Rental income: 30% jump expected in FY23 from retail malls, says ICRA

The rental income improvement is faster post-second wave with recovery at 74% for Q2 FY2022, according to ICRA.

Rental income: 30% jump expected in FY23 from retail malls, says ICRA
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The rental income from retail malls may jump 30% Y-o-Y in FY 2023, according to a report. Till now, rental income has surpassed pre-Covid levels in H2FY2022, and reached 80% of pre-covid levels on full year basis for FY2022. In FY2023, the rental income is expected to surpass FY2020 levels by around 4%-6%, according to a research by ICRA. 

The report said that retail malls have witnessed a sharp recovery in their operational metrics since August 2021, driven by pent-up demand, high vaccination coverage and resumption of multiplexes.

The retail trading values in Q3 FY2022 reached the pre-covid levels and surpassed the pre-covid trading values in Q4 FY2022. The footfalls at retail malls are expected to reach pre-Covid levels in Q3 FY2023.

Commenting on the expected increase in rental income from retail malls, Anupama Reddy, Vice President & Sector Head, Corporate Ratings, ICRA, said, ‘‘The rental income improvement is faster post-second wave with recovery at 74% for Q2 FY2022 (as against 34% for Q2 FY2021) and reaching 102% of pre-Covid levels in H2FY2022. In FY2022, the rental income in ICRA’s sample set witnessed an increase by around 56%, reaching around 80% of pre-Covid levels.”

Reddy further said the addition of new retail space was around 11 msft in FY2021 and FY2022 for the aggregate of six cities, however, the incremental space absorption was only around 4 msft during this period resulting in a significant increase in the vacancy levels to 23% in FY2022 from 18% in FY2020. 

“On same-store basis, the rental income is expected to increase by around 30% in FY2023 and is likely to surpass FY2020 levels by around 4%-6%. With the normalcy in the trading values, the occupancy is expected to improve in FY2023,” Reddy said. 

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