Shopping Malls In India: Survival Of The Fittest
By Bijay Kumar Sahoo
India has witnessed a frenetic pace of retail development over the past five years. While local shopping centres have always existed in India, their structure, ambiance and method of doing business served the needs of the local population. The pace of change in retail development has triggered a frantic pace in the development in the malls. A number of factors such as income growth, changing demographic profile and socio economic environment have driven this transmission in retail in India.
Goldman Sachs has estimated that the Indian economic growth could actually exceed that of China by the year 2015.It is believed that the country has the potential to deliver the fastest growth over the next 50 years.Keeping in mind the rates of growth predicted for India and China the balance of economic power is poised to tip in favour of two of the world’s largest populations over the next fifty years.The Global Retail Development Index developed by A.T Kearney has ranked India first, among the top 30 emerging market in the world.
MALL DEVELOPMENT IN INDIA
It would be perhaps incorrect to say that shopping malls have come into existence in India in the recent past.While they have always existed in the local and regional markets,the manner in which they now present themselves to the end consumer has changed. Spencer Plaza in Chennai and Crossroads in Mumbai are considered to have pioneered the shopping mall and shopertainment revolution in India.From three malls in 2000 to almost 450 malls by the year 2015,thw pace of development is rapid.It is estimated that mall development would spread across 60 cities in the country by the by the end of the decade.
The west and north of India are estimated to witness the highest rate of mall development in India .While the NCR has witnessed rapid developments in retail development, all developments have not necessarily been successful.In many cases the supply of retail space has far exceeded the demand of retail spaces.The tenants in mall in India are also faced with high lease rentals and the payment of high cost towards common area maintenance(CAM),which eventually affect the retailers profitability.
The retail real estate sector witnessed yet another slow year with limited retail space getting added to the total supply, reports Cushman & Wakefield, a global real estate consultancy. At the end of 2014, only 1.7 million square feet (msf) of fresh mall space was infused in the top eight cities of India. Leading cities of India saw an addition of only 5 new malls of which Pune noted the influx of 2 malls adding upto 500,000 square feet (sf) of mall space. Hyderabad (500,000 sf), Bengaluru (310,000 sf) and Delhi-NCR (250,000 sf) witnessed an infusion of 1 mall each. Kolkata saw an addition of 120,000 sf to the city mall inventory.
The total supply that was estimated to enter the market in 2014 was approximately 12 msf of which less than 15% came into existence amounting to indefinite deferment of approximately 25 malls across key cities of India. Maximum number of malls (9) were deferred in Delhi-NCR totalling to 6.7 msf of new mall space, which is 56% of the total mall space deferred. Though Bengaluru, Pune and Kolkata witnessed some supply during this year, a large quantum has been deferred. Bengaluru lost out on 7 planned malls while 4 malls were deferred in Pune. Kolkata witnessed the deferment of 1 mall while Chennai and Hyderabad both witnessed the deferment of 2 malls each. The delays have happened due to a variety of reasons, mostly from approval construction linked delays in Pune, Hyderabad, Bengaluru, Kolkata and Delhi-NCR. However, low demand has also led to the deferment of some malls in Delhi-NCR, Bengaluru and Chennai.
Deferment in Q4 2014 from Q4 2013
| City | Number of Malls | Total Volume in (Square Feet) |
| Ahmedabad | 0 | 0.00 |
| Bengaluru | 7 | 3.00 |
| Chennai | 2 | 1.00 |
| Hyderabad | 2 | 0.00 |
| Kolkata | 1 | 0.00 |
| Mumbai | 0 | 0.00 |
| NCR | 9 | 7.00 |
| Pune | 4 | 1.00 |
| India | 25 | 12.00 |
Volume in e Feet Mall Source: Cushman & Wakefield Research
However, leasing activities in the existing and new mall spaces remained stable with vacancy levels remaining similar to the previous year recording a very marginal drop in vacancy at 0.2%. The average vacancy level stood at 14.3%.
Sanjay Dutt, Executive Managing Director, South Asia, Cushman & Wakefield said, “There has been a period of low activities in the mall supply across the country as the developers are cautious of taking up retail projects which are high gestation and high investment as retailers still remain concerned on uptake and are therefore cautious with their expansion plans in India. Having said that, any new retail location that has appropriate catchment areas have witnessed good levels of activities.”
Pune witnessed robust leasing activity and the vacancy levels dropped by 3.5 percentage points despite new supply infusion. Hyderabad and Kolkata also witnessed the mall vacancy of the city dropping by 0.5-0.7 percentage point during 2014 owing to increased demand. Vacancy levels in Ahmedabad increased the most by 1.8 percentage points due to low preference for poor quality mall space, followed by Delhi-NCR, where the mall vacancy level rose by 1.3 percentage points due to exits in select malls in eastern and north-western part of the city. Mall vacancy level increased by 0.9 percentage point in Bengaluru due to retailers exiting poor quality mall space and malls with accessibility issues. Due to churn, Chennai and Mumbai witnessed marginal increase in mall vacancy level.
The estimated supply for 2015 is expected to be at 13 msf, all of which is expected to be a carry forward from the previous year. NCR which had seen the highest deferment in 2014, is expected to see the highest new supply of 6 msf followed by Bengaluru which is expected to see supply of approximately 3.39 msf in 2015. Pune and Kolkata are expecting new mall supply of a little over 1 msf while Chennai and Mumbai will see 500,000 sf of new malls by the end of 2015.
Vacancy & Mall Supply 2014 and Forecast for 2015
| City | Y-o-Y Vacancy Change | Supply 2013 (in million sf) |
Supply 2014 (in million sf) |
Supply 2015 (F) (in million sf) |
| Ahmedabad | 1.8% | 0.00 | 0.00 | 0.00 |
| Bengaluru | 0.9% | 0.00 | 0.31 | 3.39 |
| Chennai | 0.2% | 2.01 | 0.00 | 0.50 |
| Hyderabad | -0.5% | 0.43 | 0.50 | 6.06 |
| Kolkata | -0.7% | 0.50 | 0.12 | 1.23 |
| Mumbai | 0.1% | 0.94 | 0.00 | 0.50 |
| Delhi-NCR | 1.3% | 0.00 | 0.25 | 6.06 |
| Pune | -3.5% | 0.70 | 0.50 | 1.14 |
| TOTAL | -0.2% | 4.59 | 1.68 | 13.01 |
Source: Cushman & Wakefield Research
Sanjay further added, “The ambiguity around the Government’s stand on allowing FDI multi brand retail in India, is one of the key reasons for developers and investors to keep off creating large retails spaces. The growth in online sale activity in recent past has only added to the challenges faced by off line retailers. Going forward, in 2015, retail development activities are expected to remain stable but shy of seeing any large scale standalone mall development. Exceptions will be there where land is zoned – retail or commercial or where mixed used development is able to allow cross subsidies retail development. The expected supply for 2015 for mall space is estimated to be 13 msf all of which are the deferment from previous year. However past trends indicate 60% to 70% of the total estimated supply only opens for occupancy.”
• Bijay Kumar Sahoo is the Store Manager ,Reliance Retail Ltd.
• Mobile : 9090003536, e-mail : bjkumarsahoo8@gmail.com