennai and prime retail properties in FC Road and Aundh main streets of Pune witnessed quarterly rental escalation of 3-5% due to increased demand and limited space availabilities. Mumbai’s prominent main street of Linking Road was the only main street to witness a decline (approximately 12%) due to increased availability caused by the exit of few retailers in this quarter.
Jaideep Wahi, Director, Retail Services, Cushman & Wakefield commented, “Malls now prefer to open with near full occupancy, as was seen in Chennai. Deferment of malls is hardly a cause of concern. However, a close tab on the infrastructure activities is needed as they take a toll on the retail real estate in the short term, not only on the main streets but also on malls.”
Robust demand, primarily from Apparel retailers, was witnessed in Bengaluru’s established mall micro markets of Kormangala and Magrath Road. Although Bengaluru did not see any new mall getting operational this quarter, in the face of strengthening demand, mall vacancy levels registered slight drop of around 1% and was noted at nearly 12% this quarter. Malls located in Mysore Road and Rajarajeshwarinagar experienced a slight dip in their rentals in this quarter due to the ongoing road widening work and weak residential catchment in the region. Main street rentals remained stable this quarter and the trend is expected to continue in the next quarter barring Marathahalli Junction, which may witness a slight drop in rentals due to infrastructural activities. Brands are also exploring options in nearby locations like Outer Ring Road. Malls in locations like Kormangala and Magrath Road with limited vacancy will fetch higher rentals while other malls are expected to hold on to their current rentals.
In Chennai, Velachery witnessed the launch of the city’s largest mall accounting for 1 million sq. ft. of new mall space with almost full occupancy level. Although the overall mall vacancy level dropped by 2% to nearly 6.5%, the mall rentals maintained a status quo. Main streets like Nungambakkam High Road and Khadar Nawaz Khan Road witnessed moderate increase in rentals in the range of 4-5% due to the prevalent high demand along with lack of new supply in these locations. Usman Road-North witnessed nearly 9% increase in rentals due to the scarcity of quality retail space options coupled with significant demand from jewellery brands. Rentals in most main streets and malls are expected to remain stable in the next quarter except Khadar Nawaz Khan Road, Pondy Bazar, and Cathedral Road-RK Salai, which may witness an uptrend as indicated by the enquiries.
Most of the main streets and malls in Hyderabad witnessed stable rentals due to moderate demand and subdued lease renewals. However, few main streets such as Banjara Hills and S.P. Road/Begumpet witnessed a rental appreciation of 7-10% due to high demand for small spaces coupled with lack of suitable options. Upcoming main streets such as Uppal, Habsiguda and Miyapur to Chandanagar stretch witnessed interest from retailers due to favorable rentals and proximity of good catchment areas. Retailers operating in apparel, automobile and accessories categories showed interest in premium main streets like Banjara Hills & Jubilee Hills. Food & beverage transactions in Madhapur mall micro market has further reduced the mall vacancy of the city by 0.5% and the recorded vacancy level stands at a mere 0.4%.New domestic as well as international retailers are expected to enter Hyderabad in the coming months.
Kolkata witnessed active demand for quality retail space across main streets and malls, especially in prime locations such as Park Street, Camac Street, Elgin Road and South Kolkata. Due to the newer leasing transactions in malls located in Elgin Road, Salt Lake and Rajarhat, the city mall vacancy level for the city dropped by 1.2% to 4.5% over the last quarter. Mall rentals remained stable in the first quarter as there was no fresh supply or renewals of existing lease agreements. The main streets too, witnessed stable rentals. Going forward, the rentals are expected to remain stable due to the already high rental rates, especially in malls and the prime main streets. Domestic and international retailers operating in food & beverages and premium lifestyle categories are expected to remain the most active in the next quarter.
In Mumbai, main-street locations witnessed healthy enquiries from the food and beverages segment and jewellery retailers. Limited transactions and churn resulted in stable rentals in most main street locations except for Linking Road, which witnessed a q-o-q decline of 12%. This was due to a few stores becoming available in the micro-market with a few retailers exiting the location. Limited availability of quality space in malls at Vashi and Ghatkopar resulted in rental appreciation of 6-7% during the quarter. Malls in Lower Parel, Malad, Goregaon, Mulund and Thane continue to operate at low vacancies with rentals remaining stable due to low transaction activity. These locations could witness additional appreciation in the near future due to low vacancy levels. A new mall in Thane is expected during the second quarter. Excluding Lokhandwala and Borivali main streets, where an increase is anticipated due to increased demand, other main streets rentals are likely to be stable.
Prominent main streets of NCR like Connaught Place and Greater Kailash I, M Block markets witnessed expansion and entry of prominent international brands. Due to healthy demand in Connaught Place, a sharp quarterly rise of 12% was witnessed. NCR witnessed renewed interest from luxury retailers and recorded a few transactions in malls. Select quality malls in South Delhi and Noida witnessed rental appreciation. Dearth of quality mall space and high demand caused a 10% q-o-q appreciation in Noida’s mall. Despite the lack of mall supply in this quarter, the vacancy rate increased by 1% to 15.7% over the last quarter, mostly due to the increased availability in malls located in Faridabad, Ghaziabad and North Delhi locations. Steady demand and expected churn is likely to push up the mall rentals in South Delhi and Gurgaon and main street rentals in Connaught Place (Inner Circle), South Extension I & II.
Pune witnessed no new mall supply and the scheduled 700,000 sf of mall space got deferred to the second half of 2013. Due to muted market sentiments, mall leasing activity was subdued, causing only a minor dip in mall vacancy rate over the quarter, which was noted at 25.3% this quarter. The main streets of FC Road and Aundh witnessed rental appreciation by 3-5% on account of increased enquiries. Whilst the leasing on main streets was mostly by retailer of apparels, footwear, electronics and jewellery categories, malls recorded demand from food & beverages and apparels retailers. No fresh mall supply is anticipated to come into market in the next quarter. Given the steady enquiry level, a minor downward movement in mall vacancy level is anticipated in the short term. Aundh’s main streets will continue to witness attention of the retailers wanting to serve the demand in western Pune.
Whilst sustained demand for quality spaces especially from the food & beverages and apparel sectors has led to positive sentiments in the market, sluggish transaction activity in Ahmedabad has resulted in stable rentals at main street locations like C.G. Road, Satellite Road, Law Garden and S.G Highway. Scarcity of quality retail availabilities continued to plague the sector resulting in retailers looking at other suburban locations in the city. Prahladnagar’s main street is courting growing retailer interest. Malls rentals have remained stable during the quarter, but continued to remain under pressure due to the high vacancy level of 33%. In the short term, there might be a dip in mall rentals of S.G. Highway whereas C.G Road, Prahladnagar and Law Garden could witness increase in main street rentals due to limited availabilities.