What malls are doing to increase footfalls and rental yields

When Swedish fashion retailing giant H&M opened its shop in Delhi’s Select Citywalk last week, a crowd of 700 or so queued up for several hours to get in.

The mall’s operators intentionally relocated anchor tenant Pantaloon Department stores to make way for H&M. With such new brands bringing the much-needed pull factor and freshness into their premises, mall managers are bringing down the lease tenure to three years from the earlier 8-10 years. This, they point out, brings long-term viability to their retail assets, besides continuous footfalls.

“You have to excite the customer. In a market that is so dynamic with new international brands coming, it is prudent to have shorter leases. Our leases are well-researched to ensure maximum crowd pull,” said Benu Sehgal, VP, DLF Utilities, and Mall Head of DLF Place Saket.

Sehgal, who manages five malls — DLF Place, Mega Mall, Star Mall, City Centre Mall and Grand Mall — also pointed out that laggards are often asked to vacate for newer entrants.

Xander-promoted Virtuous Retail says it has brought down the vanilla-leases (850 sq. ft to 2,000 sq. ft) to around three years from 10. The company develops and operates malls in six cities.

“Shoppers want freshness and to ensure that our premises attract footfalls, we lease out shops for shorter periods,” said Ankit Samdariya, Vice-President, Asset Management & Acquisitions, Xander Group. The company said it uses the build-operate-lease model. Its total portfolio stands at seven million square feet.

Echoing a similar sentiment, Shrikanth Bhasi, Chairman, Carnival, which recently bought Chandigarh-based Elante mall, said that the company was looking at shorter leases for all its vanilla stores. “We constantly evaluate the performance of various brands before renewing the lease. Rental yield is an important part of our portfolio,” he added.

According to a Collier report on retail spaces, the total existing stock in terms of gross leasable area in the five major cities currently stands at around 70 million sq. ft. About 21 million sq. ft is currently under construction, and expected to become operational within three years.

It also said that in 2014 new supply was minimal and developers showed little interest in launching new retail projects, focusing instead on profitability.

Mall owners typically follow either a leased model or strata sold model, where shops are sold to brands. However, in the last couple of years, multiple ownerships were creating legal problems. International brands prefer malls that are leased rather than sold to achieve maximum operational efficiency.

COMMENT NOW