Malls are back in fashion, 7.9 mn sq ft new space to be added this year

Developers such as Oberoi Realty, Phoenix Mills, Lodha group, among others, are looking to build new malls or acquire existing ones

Mall closures and rise of e-commerce made headlines last year, but tables seems to have turned now with malls showing signs of revival even as e-commerce battles for profitability amid funding crunch. Property developers are looking to build new malls to tap demand for retail spaces from foreign as well as Indian brands.

About 7.9 million square feet of new mall space is expected to be added this year, is almost double of last year, according to real estate consultant JLL. The total number of malls will go up to 720 in 2016, from 542 in 2014, it pointed out in a recent presentation.

Developers such as Oberoi Realty, Phoenix Mills, Raheja-owned Inorbit Malls, Lodha group, among others, are looking to build new malls or acquire existing ones.

K Raheja Corp-owned Inorbit Malls, which runs malls in cities such as Mumbai is planning to build new malls or acquire the ones that are under various stages of construction. “We believe there will be a lot of demand from international retailers after the relaxation in norms. There is also dearth of quality spaces as most of the good malls are completely leased out,” said Puneet Verma, AVP, marketing and corporate communications, Inorbit Malls. “Footfalls are back in malls as discounts in ecommerce have come down,” he said.

After its successful mall in Mumbai’s Goregaon, Vikas Oberoi-led Oberoi Realty is looking to develop a luxury mall in Worli, a mall in Borivali and others. “Our mall has performed well and it has given us confidence to build new malls,” said an executive at Oberoi Realty. In fact, the new mall will be a part of its upcoming residential project.

Oberoi is also likely to set up a mall development platform with one of the global investors and is already in talks with Morgan Stanley and GIC, among others. The JV would have a corpus of Rs 1,000 crore.

Mall developer Phoenix Mills, which runs Highstreet Phoenix and Palladium in Mumbai, is in talks to buy ready malls as well as greenfield ones to expand its portfolio. According to sources, the company wants to sell stake in some of its mixed-use projects in Pune and Bengaluru to raise funds.

“We are wanting to continue our leadership position in the mall business and in this context we are looking at various greenfield and brownfield acquisitions,” said Atul Ruia, managing director at Phoenix Mills.

Lodha group, the largest developer by sales, is also exploring plans to build malls in its residential projects in Mumbai, including New Cuffe Parade in Central Mumbai. It recently opened a mall in its Palava project in Dombivali, on the outskirts of Mumbai.

Most of the big developers such as DLF in Delhi and Runwal in Mumbai have stayed away from building new malls due to long gestation periods, low rents and onslaught of ecommerce players, which resulted in lower footfalls. According to realty consultant JLL, 14 malls have shut shop in Mumbai and Delhi in 2015 due to unviability.

Ashutosh Limaye, head of research at JLL, says most of the malls failed due to bad tenant mix, poor layouts and design and so on. “The developers who are looking to build new malls have experience of running good malls.”