Personal Finance

Retail revvs up Mumbai builders

MOUMITA BAKSHI CHATTERJEE | Updated on February 12, 2011

Real estate developers are witnessing a steady flow of enquiries from prospective mall tenants, as the retail industry, buoyed by turnaround in consumer sentiments, gears up to roll out expansion plans. But market watchers believe that despite these encouraging signs, builders are likely to tread with caution, leading to a ‘measured' shop space supply entering the market in coming months.

“The retail consumer confidence has returned and shopping in the malls has become a norm. As a result, we are seeing an increase in enquiries from retailers,” the DLF Executive Director (Finance), Mr Saurabh Chawla, said in an investor call recently .

The DLF Group Executive Director, Mr Rajeev Talwar, estimates that footfalls in malls have gone up to nearly 20 per cent compared to the year-ago period.

The revival of interest in the retail space is also underlined in a recent report by CB Richard Ellis which notes an increased momentum in transaction activity, particularly during the second half of 2010.

Carrefour deal

That may well be true. Just a month ago, French retailer Carrefour zeroed in on Parsvnath's Seelampur metro mall for its first cash-and-carry store in India; the deal involves 70,000 square feet of leasable space. Over the last few months alone, Parsvnath Developers is learnt to have snapped up lease commitment for 0.5 million square feet of space (including letters of intent and lease agreements) from various large retailers, across its ten metro properties.

Here is another case in point. A senior official of a large real estate company told Business Line recently that the builder has been able to draw anchor tenants for all six malls that are currently under construction. The official did not wish to be named as he is not authorised to speak to the media.

“There are 6-9 hypermarket players operating in India today and each of them have chalked out a 15-50 store expansion blueprint – so there is a significant demand. This year, we expect supply target for retail space to be about 20 million square feet (msf) although some of that may spill over to next year,” Mr Shubhranshu Pani, Joint Managing Director - Retail Services, Jones Lang LaSalle India, says adding that rentals are expected to remain stable.

Clearly, therefore, the mood in the industry is that of cautious optimism.

“The demand has definitely picked up. Retailers are expanding, but at the same time they are being cautious...They are doing catchment area research while taking decisions...they are looking for quality supply when it comes to retail space,” Ms Tanuja Rai Pradhan, National Head - Research Services for Cushman & Wakefield India, observes.

Trend to continue

Last year, developers ended up deferring supply of retail space; and the trend is likely continue in 2011 although the quantum of spill over this time could be smaller, feel experts.

Rentals, says Ms Pradhan, are expected to be stable across most macro markets with exception of Bangalore and Hyderabad. The two locations could see some increase in rentals thanks to somewhat limited supply and rising retailer interest.

According to Cushman & Wakefield, the fresh supply of mall space across India's major cities stood at 6.9 msf during 2010, nearly 22 per cent higher than the last year's supply of 5.7 msf. About 19 malls were delivered by the end of 2010. However, the year also saw about 13 msf of expected mall supply being deferred, reducing the mall space projections by about 65 per cent from original estimates outlined at the beginning of the year.

All cities witnessed mall supply deferment; Delhi NCR saw almost 59 per cent less-than-the expected mall supply but this helped the city bring down the vacancy levels to 25 per cent compared to 27 per cent last year, Cushman & Wakefield said.

At the same time, Delhi NCR also accounted for the largest share of the overall supply cornering as much as 3.6 msf, followed by Mumbai (1.4 msf) and Bangalore (0.9 msf). Chennai was the only city which saw 80 per cent of its anticipated mall supply for the year becoming operational; Kolkata witnessed a meagre supply of nearly 0.04 msf. Pune - which was slated for about 1.12 msf of fresh mall supply - witnessed about 87 per cent of the space supply being deferred to the future.

Published on February 12, 2011

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