Realty firms have delayed the construction of shopping malls in eight major cities due to large vacant space in the existing complexes, according to property consultant Cushman & Wakefield.
"The retail real estate market recorded a deferment of more than 30 percent of retail mall space against the projected supply for the first half of the year," C&W said in a statement.
The consultant, however, said the deferment was necessary considering the high vacancy rates in the shopping malls and cautious approach adopted by retailers on expansion.
The eight major cities (Ahmedabad, Bengaluru, Chennai, Hyderabad, Kolkata, Mumbai, NCR and Pune) witnessed a fresh mall supply of 2.27 million sq ft during first half of 2012.
"Approximately one million sq ft of expected mall supply was deferred to second half of the year or next year. The overall vacancy rate for the major cities as of H1, 2012 stood at 19.6 percent, marginally higher than the previous quarter.
NCR saw the highest mall supply deferment of over 80 percent ensuring the city maintained 28 percent vacancy levels. NCR saw only 1.2 lakh sq ft of mall supply in H1. Bangalore saw the highest mall supply of 1.5 million sq ft in H1 2012. "This slowdown in mall construction need not be viewed as a negative growth indicator for the retail real estate segment.
The current pace is, in fact, expected to help in maintaining a healthier supply to demand equation; especially for oversupplied micro-markets," C&W India Director Retail Agency Jaideep Wahi said. "With high vacancy levels as well as cautious expansion plans of retailers, the deferment of supply is a necessary measure to bring stability in the retail market," he added.
According to report, the rental values across most mall destinations within these 8 cities remained largely stable, except for certain micro-markets in Bengaluru, NCR, Kolkata and Mumbai where mall rentals have seen a growth over the previous quarter in the range of 2-13 percent. Elgin Road in Kolkata recorded the highest growth in mall rents at 12.4 percent over last quarter mostly owing to renewals of existing tenants at a higher value.
Some prominent high streets destination recorded higher increase in rental values as against malls, reflecting the bent of interest amongst retailers for high-street. Select locations across Bengaluru (MG Road, Jayanagar, Koramangala, Vitthal Mallya Road) recorded increase in rental by 8-9 percent over the previous quarter.
Camac Street in Kolkata saw the highest increase in high street rentals at 25 percent followed by MG Road in Bengaluru at just over 9 percent. Gurgaon and Pune also saw increase in high street rents by 7-8 percent.