With fresh infusion of funds and renewed confidence among developers, malls are on a ball as high vacancy rates are seen falling countrywide. Going by realty consultant Cushman and Wakefield’s take, the current mall vacancy rate stands at 13%, an improvement over last year’s 20%. About Rs 8,000 crore has been invested in malls this year, according to data collected until the end of September. “There is now a regained confidence among developers to invest in this sector because investors have now demonstrated confidence,” said Anshul Jain, managing director, Cushman and Wakefield. Among them are companies like Oberoi Realty, DLF and Prestige Estates. Whereas these companies started out by operating one mall, they are now pursuing plans for a platform deal, and thereafter, a possible divestment.
Some malls, like Mumbai’s Atria, which lay more than 80% vacant three years ago, have somewhat revived. F&B and entertainment are being called the new mall anchors; in some malls, they are occupying as much as 40% space. “Despite the fact that spends are much less when compared to a large apparel store, entertainment has been able to lower vacant spaces in malls,” said Pankaj Renjhen, managing director of retail at JLL, India.
The fact that several developers changed plans to convert their malls to other uses has also had a favourable impact on the overall vacancy level. Developers who could not make money from their malls started to convert the defunct malls into either residential or office blocks. For example, in Mumbai, Nirmal Lifestyle, City Centre, Centre One and Palm Beach Galleria all were converted. In Pune, K Raheja Corporation made an Inorbit outfit over into a commercial building, leading to a more streamlined mall supply and aiding lower vacancies.
Moreover, funds like Blackstone have started operations in cities like Ahmedabad, with almost fully leased-out malls. Blackstone and Phoenix Mills are looking to set up shop in cities such as Chandigarh, Amritsar, Indore, Pune, etc. “Because funds are now involved, upcoming malls are of far better quality and standards,” said Renjhen.
That might be heartening as according to estimates, 34 new malls are expected in the next three years, which translates into approximately 13.6 million sq ft, according to Cushman and Wakefield. This means an addition of 20% to the available mall inventory in the top eight cities.
Much of this increase can be attributed to leading international brands that are now well entrenched in the country and looking to expand at a rapid rate. These include the likes of Zara, H&M, Forever 21, etc. According to a top official in Phoenix Mills, apart from the Tier I cities, leading Tier II cities have an appetite for at least a 1 million sq ft of retail as consumers are now exposed to international and top line brands easily online.