As of February, malls were on the verge of recovery and according to SCAI, were witnessing 75 percent of pre-COVID-19 (before March 2020) footfalls. [Representative image]
In life before COVID-19, shopping malls were an intrinsic part of the existence of urban dwellers. Not any longer.
Struggling to get business in the wake of a second round of pandemic restrictions, the malls are looking at cost-reduction steps such as layoffs to stay afloat, while being wary of extending rental waivers, which had been offered to retain retailers in 2020.
Thane-based Viviana Mall, for instance, has already laid off 50 percent of its 500 employees. “We are looking at ways to cut down our expenses and considering that manpower draws huge costs, we had to resort to layoffs,” says Gurvineet Singh, chief executive officer of the Viviana Mall.
According to a report released by the Shopping Centres Association of India (SCAI) in April 2020, about 25-30 percent of jobs were impacted in the industry due to restrictions. By mid-March, however, 70-75 percent of employees had re-joined.
“If the situation does not normalise after April and curbs on mall visits continue, companies will have to let go of employees again,” says Mukesh Kumar, chairman, SCAI and CEO, Infiniti Malls.
The association, Kumar informs, is in talks with the government, exploring options like relief on property tax, a moratorium on loans and payment deferment from power companies, among other steps.
In 2020, several malls had allowed retailers to deploy their spaces as fulfilment centres for e-commerce deliveries. The malls indicate they could be looking at this option again when the states allow the delivery of non-essential goods.
As per SCAI, currently, there are 650 large and 1,000 small shopping centres in the country, which support 12 million livelihoods directly and indirectly. These employees are associated with malls, retail, and manufacturing retail, it says.
No relief for retailers
In 2020, several shopping malls had offered rental relief to their retailers, keeping the dismal business situation in view. DLF malls, in the first quarter (Q1) of FY21, waived the minimum guarantee (MG) rent for its retailers, while in Q2, it gave a 70 percent rebate on MG rent for food and beverage players and 50 percent to the retailers.
Inorbit Mall and Nexus Mall also had given waivers to their retailers.
However, this time they are reluctant to offer such relief measures. This spells bad news for retailers, who incur high costs due to rentals, especially, in prime locations and shopping malls.
Monthly rentals for a metro city-based shopping mall fall in the range of Rs 200-600 per sq ft, depending on the location of the shop within a mall, according to industry estimates.
“We will have to sit with various categories of retailers and find a way out. However, rent waiver is the last resort,” admits Yogeshwar Sharma, chief executive officer and executive director of Delhi-based mall, Select Citywalk.
According to Viviana Mall’s Gurvineet Singh, it is a question of survival for them after the recent curbs introduced by the government. “We cannot pass on any discounts to the retailers unless the government permits a moratorium on the loan repayments,” he points out.
The shopping malls have been grappling with low footfalls for over a year now since the central government imposed a nation-wide lockdown to contain the spread of the COVID-19 pandemic in March 2020.
In fact, Maharashtra allowed the reopening of shopping malls only by August.
As of February, malls were on the verge of recovery and according to SCAI, were witnessing 75 percent of pre-COVID-19 (before March 2020) footfalls. The business, SCAI revealed, had seen a 90 percent recovery in recent months.
However, as state governments impose a fresh set of curbs and lockdowns to battle the second wave of the pandemic, shopping malls are back to square one. SCAI reported that the industry’s revenue dropped by almost half due to local restrictions in mid-March, whereas prior to this, it was clocking Rs 1,500 crore revenue per month.
South Delhi’s Select City Walk, which in pre-COVID-19 times witnessed an average 30,000 footfalls in a day during weekends, in February and mid-March saw 27,000 footfalls a day. But towards the end of March itself with rising COVID-19 cases, the number of visitors started waning and decreased to 15,000 a day.
Now with lockdowns being imposed across the country by state governments including Delhi and Maharashtra, the malls have been hit severely. “Even in the places that are open, we are witnessing only 30-40 percent footfalls,” says Kumar, chairman of SCAI.
“Unlike in 2020, even smaller cities are not faring well, and we are experiencing this across the country this time,” he says.
The way ahead
While the shopping centres are hopeful that they would be allowed to reopen after April and the vaccination push by the government might restore footfalls, industry watchers predict tough times for the industry, going ahead.
Says Anuj Puri, Chairman, ANAROCK Property Consultants, a trifle direly, “The state governments may ease restrictions as soon as they begin to see cases decline. That said, footfalls in malls may not return even if restrictions are eased and will remain low for at least some time.”
A report released by rating agency Crisil last week estimated that the industry will reach only 80-85 percent of its pre-pandemic topline in FY22. That, indeed, appears like a grim prognosis.