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Construction of retail space across the country continues to be strong with vacancies remaining low.
According to research by Cushman & Wakefield, a global real estate consultant, about 1.2 million square feet (msf) of new mall space was constructed in the second quarter of 2018 while 13.81 msf currently was under construction.
Mall vacancies remain low -- sub 10% -- in many cities confirming the healthy numbers being witnessed in retail.
Higher vacancies in Delhi, Mumbai and Ahmedabad are mainly due to “strata-owned” malls, or malls owned by multiple owners. Fully owned, well-managed malls even in these cities have very low vacancies.
Retailer interest in prime malls remain high for both Tier I and other cities, said Vivek Dahiya, Managing Director- North, Cushman & Wakefield India.
Mall vacancy levels for the second quarter of 2018 was the maximum in Ahmedabad (27.7%) and Delhi (22.5%). Vacancies in other cities such as Mumbai, Pune and Bengaluru were 14.5%, 13.3% and 10% respectively. Hyderabad was 4.5% and Kolkata was 6.6%.
India is a key retail market with a 1.3 billion population, half of which is below the age of 25, a growing middle class, high urbanisation rate and a fast-growing economy.
“Reputed global brands continue to enter and expand in India; a clear sign of the strengthening interest and confidence in this fast-growing market with a burgeoning millennial population. Compared to the last few years, 2018 continues to observe considerable investment activity in retail assets and this upswing is expected to continue,” says Anshul Jain, country head and managing director India, Cushman & Wakefield.
Key private equity transactions worth Rs 1700 crore were completed in the retail sector in the second quarter of 2018. CPPIB invested Rs 938 crore in their platform with Phoenix mills, where they bought land from L&T in North Bengaluru, for development of 1 msf Phoenix market city mall, second in the city.
Xander - APG also made a substantial investment of Rs 800 crore in North Delhi Metro mall.
Rising demand in the Chennai and Kolkata markets has led to record low levels of vacancy and in turn has driven supply of new malls there. In Suburban west submarket of Chennai, the second quarter of 2018 witnessed the supply of 0.90 msf in VR Mall, which caters to catchments of Annanagar, Koyambedu and Arumbakkam.
Increase in mall supply is expected to intensify transaction activity owing to a steady demand from retailers. In the upcoming quarters, Rajiv Gandhi Salai is to witness the supply of 2 malls. Rajarhat in Kolkata observed addition of new supply, with new mall supply of 300,000 sf was added to the city’s retail space after a gap of two years with completion of Downtown Mall in Rajarhat.
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