New Delhi’s Khan Market has moved down 2 spots on its global retail ranking to become the world’s 28th most expensive retail location globally, according to Cushman & Wakefield’s annual flagship report ‘Main Streets Across the world.’ New York’s Upper 5th Avenue continues to remain the world’s most expensive retail location, narrowly ahead of Hong Kong’s Causeway Bay. Back home in India, Khan Market continues to be the most expensive retail location with rentals of INR 1,250 /sq.ft/ month.
The annual ‘Main Streets Across the World’ report tracks 462 of the top retail locations around the globe, ranking them by their prime rental value, utilising Cushman & Wakefield’s proprietary data. Now in its 28th edition, the report also includes a ranking of the 71 most expensive streets – the top one per country. This year’s report showed that 36% of all streets analysed saw rental gains.
Despite witnessing stable rental values, Khan Market’s position slipped two places, due to marginal increases in rentals of other countries. The micro market has been the most expensive market in India for more than five years as demand for retail space has remained steady on account of its location and current occupier profile. The area, which is centrally located within the city of New Delhi, is flanked on all sides by high-end residential catchment areas. Within Asia Pacific too, Khan Market slipped down by a rank to be the 15th most expensive location, as Vietnam’s Ho Chi Minh City overtook Khan Market’s rentals this year.
Among Asia Pacific locations, Raj Bhavan Road in Hyderabad continued to be the most affordable retail location in Asia Pacific with a rental of INR 90 / sq.ft/ year. Vehicular restrictions in the location due to the presence of the state chief minister’s residence and other government organizations, has led to tepid demand for space by retailers, resulting in stagnant rental values. Moreover, adjacent locations of Panjagutta and Banjara Hills are developed retail locations, which offer greater options and variety to shoppers.
On the other hand, Marathahalli Junction in Bengaluru witnessed the strongest rental growth of 28%, with rentals within the Asia Pacific region which was recorded at INR 160/ sq.ft/ year. The micromarket, which comprised of factory-outlet stores until some years ago, has witnessed a surge is rentals due to its growing importance in catering to surrounding locations such as Outer Ring Road (ORR) and Whitefield that are developing as established and popular office and residential hubs.
Retailers continue to be cautious in their store expansion across the globe due to concerns including continued global economic instability, which is expected to continue well into 2017 as well. However, in India, notwithstanding the expectations of a period of lull due to the recent current demonetization, retailers are likely to expand at a faster growth, as the economy is expected to be one of the top performers amongst all large economies on the back of expected surge in demand post good monsoons, lower inflations, implementation of the Seventh Pay Commission and improving economic environment. Moreover, the implementation of the Goods and Services Tax (GST) in 2017 would likely improve operational efficiencies of retailers and help them increase their profits.
RETAIL RANKINGS IN INDIA: DELHI-NCR LEADS THE WAY
In India, the three most expensive retail micro-markets are located in Delhi-NCR. Khan Market and Connaught Place in New Delhi demand the highest rentals of INR 1,250 / sq.ft/ year and INR 850 /sq.ft/ year respectively. These are followed by DLF Galleria in Gurgaon, which emerged as the 3rd most expensive location.
Of these top three markets, only DLF Galleria Gurgaon recorded a year-on-year growth in rentals. These are established markets with long standing interest from occupiers as well as consumers on account of tenant mix, accessibility and legacy. Thus, most brands (especially F&B and fashion brands) have been working on establishing their presence in these markets, despite high rentals. Marathahalli Junction in Bengaluru, although ranked 33rd rank in India, witnessed the highest increase in rentals at 28%.
Linking Road in Mumbai is ranked as the 4th most expensive main street in India, with rentals of INR 760 (an 1.3 % increase from 2015). Despite garnering interest from F&B players and apparel retailers, the location saw only a marginal increase in rentals. Apart from Linking Road, Colaba Causeway is ranked high on the India Index (India Rank 6th) and recorded an increase of 4.2% with rentals of INR 625/ sq.ft/ year. Going ahead, limited availability of quality space could push rentals northwards in both these locations.
Kolkata’s Park Street (7th in India) and Camac Street (9th in India) also made to the top ten of the Indian ranks despite stagnant rental values on account of robust retailer interest in the market and regular inflow of brands to the location.
Anshul Jain, Managing Director, India, Cushman & Wakefield said, “India’s retail real estate is going through rapid changes with consumer behaviour evolving faster than the sector can adapt to. The game changing phenomenon has been the rapid forward movement by e-commerce, which is challenging the existing brick and mortar format. Having said that, main streets have not seen a significant erosion in attractiveness. These continue to see interest from retailers, albeit most locations have no vacancy, which keeps the rentals status of these locations stable. However, very few new locations have been added to the retail geography of India in the last few years, owing to the cautious outlook by retailers.”
Anshul further added, “Government decision to demonetize large value currencies is likely to have some negative impact on the ultra-luxury retail segment in a long term basis. However, other retail sectors, while they may be cautious in immediate terms, are expected to gain back confidence very soon. Further with the Government looking at more tax reforms that are likely to push up liquidity and reduce tax burdens on individuals as well as retailers, we should see the a new phase in Indian retail.”