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With low footfall becoming a thing of the past, retailers in Delhi NCR region are embarking on an expansion drive and the region is witnessing a pickup in retail rentals. The trend – an increase in tenant queries and lease transactions by retailers – is expected to continue in the next 12 months.
Many retailers Business Line spoke to said retail rentals were headed north. “Though it has not reached the peak of 2008, it is climbing steadily,” a retailer said, adding that landlords were pressing for price revisions.
He said his company, however, was not renegotiating its contracts despite the rentals showing an upward trend.
According to Mr Abhishek Kiran Gupta, Head - Research & REIS, Jones Lang LaSalle India, “Caution is still the buzzword as retailers have strategically restricted their expansion to only key popular retail projects or new ones, limited to those that offer good design, branding and the potential for a higher footfall to sales conversion ratio.”
He said that the vacancy rate across all micro-markets rose to 29.1 per cent in the first quarter of 2011 up from 26.1 per cent in fourth quarter 2010. Net absorption recorded in the NCR retail market was 622,001 sq ft compared to 201,576 sq ft observed in the previous quarter.
The level of absorption rose appreciably as one of a total of six completions recorded this quarter became operational with a nearly 90 per cent occupancy level.
The Delhi NCR retail market witnessed six mall completions in first quarter 2011. Also, new malls became operational with occupancy levels in the range of 7-10 per cent.
Rental increase
JLL said that the overall rents rose slightly to reach Rs 128 a sq ft a month in 1Q11 from Rs 127 a sq ft a month in 4Q10. The Prime South micro-market witnessed rise in rental values this quarter mainly due to high occupancy in good quality assets where landlords have started to test the price elasticity. Prime Delhi rents moved up and ranged between Rs 210 and Rs 260 a sq ft a month.
According to the findings of CB Richard Ellis India's report titled “Indian Retail view” for H2, 2010 India witnessed the addition of more than 5 million sq ft of organised retail mall space in the country across various primary and secondary locations of top 7 cities in the year 2010. The supply is concentrated largely in the National Capital Region, Mumbai, Bangalore and Chennai.
In Delhi and NCR, rental values increased compared with first half of 2010 by almost 9-11 per cent in the high street location of Khan Market, while remaining stable in locations such as Connaught Place and Basant Lok. In the organised segment, retail rentals appreciated by almost 15 – 20 per cent in Saket District Centre and by almost 10-15 per cent in Vasant Kunj.
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