Slack demand from the retail sector of realty has cooled down retail rentals significantly in the current financial year. Going forward, rentals are expected to fall even further, according to the annual retail report issued by Cushman & Wakefield. The supply of retail space in malls has increased by 17%, while the total mall supply in major cities was recorded at 9.6 million sq ft.

The report indicates that as much as 11 million sq ft of expected mall supply in the year 2008 was deferred, a shortfall of 54% from the projections made at the beginning of the year. Of the proposed 74 malls at the beginning of Q1 2008, only about 34 were delivered through the year.

Hyderabad witnessed the least mall space at only 10% of the initial projections, followed by Pune (20%), Chennai (22%), Bangalore (27%) and Kolkata (36%). Delhi NCR and Mumbai, however, received a relatively higher share of the projections with 67% and 47% respectively.

Rajneesh Mahajan, director of retail services at Cushman & Wakefield, said, “From the projected supply of 20.8 million sq ft space in Q1 2008, we will see a spill-over of about 10 million sq ft development in 2009-2010. Lack of funds leading to construction delays and cautious expansion by retailers has resulted in slow absorption of retail space in malls.”

Delhi NCR witnessed the highest mall supply in the country, recording 12% increase in supply over last year, with 4.73 million sq ft entering the market across 18 mall projects. Main streets and mall rentals witnessed the much needed correction; rentals in Connaught Place, Karol Bagh and Basant Lok recorded an annual dip of 16% each and Khan Market decelerated by 14% in rental values.

Of the 4.3 million sq ft expected in Mumbai at the beginning of the year, approximately 2 million sq ft (7 malls) entered the market by the end of the fourth quarter, recording 30% increase over last year’s supply. Mall vacancy in the city was registered at 10.2%.

Of the proposed 12 malls, Kolkata witnessed only two malls getting operational in the year 2008, with approximately 1.37 million sq ft mall space, which is six times more than the supply from last year. Vacancy rates in the city were estimated at 5.6% at the end of the year.

Customer crunch

• 11 million sq ft of expected mall supply in the year 2008 was deferred

• Of the proposed 74 malls at the beginning of Q1 2008, only about 34 were delivered through the year

• Delhi NCR witnessed the highest mall supply in the country, recording 12% increase in supply

• In Kolkata, of the proposed 12 malls, only two got operational in 2008