Mall Rentals Go Down

May 7, 2009	(Be the first to rate this story!)  Loading ...
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The low pick-up in the retail real estate sector and a holdover of expansion plans by large format retail players has led to a correction in the mall rentals in the city in the first quarter of the current year (2009), a report by real estate consultancy and research firm Cushman & Wakefield India said on Tuesday. Prime business destinations such as Koregaon Park and Bund Garden road have seen a major slide in rentals, while rental levels in areas such as M G road remained stable in the quarter due to lack of supply, the report said. According to the report, retail real estate across India continued to reel under the current economic pressure while retailers continued to show their apathy towards expansion plans. Most retail micro markets, both mall as well as main streets saw a further correction in rental values, the report noted.

The report has highlighted the fall in rentals in all major national markets where retail had been perceived to be flourishing over the last couple of years. Mumbai, for example, saw the sharpest decline in rental values for both malls (about 42 per cent in Mumbai suburbs) and main streets (about 38 per cent in locations such as Colaba Causeway), the report said. In the National Capital Region (NCR), main street location of Greater Kailash witnessed a 25 per cent decline in rental values while mall rental values in Noida dropped by 17 per cent. Ahmedabad saw a serious downturn in rental values in malls and main streets with corrections in the range of 20 per cent to 36 per cent over the last quarter.

Pune also did not witness any addition to mall supply for Q1 2009 and rentals corrected in the range of 6 to 25 per cent over the last quarter. Subdued demand and weak market sentiments resulted in a decline of rentals with Bund Garden road witnessing the steepest correction of 25 per cent and Ganeshkhind road, 22 per cent. Reduced demand also impacted the main street rental values with all micro markets recording a correction in the range of 5 to 26 per cent over the last quarter. Mall rentals on MG Road remained unchanged at Rs 380 per sq ft per month in the January-March period in 2009 as against those in the period October-December 2008. The rentals are however 9 per cent lower than the levels witnessed in January-March 2008, the report said. The main street rentals however dropped 21 per cent in January-March 2009 as compared with the last quarter and 35 per cent as compared with rentals prevalent in January-March 2008.

JM Road saw a decline of 26 per cent in the quarter (37 per cent over last year), Aundh was 22 per cent lower (30 per cent over last year), Koregaon Park at Rs 150 per sq ft per month was 17 per cent lower for the quarter and 33 per cent lower over last year. Rajneesh Mahajan, executive director, retail services at Cushman & Wakefield India said, “Even while a correction in rental values is recognised as a potential catalyst for retailers to re-enter, receding end user demand has severely curtailed uptake of space across most micro markets. Thus the trend of further correction is likely to continue in the short to medium time frame, leading to further correction in both mall rentals as well as high street rentals. Only established retail micro locations and successful malls are expected to hold steady largely on account of revenue potential and low vacancy. “Retailers in the operational malls have also realised the actual potential of the mall in terms of generating business. Thus, while they initially agreed at higher rental values on the basis of hypothetical projections, most retailers are now renegotiating their rental commitments as per the actual business potential in the mall, thereby exerting downward pressure on the rental values,” Mahajan added.

News Published Under:   Retail Market in India |

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