High street rentals up, malls continue muted growth

High street retail rentals rose between nine and 25 per cent in the March quarter, compared to the previous quarter, according to a report by global real estate consulting firm Cushman & Wakefield.

Malls continued to see muted growth in rentals, reflecting the level of interest of retailers.

The real estate market received a fresh mall supply of 1.94 million sq ft. Many of the expected mall projects were deferred due to a delay in construction, resulting in a deficit of close to 50 per cent from the estimated supply of 3.37 million sq ft for the quarter.

Of the eight surveyed cities, Bangalore led the supply scenario in malls with an addition of 1.2 million sq ft. Pune was second at 0.5 million sq ft. Mall rentals remained stable, barring Ahmedabad, Bangalore and Hyderabad, which saw 15-30 per cent growth.

“While the mall space has been moving cautiously to ensure that the demand-supply ratio remains stable to maintain rental values, high streets continue to see increased demand and interest from a range of retailers,” said Jaideep Wahi, director, retail services, Cushman & Wakefield.

The Vitthal Mallya Road in Bangalore was the hot bed for retail action — high street rentals increased by 25 per cent, the maximum, and mall rentals grew by 14 per cent. The location has been witnessing some rapid increase in retail activities due to the presence of the city’s only luxury mall, generating interest from premium brand retailers. “Other than that the advantage of being surrounded by a good retail catchment area has been the key to the location’s rise,” stated the report.

In the National Capital Region (NCR), South Extension I & II recorded the maximum rise in retail rentals at 9.1 per cent, followed by Karol Bagh (7.7 per cent) and Connaught Place (four per cent).

“The approval for 100 per cent foreign direct investment in single brand outlet in India is a crucial step towards restructuring the retail scenario in India,” said Wahi, adding Cushman & Wakefield expected more international retailers to show interest in India, which would eventually lead to a more structured approach towards retail real estate.

Rentals across the mall space remained unchanged from the previous quarter, as well as from last year, in NCR. Mumbai showed inaction in both malls and high streets. “It was largely due to unavailability of quality retail space within the city,” the report noted. The latent retail interest in the city is expected to remain high and retailers will be keen on having both high street and mall presence, according to the report.