Retail majors in talks for 50-60% cut in rentals

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Mumbai: Retail companies are negotiating a 50-60% reduction in rentals in key areas in metros across the country. Industry experts said that rental negotiations are already underway at prime retail locations in Mumbai, including Phoenix Mills and Mega Mall.

At the start of a new year, retailers want to tide over a dip in retail market growth; the market has dipped 30-40% in metros, up to 55% in leading Tier II cities and as much as 70% in Tier III cities.

Suresh J, CEO, brands and retail, Arvind Brands (A division of Arvind Ltd), said, “The current economy and post-terror sentiments of customers are not good.

In such crucial times, we are running our operations efficiently. Besides, we have already started negotiating for a 50-60% reduction in rentals, so that we are able to open another 30 stores including that of Megamart, Flying Machine and Arrow. We have already identified locations for the same.” So far, the company has 60 retail stores under different formats.

Industry experts believe that the next two years in the retail segment will be interesting. Certain brands will be phased out, while those that sustain the current crunch will be at an advantage.

Shubhranshu Pani, managing director, retail, Jones Lang LaSalle Meghraj (JLLM), said, “There will soon be increasing realism in rentals across the country. Whereas retail majors are expecting a correction in rates over the next six months, developers are coming down in certain deals, depending on brands and how seriously a certain catchment is affected.”

Almost one-and-a-half years after entering the organised retail space, Bharti and Reliance Industries have announced plans to invest Rs 10,000 crore and Rs 25,000 crore in their retail ventures respectively.

As per a study by PricewaterhouseCoopers (PwC), among retail formats, hypermarkets are expected to fuel retail growth since food and groceries account for 76% of consumer expenditure.

Reliance Retail, the retail arm of Mukesh Ambani-owned Reliance Industries launched two hypermarket stores each in Ahmedabad and Jamnagar in Gujarat. But the company is far from its objective of setting up 30 RelianceMart hypermarkets by the end of this fiscal.

Moreover, Reliance Retail is understood to be in the process of shutting down 200 retail stores, owing to liquidity crunch and instability in the stock market.