Cafes taking precautionary measures at Khan Market. Temperature checking is done. (Image: News18)
As many as 80% high streets in India witnessed a decline in rent on account of the COVID-19 pandemic with India’s most expensive retail real estate destination seeing rents go down by almost 14%, a new report has said.
Khan market in New Delhi also slipped in rank from being the top 20 most expensive retail high street markets in APAC to rank 21, a report by Cushman & Wakefield has said.
Nevertheless, Khan Market continues to be the most expensive retail market in India with a rent of $195 per sq ft, followed by the age old retail hub Connaught Place at $153 psf, both in New Delhi. Linking Road, Mumbai was at $145 psf. DLF Galleria in Gurgaon was at $113 psf. Fort/Fountain in Mumbai was at $105 psf and South Extension in New Delhi was at $105 psf as well, the report said.
The start of lockdowns from Q2 2020 stalled the momentum and transactions have declined even as markets gradually re-opened in H2 2020.
The ongoing wave of lockdowns that occurred across the country at different times and for varying lengths resulted in an average decline in rents of around 9%, but this ranged from 18% and 14% in Kolkata and Bengaluru respectively to more benign declines of less than 2% in Chennai and Ahmedabad, the report said.
According to the report 60% of high streets in the Asia Pacific region witnessed rental decline in 2020. Among the worst impacted was Hong Kong’s premier shopping district of Causeway Bay, which saw rents fall 43% to HK$870 psf per month.
The top three most expensive cities for retail remain as Hong Kong, Tokyo and Sydney.
Also Read: High rents, poor business trigger exodus of F&B brands from Delhi’s Khan Market
Anshul Jain, Managing Director India and South East Asia said, "The APAC region has world's 64% smartphone users and the largest share of global e-commerce at 2.5 trillion USD of the global total of 3.9 trillion USD. That makes it easier to comprehend why the pandemic forced buyers to tilt towards online shopping.
Even in the last quarter of 2020 when the markets began to open and main streets began experiencing improved footfalls, people across the region continued to shop online.
"And with the second wave of the pandemic at its peak, partial lockdown imposed in several cities in India, e-commerce will continue to be the obvious preference till we ride out of the current situation," Jain said.
According to the report, some of the retail trends that emerged during the pandemic were rise of localism. Shoppers became more supportive of local businesses to help them survive through the pandemic.
In a 2020 global survey of 8,000 consumers carried out by Rakuten Advertising, 50% of households responded that they had purchased more from local businesses. Furthermore, consumers in Asia Pacific were more likely to avoid making international online purchases, showing a preference to spend their money domestically.
The pandemic has inevitably increased online retailing as lockdowns and health concerns have pushed purchasers onto digital platforms. For the Asia Pacific region, which was already a digitally hungry region, the growth of e-commerce comes as no surprise. The region has a 64% share of global e-commerce at $2.5 trillion out of a global total of $3.9 trillion, according to e-marketer.
The pandemic has also transformed the luxury goods sector with online share of luxury purchases increasing from 12% in 2019 to 23% in 2020, according to Bain & Company.
However, it remains too early to tell if this is a temporary enforced shift or start of a much wider acceptance of online retailing for luxury goods. While consumers of luxury goods generally prefer to buy in-store to enjoy the accompanying high-quality service, the growing presence of omni-channel marketing will have an impact on the evolution of the luxury goods sector, the report said.
Going ahead, the retail sector is facing some of the most significant cyclical and structural headwinds of all real estate sectors; some of which were in play prior to COVID-19 while others have occurred as a result of swift and strict restrictions on domestic and internal population mobility. Such issues have had a disproportionate impact on high-end retail destinations.
It is unlikely that these districts will immediately spring back to pre-COVID performance because of the slow pace of recovery in international travel, but at the same time it does not mean that they will fade into irrelevance. The progress made in the roll-out of vaccine programmes globally and the gradual return to normalcy will also contribute to the overall recovery of the retail sector, the report said.
For retail, in the near term, this means greater bifurcation in consumer spending; with value-oriented concepts continuing to flourish and luxury retail rebounding more quickly. Following the 2008 global financial crisis, global luxury retail generally rebounded within a 12 to 18-month timeline. Evidence from China in 2020 supports this view, which should provide a dose of optimism to the luxury sector, the report added.