Malls may have doubled since 2008 but rentals are still flat. Here's why

Despite the slowdown in Indian real estate, the retail space continues to flourish as at least 60 malls opened across India’s metros in the last one year, while the number of malls since 2008 have doubled from 225 to 570 as of May 2013, a Times of India report said today, quoting data from Bangalore-based real estate consultancy firm Asipac Consulting.

According to the report, developers such as Rahejas, Phoenix, DLF and Prestige are betting on larger malls which offer more brands under one roof. For instance, the average daily footfall in Phoenix Marketcity in Mumbai, the largest mall in terms of size, is 65,789 compared to 90,803 for GIP, Noida.

Several large malls like Select Citywalk, Ambience in Gurgaon, Inorbit in Mumbai etc are trying to cut down store sizes to generate more revenues.

Malls gain by way of improved yield as newer brands come in at higher revenue share deals and existing brands deliver better performance within smaller spaces, says this Economic Times report.

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Even the commercial property survey for the second quarter of 2013 ended June 30 byRICS India shows office and retail sectors will drive investments due to the recent measures such as the opening up of the retail sector to foreign direct investments butresearch by DTZ India shows that retail rental values have largely remained flat or grown by approximately 10 percent over the last four quarters since vacancy levels are high.

Anshul Jain, chief executive officer at DTZ, said there is a sense of mixed sentiment among retailers.

“Several retailers started to employ new service delivery models by closing down loss making stores, especially in non-core markets. On the other hand, a few international retailers such as Zara, Marks & Spencer’s and VeroModa continued with their expansion plans and opened new outlets reflecting greater confidence in the long-term growth opportunities available in India,” he added.

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In fact, Mumbai and Chennai were the only cities to witness new supply in Q2 2013. But don’t cheer this news just yet since Mumbai experienced the largest increase in vacancy at 4 percent.

Seven malls, totalling 2.58 million sq ft, were scheduled to be completed in Q2 2013. However, developers have sought to delay these projects by three to six months in the hope that retail space demand improves from current levels, added Jain.