With top foreign retailers looking to either debut in India or expand their presence, mall owners find they aren’t able to offer them the kind of large spaces these brands want.
With top foreign retailers looking to either debut in India or expand their presence, mall owners find they aren’t able to offer them the kind of large spaces these brands want. FE learns that Swedish multinational retail clothing company Hennes & Mauritz (H&M) is eyeing space currently occupied by Future Retail’s Big Bazaar in Phoenix Mills while Spanish clothes and accessories brand Zara wants to move into the space that currently houses Pantaloons.
Mall owners say they can’t persuade existing tenants to cut short their leases and even if the lease runs out, the incumbent often has the option to renew the lease. Hypermarkets like Big Bazaar are unlikely to find locations like the one it has in Phoenix, given there are no other big malls in the vicinity.
Nevertheless, Zara, now located in Mumbai’s Palladium mall is trying its luck and has sounded out Phoenix Mills, sources said. The apparel maker currently operates out of approximately 12,000-13,000 sq ft whereas Pantaloons occupies over 25,000 sq ft. Pantaloons’ tenure at Phoenix, it is learnt, comes to an end sometime in late 2016. “We can’t comment on speculation. We are always in discussions and relationship development with several brands,” Gayatri Ruia, director at Phoenix Mills, said.
However, foreign retailers are, more often than not, able to muscle their way into spaces of their choice. In the past six months alone, Armani replaced Satya Paul in Palladium while Adidas moved in where Reynolds once was. At the R-City mall, Globus has made way for Hamleys. And at the Oberoi Mall, Burger King ousted Bombay Blues while Nike was allotted the collective space occupied by Neckties & More and Bombay High, both apparel brands. Rajneesh Mahajan, COO at Inorbit Malls, has a point when he says malls need to keep pace with the preferences and pockets of shoppers. “The same customer who used to shop at a Lifestyle, Westside or Pantaloons now wants to shop at Zara, Forever 21 and Mango, and malls must cater for these changes,” he said.
Arvind Singhal, chairman at advisory firm Technopak, believes that from a mall owner’s point of view, it makes sense to bring in power brands like H&M as it will increase footfalls. “For instance, Zara has done well and this has helped not just the mall but other tenants too,” Singhal said.
Which is why mall manager are becoming more circumspect while allotting spaces — trimming them if necessary. And they’re also signing shorter leases.
For instance, Big Bazaar and Pantaloons, Phoenix’s first anchor tenants, had signed on for 13-15 years way back in 2003 and 2004, but no longer are leases so long. Nirzar Jain, vice-president at Oberoi Mall, Mumbai, says the business is so complicated it’s becoming hard to foresee what will happen two years ahead. “Long-term agreements with tenants might have worked a decade back but now they will limit a mall’s capability to innovate,” Jain said.
Accordingly, malls, including the likes of Oberoi and Phoenix, have reduced average anchor leases to nine years and smaller brands are being signed for only a maximum of six years. Anuj Puri, country head, JLL India, points out that it is only natural that multinational brands want the most profitable locations, of which there aren’t too many. Phoenix, Oberoi, Inorbit, R-City Mall, Select City, Orion, Forum, Seasons and Mantri are among the handful of malls that have less than 10% vacancy, according to property consulting firm DTZ. Most malls typically have a revenue-sharing arrangement with retailers who pay both a fixed rental and a share of the revenues. Understandably, they’re looking for clients that will draw in customers.