The Hindu Business Line : Realtors turn failed malls into offices

Kolkata, Aug. 29 Real estate developers in Mumbai plan to convert their not-so-successful retail malls into commercial office buildings due to high demand for offices from the IT/ITES, financial services and telecom sectors.

The demand for offices in Mumbai has seen the rentals sky-rocketing in recent months with the retail banking division of Citibank taking up space in Nariman Point at Rs 550 per sq ft per month. According to a survey report by DTZ, a global property consultancy firm, total absorption of commercial purposes in Mumbai, during the first quarter of 2007, was nearly 0.75 million sq ft.“There is an increased demand for office space by IT/ITES and BPOs in Mumbai. We have taken a decision to convert all the smaller malls, which are below three lakh sq ft , into commercial buildings,” Mr Hemant Shah, Chairman, Akruti Nirman Ltd, told Business Line.

“Size is a critical factor for the success of any retail project. We feel that smaller malls do not have a longer life span. Our focus is to create destination malls of about three to five lakh sq ft,” he added.

Another Mumbai-based developer Ajmera Builders seems to have followed a similar model. According to industry sources, the company has converted its Citi Mall into a mixed-use project with companies setting up offices within the mall premise. Mr Chhotalal S. Ajmera, Chairman and Managing Director, Ajmera Builders, was not available for comment.

According to Mr Susil Dungarwal, a Mumbai-based retail and realty analyst, “The cost of reinventing an unsuccessful mall is high. Besides, success is also not guaranteed. Hence, transforming retail malls into commercial buildings is one of the ways out. The phenomenon is predominant in Mumbai since the availability of commercial space is in a bit of a crunch.”

According to the DTZ report, “rentals have been following steady growth across most micro-markets in Mumbai. With IT/ITES companies setting up base in Navi Mumbai due to attractive HR catchments, rental values in that region have now touched almost Rs 60 per sq ft per month.”

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