Lessons in chasing malls

Two weeks after the UK-based, privately owned mall management company Donaldsons was acquired by global property adviser DTZ, its former chairman Martyn Chase was in India. On holiday? Hardly likely -- though it is on the agenda later this year.

For now Chase, a director with DTZ, is sharing insights into his company's philosophies and policies that made it a leader in UK's retail property sector, and perhaps information about his meetings with retail developers in India.

What was unusual, though Chase prefers "adventurous", was Donaldsons' decision to open an office in Mumbai before its Rs 400-crore (Rs 4 billion) acquisition by DTZ.

Though Chase will chair DTZ's UK retail division, it was his growth across Europe in the last five years, and now his foray into India, that has helped the company fix on new, more exciting opportunities in emerging markets, and will help plug a gap in its retail sector endeavours.

On the face of it, Donaldsons was involved in retail advisory and management, city centre regeneration, and local authority property consultancy -- about which more later.

On earlier visits to India, therefore, he met the key players of the country's retail industry -- "the Rahejas [of Shopper's Stop], Reliance, Pantaloon, DLF, Unitech and other smaller developers" and returned with an impression of their "huge enthusiasm for mall management but not that much experience".

Now that DTZ already has an office in Mumbai, Chase could still leverage that foray. "We would have advised," he says, "we would have bought UK investors to India."

For he realised that the Indian industry, growing at a scorching rate whether it reaches its target of 15 per cent organised retail (it is 3 per cent currently) or not, could mean adding 500 shopping centres across the country before this decade is out.

"Mall management in India," Chase smiles a little, "is different from Europe." In developed markets, a mall is seen as an essential part of a catchment area that attracts people to spend in stores so footfalls are converted into business.

And it is not just a developer but the adviser too who is part of the process of this business because land is usually acquired at top dollar rates to capitalise on this opportunity.

"What it means," Ankur Srivastava, country head of DTZ-India, says "is that the mall management company has a critical role in running the business and not just a janitor's role." Service elements become critical and footfalls are dictated by "fashion, food stores, cinemas and restaurants".

Still, in India, at least for some time, brands, upscale and value elements are likely to coexist in the same mall because of a lack of defined market cultures.

And also of buzzing central business districts. "In Europe, downtown is the starting point when it comes to locating a mall," explains Chase, "for which the central business district needs to be vibrant, for people to work, shop, live and enjoy their leisure there. Can you achieve that in your townships?" He points out that many of the malls he has seen in Mumbai and Delhi -- and he names several -- appear to be "free-standing decisions".

This is unlike, say, London, where the councils or boroughs -- akin to our district municipalities -- actually own the land and work with private developers.

"Our municipalities own the car parks, medical services, roads, schools, town parks…" he peters off, explaining the attempt to create competitive market shares within neighbourhoods.

Indian cities, clearly, don't offer a similar vision, but Chase points out that strategic planning must be undertaken.

"If you were to do a pilot project in Nariman Point," he suggests, "it would have a domino-like effect. Worli might want something similar, Bandra may want it…" Civic leadership, therefore, is very important -- perhaps a pointer to how we choose our councilors in the local municipal elections!

Yet, he's mystified how some mall developers in India sell off shops to individuals. "That's similar to selling an apartment, right? It is a way of raising finance, true, but it doesn't work in terms of tenancy mix. Single management of a mall is very important, a fragmented ownership isn't healthy." Indian retail, he says, with one large anchor store per mall, is now an outdated concept in the West. "Retail there has gone for big shops."

His walkthroughs have left him with relevant pointers for Indian developers. "They're restricted in terms of natural lighting, you need a sense of street, there should be fewer corners -- and you need to have lots of car parking."

Another issue -- and this clearly shows the lack of public-private partnership in India -- is infrastructure: "roads to get you there", for instance, street lighting and so on. "In UK, the municipality would develop that infrastructure."

In Europe, the hot trend, currently, is environment; in Britain it is responsible business. "A mall is a marketplace, a place of business, so it must make its contribution to green aspects," says Chase.

For instance, "the retail sector is a big employer so a mall can be a good employer. It can control CO2 emissions. Even a 1 per cent impact on cooling, or lighting, can make a large, very visible difference. And a mall is a travel destination, so encouraging customers to pool cars, share resources, shows a sense of responsible business."

India's burgeoning, spending young population could make shopping and leisure work together better even than Europe, says Chase, recreating an environment that changes in its day-night cycle from shopping to cinemas to restaurants to nightclubs.

But, he sighs meaningfully, investment and regeneration go hand in hand and must occur in city centres, in the central business districts that must emerge as high streets.

"There's less profit on the edges of a city." And government must improve the environment and traffic management in business districts "else investors will look for the least risky solutions".

Our time is running out and Chase has to head back for more meetings, but he can't help a parting shot. "Connaught Place," he points to Delhi's once-premier shopping destination, "is a little rundown, you can't deny that."

In truth, I can't. "Now imagine that place under a single management," – have I imagined that wink? – "in UK, that's what we'd do, buy the whole place out." He means the municipality, of course.

Connaught Place under a single management, as a public-private partnership? The mind boggles.