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| Recession downs retail rentals by 25% in A'bad |
| Vinay Umarji & Chitra Unnithan / Mumbai/ Ahmedabad Dec 04, 2008, 00:42 IST |
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Retailers in turn ask for share in revenues.
All’s not well with the retail scenario of Ahmedabad. While many retailers have downed their shutters or are downsizing their existing stores, the rentals are also on their way down.
The rentals have gone down by 20-25% in the last three months owing to recession. The rentals on CG Road are in the range of Rs 90-100, down from Rs 120-130 three months ago, industry watchers said. On SG Highway, which houses a maximum number of malls in the city, the rentals are down from about Rs 110 per sq ft to Rs 75-90 per sq ft, according to mall owners.
The retailers on the other hand are now asking for a pie in revenues. “The retailer store owners in Ahmedabad are demanding 8-12% share in revenues from mall owners,” said an official working in a mall.
The footfalls are down by 25-30% on weekdays while it is down by 40% on weekends, as per industry estimates. Also the retailers are seeking a 15% reduction in common area maintenance (CAM) rates by 15%. “We have one of the most reasonable prices in the city. Already from the beginning our rates were lower than others by 15% and we further slashed another 15% three months ago. Hence we are not planning to slash the rentals any further,” said Harit Kothari, senior marketing manager, NG Group-the promoters of Gallops Mall on SG Highway.
Malls on an average are seeing an occupancy level of about 65-70%. Reliance Retail has downsized its hypermart format – Reliance Mart in Iscon Mall on SG Highway, sources familiar with the development said.
Future Group has meanwhile closed down its 70,000 sq ft Big Bazaar near Shyamal Cross Roads. Subhiksha has also downed shutters of a couple of its stores in Ahmedabad and is re-structuring its business. RPG group owned Spencer's retail does not find Ahmedabad a viable business option and has decided to quit. "The closing down of Spencer's retail stores in Ahmedabad is because we did not achieve the targeted revenue. Moreover, Ahmedabad does not seem to have a potential in organised retail in the near future," says Samar Singh Shekhawat, vice president-marketing of Spencer's Retail.
While real estate developers like Alpha G Corp and Modi-Build Well Ltd. agree to correction in property rentals for retail stores in Ahmedabad, they deny any re-negotiations for their projects. The developers claim that their rentals were low from the beginning.
Ahmedabad-based Modi-Build Well, which built the Himalaya Mall has booked almost all retailers around 2-3 years ago. "We had leased almost all the retailers around 2-3 years ago at rates between Rs 40 per sq ft and Rs 60 per sq ft. An early entry into the market at low lease rates has insulated us from current corrections in rentals," said Kamlesh Modi, director of the real estate development company.
Indiabulls has also closed two of its hypermarts in the city as it is restructuring its retail business, sources said. "The correction that has been taking place in rentals for retail stores is related to properties with high rates. Our upcoming project in Ahmedabad has a low average rental of around Rs 70 per sq ft.," said S K Sayal, chief executive officer and director of Alpha G Corp Development Pvt. Ltd., who is developing the Alpha One, a one million sq ft huge mall-cum-hotel project in Ahmedabad, which will come up in 2009.
”We have not negotiated the rentals in the past few months and there has been no change in our rentals at Ten Acres. We have maintained a consistent Rs 55 per sq ft since the last six months," says Indranil Banerjee, general manager of Ten Acres, Ahmedabad City Mall.
The city has witnessed no fresh supply of malls in third quarter of 2008 with the projected 220,000 sq ft development that was scheduled for completion in second quarter being postponed to the last quarter, according to Cushman & Wakefield report. Few retailers have moved out of non-performing malls due to lower conversions causing higher vacancy levels in the existing malls, it said. The city is expected to witness mall development of approximately 870,000 sq. ft. in the next six months, which is likely to put pressure on the current mall rentals, according to real estate consultant Cushman & Wakefield.
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