Seven of nine malls defer launches in Q3. Here's why

Weighed down by lack of liquidity, construction delays, and low demand from retailers, seven malls admeasuring 2.62 million square feet have deferred their launches though nine malls were expected to be operational by the third quarter,according to a report by real estate consultancy firm Cushman & Wakefield.

Bengaluru and Chennai witnessed deferment of two malls each totalling to 710,000 sq ft and 461,000 sq ft ,respectively. In Bengaluru, one mall got deferred due to construction delays while the other went on hold due to liquidity issues.

Of the two Chennai malls, one was deferred due to construction delays while the other due to lack of sufficient demand from retailers.

Pune too saw postponement of 430,000 sq ft of mall space due to lack of demand from retailers due to location constraints of the project.

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Hyderabad witnessed deferment of 425,000 sq ft mall supply to early Q4 2013 due to construction delays.

A mall space of 225,000 sq ft was deferred in the National Capital Region (NCR) to later quarters because of delays in acquiring necessary regulatory approvals for operation, the report said.

The vacancy levels in malls, however, have come down to 14.51 percent in the July-September quarter due to a decline in the supply of new mall space, the report added.

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Mall rentals increased 7-10 percent in certain segments of Mumbai and NCR due to high persistence and low availability of space.

The ongoing churn in some parts of NCR propelled the rental appreciation.Given the limited availability of retail space in Vashi’s (Mumbai) main street, the rentals climbed 17 percent over the last quarter, mainly due to the demand from food and beverages retailers. For the same reasons, rentals inched up by 11 percent in Park Street (Kolkata), by 8 percent each in Usman Road -North (Chennai) and DLF Galleria (NCR) and by 6 percent in VIP Road (Kolkata) over the previous quarter.

“Given the low availability of quality retail spaces, select established main streets continue to gain traction.International and national apparel, footwear, food and beverages and jewellery retailers seem to be expanding aggressively.Landlords are being sensible and in case of excess supply, they are reducing rentals even in main streets,” said Sanjay Dutt, executive managing director - South Asia, Cushman & Wakefield India.

He noted the demand for quality mall spaces located in areas having good residential catchments was on the rise.

“Reduction in mall vacancy over consecutive quarters in the past, points towards healthy demand for such spaces from retailers. Contrary to the trend, cities such as Pune and Kolkata are seeing mall vacancy decreasing despite the influx of fresh mall supply.Amidst the slowdown, retailers have become more conscious about the choice of their outlet’s location. This has led to little or no turnout in terms of occupier demand for certain upcoming malls, pushing their opening dates forward,” he said.

Dutt further said current economic woes have also led to a liquidity crunch among developers of certain projects, forcing them to put their under-construction malls on hold.