COVID-19 impact: Average monthly rent for retail space in Khan market, CP & South Extension drops 14%

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Updated: Oct 11, 2020 11:31 AM

In its 'Market Beat Delhi-NCR Retail Q3 2020' report, Cushman & Wakefield said the average rentals of Khan Market stood at Rs 1,200 per sq ft a month during July-September, down 14 per cent from the year-ago period.

Revenue sharing arrangements as suggested by retailers were also supported by landlords to ensure that retailers stay afloat. (Photo source: IE)

The average monthly rentals in Delhi’s upscale retail locations of Khan market, South Extension and Connaught Place declined by 14 per cent year-on-year during the July-September period due to COVID-19 pandemic, according to Cushman & Wakefield.

In its ‘Market Beat Delhi-NCR Retail Q3 2020′ report, Cushman & Wakefield said the average rentals of Khan Market stood at Rs 1,200 per sq ft a month during July-September, down 14 per cent from the year-ago period.  Connaught Place and South Extension I & II also witnessed 14 per cent fall in monthly rentals in the last one year. At present, the average rent in the CP market stands at Rs 900 per sq ft and in South Ex at Rs 600 per sq ft a month.

Rentals of retail space in Sector 29, Gurugram, fell 23 per cent to Rs 180 per sq ft, while Sector 18, Noida, saw the maximum fall of 28 per cent to Rs 180 per sq ft a month.  The per sq ft monthly rentals were stable in Lajpat Nagar (Rs 250), Greater Kailash I, M Block (Rs 375), Rajouri Garden (Rs 225), Punjabi Bagh (Rs 225), Karol Bagh (Rs 385), Kamla Nagar (Rs 380) and DLF Galleria, Gurugram (Rs 675).

According to the data, rentals in malls were stable during July-September. At present, malls in South Delhi commands per sq ft monthly rentals of Rs 600, West Delhi Rs 325, Gurugram Rs 350, Noida Rs 250, Greater Noida Rs 125 and Ghaziabad Rs 200.

“The COVID impact on the retail sector is quite well-documented. The lockdown of nearly six months has hit the retailers’ business really hard,” Cushman & Wakefield Research Head Rohan Sharma told PTI. He pointed out that many retailers had to rationalise store counts.

“Some have shut down their business completely while others have had to go to their landlords for help towards real estate costs control during this time asking for waivers or rental reductions,” Sharma said.

The consultant noted that key high streets across most cities had become strong F&B (food and beverage) destinations along with other retailer categories across apparel and accessories segments. “With the F&B business bearing the brunt of the lockdown, many such outlets had to be closed permanently,” he said.

With most retail businesses being start-ups, Sharma said they faced working capital challenges and found real estate costs as a big burden. The consultant said that exits across retail segments were seen and it created new vacancy in the high street locations. With most retailers shelving their expansion plans for the next 6-12 months, new demand was also quite limited.

“In such an unprecedented situation, landlords in high streets had to offer lower rents to new space enquiries as active retailers were negotiating hard,” Sharma said. In some cases, landlords offered to reduce rents for a short time period or gave rent abatement support.

Revenue sharing arrangements as suggested by retailers were also supported by landlords to ensure that retailers stay afloat. “The impact was seen in many main streets clocking a decline in average rents as a result. Many of these changes were reflected in Q2 itself while some changes are now visible in Q3 numbers,” he said.

On the other hand, Sharma said malls have not seen a big change in quoted rents.  Mall owners and operators have offered short-term rent waivers, rent abatements, rent discounts and revenue share arrangement to many of their retailers quite early so as to retain them when the malls open.

“We expect that the rent advantages would exist for a short-term period till retail activity resumes and some positive momentum is injected back,” Sharma said. The opening of multiplexes, food courts and entertainment formats and the upcoming festive season might help support a gradual rise in footfalls and help retailers make up their losses, he added.

“A complete recovery may take a little longer, but the rents may start coming back to close to their pre-COVID levels over the course of the next 6-9 months as the activity from retailers for new stores may pick up more momentum and retail business gets closer towards stability,” Sharma said.

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