Retail real estate sector absorption has remained subdued in the first half of 2012.

The net absorption of retail space fell by 57 per cent from the levels seen in the first half of 2011, according to consultancy Jones Lang LaSalle.

According to Subash Bhola, Senior Manager-Research, Jones Lang LaSalle India, “The watchful stance by retailers, coupled with the lack of quality malls and postponement of project construction, were the main causes for the sluggish absorption.”

In the past six months, only 2.3 million sq ft of operational retail space has been added to the market across the top seven cities of India. On the back of this small supply, the overall vacancy rate declined to 18.8 per cent.

Weaker biz sentiment

Because of the uncertain economic climate and weaker business sentiment, developers have been and continue to be cautious about new mall launches.

Kolkata and Pune have higher pre-commitments in projects that are ready for fit-out and expected to commence operation in the second half, with large spaces signed by anchor retailers and large-format stores in these cities.

The recent absorption is skewed towards malls with better quality. This trend is largely prevalent in Mumbai and NCR-Delhi. NCR-Delhi and Mumbai together accounted for 64 per cent of the total retail space in India, housing 149 of the 240 malls currently operational in the country’s top-seven cities.

Limited availability

Due to limited availability of new malls and the low vacancy rates in the existing prime malls, retailers in Hyderabad, Chennai and Bangalore continue to actively lease space on high streets.

It notes that FDI in retail in multi-brand retail could significant boost absorption.

(This article was published on August 9, 2012)
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