Extra space pushes mall rents down 25%

Availability of extra space has pushed mall rents down by almost 25 per cent in the last one year across the country, say experts.

In Gurgaon, rents are down by 20-25 per cent. For the entire National Capital Region, the decline has been up to 5 per cent, according to a real state consultant at Jones Lang LaSalle India. In Bangalore, developers say, rents have fallen by around 10 per cent.

"Earlier rents were extremely high. Now, in order to retain tenants, developers have to reduce prices or, as in some cases, enter into revenue-sharing with the retailer," says Retail and Leisure Advisory Head Vivek Kaul, Jones Lang LaSalle India.

According to an ICICI property services research, 32 malls, covering an area of almost 10 million sq ft, are expected to come up in the NCR by next year.

Twenty-one are expected in Mumbai, over an area of 7 million sq ft. Pune will have 8 new malls over an area of 2.61 million sq ft and Kolkata will see 3 more with retail space of 1.15 million sq ft.

According to Sunit Sachar, vice-president marketing, Parsvnath Developers Ltd, mall developers are trying to regain ground by leasing space to smaller stores or "non-brands".

Over-supply is not limited to major cities only. In tier-II cities, too, developers that have first-mover advantage, or have unique supplements in their malls, can demand high rents.

Ansal Plaza in Ludhiana, as the first- mover, enjoys rents as high as Rs 125-140 per sq ft. But, other developers, which do not have any USP, have been forced to reduced their rents.

As most developers are focusing on the same towns like Agra, Jaipur, Sonepat, Ludhiana and Nagpur, the availability of retail space exceeds demand.

Amit Srivastava of retail consultancy firm KSA Technopak argues that although prices have fallen, it is not a pan-India phenomenon. "Prices in southern India are on the rise, as supply is still less than demand," he adds.

He says Bangalore, Hyderabad, Cochin and Chennai together, have 18 malls under construction covering an area of 4.85 million sq ft, which is only half of what the NCR alone is expected to witness.