 "The Rise of Ghost Malls: Why Indian shoppers are staying away from small shopping centres")
Vacant complexes, no visitors, and eerie silences. This is the stark reality that retailers in several small shopping malls in India face. They have been “ghosted”, courtesy of changing consumer demands.
A recent “Think India Think Retail 2024” report by Knight Frank India, highlighted that despite a significant 238 per cent year-on-year surge in the Gross Leasable Area (GLA) across prime Indian markets in 2023, the spectre of ghost malls looms larger. Their number is increasing – from 57 in 2022 to 64.
Ghost malls are those properties that have a low footfall and a vacancy rate of over 40 per cent. As a result of the rise in such shopping centres, Knight Frank India predicts job losses and economic dislocation, especially for small retailers and service providers.
What is the reason behind this abandonment and which cities are reporting a rise? Let’s take a closer look
Why are ghost malls rising in number?
The report mentions that a shift in consumer behaviour and rising online shopping trends have been major factors in people ditching small shopping complexes.
The decline in consumer footfall stems from reasons like poor design, ineffective management, lack of maintenance, uninviting exteriors, intense competition from high-grade malls, insufficient retailers, or an unfavourable mix of brands.
“The momentum of consumption, propelled by rising disposable incomes, a youthful demographic, and urbanisation, tilts in favour of the organised retail sector. An enhanced retail experience remains crucial for shoppers, highlighting the significance of physical retail spaces,” Shishir Baijal, chairman & MD, Knight Frank India said in a Mint report.
Impact Shorts
More ShortsAround 132 malls, which are considerably small in size (less than 1 lakh square feet) had a vacancy rate of 36.2 per cent in 2023, as they do not offer a comprehensive shopping experience to the consumers, pushing them on the verge of turning into ghost malls, the report which is based on a survey of 29 top cities said.
In contrast, “Grade A malls have notably excelled, maintaining robust occupancy, foot traffic, and conversion rates, thereby delivering value to their customers. Conversely, Grade C assets and those classified as Ghost Shopping Centres are lagging, prompting landlords to take action to rejuvenate or divest such properties,” Baijal further said.
Which cities have the most ghost malls?
The data from Knight Frank reveals that the 64 abandoned malls spanning eight cities occupy 75 per cent of the total 125.1 mn sq ft. gross leasable area.
According to the survey, Delhi-NCR has the highest concentration with 21 ghost shopping centres (5.3 million sq ft), trailed by Bengaluru with 12 (2 million sq ft), Mumbai with 10 (2.1million sq ft), Kolkata with 6 (1.1 million sq ft) Hyderabad with 5 (0.9 million sq ft), Ahmedabad with 4 (1.1 million sq ft), and Chennai and Pune with 3 each (0.4 million sq ft).
Interestingly, Hyderabad saw a 19 per cent decrease in abandoned shopping centres. In tier 1 cities, the total number of shopping centres decreased over the year, despite eight new additions, resulting in a total of 263 complexes in 2023. The survey indicates that underperforming malls were either demolished for residential or commercial projects or permanently closed or auctioned off.
In the tier II city category, Lucknow, Kochi, and Jaipur stood out as the top three cities in terms of available Gross Leasable Area (GLA) in shopping centres, with 5.7 million square feet, 2.3 million square feet, and 2.1 million square feet, respectively. Lucknow has become a significant player, commanding an 18 per cent share of the total GLA within tier II cities.
How ghost malls incur losses
As per the report, around 64 shopping malls with 13.3 million square feet of shopping space remain vacant, resulting in a loss of Rs 6,697 crore of revenue for developers in 2023.
“Many of the small shopping malls are on the verge of closure,” Gulam Zia, director of Knight Frank told Reuters. Unable to match the convenience and diversity of large shopping centres, many small mall owners are caught in a downward spiral of declining revenue, he said.
With inputs from agencies
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