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| Mall vacanies drop 5.7% in Q3 |
| BS Reporter / Chennai Nov 04, 2009, 21:29 IST |
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Average mall vacancy in the the southern cities of Chennai, Hyderabad and Bangalore dropped from 7 per cent in the second quarter to 5.7 per cent in the third quarter (July - September) 2009. While the supply in these three cities rose 1 million sq ft, an increase of 33 per cent from the previous quarter, the available stock declined.
Alongside the development, rents stabilised in these southern markets in the third quarter as against the corrections they witnessed during the last six to seven months to 18 per cent in Bangalore; 26-28 per cent in Chennai and 29-41 per cent in Hyderabad, according to Cushman & Wakefield, a commercial real estate services and research firm.
Chennai emerged as an exception as mall vacancy levels in the city increased to approximately 3-4 per cent this quarter from the previous 1 per cent, largely due to the 15 per cent vacancy in Ampa Mall.
Average mall vacancy level across the seven major Indian cities showed a marginal increase from 17.3 per cent in the second quarter to 17.5 in the third (July - September) 2009 and some markets like NCR, Kolkata and Chennai witnessed an increase in average vacancy levels. This can also be attributed to the increase in supply these markets.
Jaideep Wahi, director, agency, retail services, Cushman & Wakefield said that rents in major cities and markets are expected to maintain stable values in the coming few months. Over 60 per cent of the anticipated supply in the third quarter was delivered which is a marked improvement from the previous few months.
In all probability, major retail markets in India are likely to witness the first rental upswings around mid-2011 which is about a couple of quarters after the commercial office markets in the major metropolitan centres.
The third quarter of 2009 did not witness any fresh mall space in Bangalore. Though leasing activities remained low, vacancy rates dropped over the previous quarter as there was no additional supply in the city. A stabilising trend in average mall rentals was noted over the last quarter, indicating the beginning of a gradual revival of interest in the city’s organised retail space. Malls in the city also noted a slow but steady return of genuine consumers, as against non-serious shoppers, which led to a gradual rise in the mall conversion rates. Rental values across malls and main streets stabalised in the third quarter.
The city anticipates a fresh mall supply of around 1 million sq ft in the next six months, of which 80 per cent is expected to come up by the last quarter of 2009. Bangalore’s suburban zone will see over 60 per cent of this total upcoming supply, while the rest is expected in the peripheral micro markets. Rental growth across the city’s malls and main streets are likely to continue their stabilisation trend in the short to medium term.
In Hyderabad, the third quarter of 2009 witnessed additional mall supply of 650,000 sq ft at Madhapur. Of the three operational malls in Banjara Hills Road No.1, Ashoka Metropolitan mall saw drop in rentals largely accruing from higher vacancy and hence brought down the average rentals by 5 per cent over the previous quarter. Mall vacancy in third quarter 2009 decreased to 14 per cent from 17 per cent in the last quarter. Rental values are likely to remain stable till first quarter of 2010.
The mall stock in Chennai increased by around 28 per cent as Ampa Skywalk mall became operational this quarter with various vanilla formats.
A recent trend in the city has been that mall developers are willing to consider revenue share model for new leases in order to ease operational expenses for retailers, thus ensuring operational viability.
Food and beverage outlets continued to be the main demand driver for retail space and are expected to remain so in the future. Retailers preferred to expand within city limits and refrained from venturing into the peripheries. Malls in the peripheral regions are expected to witness weak demand and pre-commitments and so further delays in these projects can be expected. As the economy moves towards revival, retail sales are expected to gain momentum; landlords are likely to benefit and show preference to revenue share models in comparison to the fixed rental model.
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