Retail boost for realty in second half of 2011

9.6 million sq ft space added in H2, against 6 million sq ft in H1

The second half of 2011 (H2 2011) showed heightened activity in adding retail mall space across India due to increase in consumer demand.

Almost 9.6 million sq ft of organised retail mall supply was introduced into the market in H2 2011, compared to almost 6 million sq ft in the first half (H1), according to a retail sector report by international consultant CB Richard Ellis.

Towards the end of this period, November 2011 to be precise, the Union Cabinet took a key decision to allow up to 51% FDI in multi-brand retail and 100% in single-brand retail. However, due to political opposition, the government kept in abeyance the move to allow foreign investment in multi-brand retail. Single brand retail however has been opened to 100% FDI, up from 51% earlier.

The report titled 'Indian Retail Market view’ for H2 2011 has said India witnessed addition of more than 15 million sq ft of organised retail mall space through the past year.

During the second half, which added much more retail space than the first, Mumbai was on top in terms of new activity, followed by Pune, Bangalore and Chennai. These cities comprised more than 90% of the entire organised mall supply during the review period, CBRE said.

In the second half of the year, large completions included Pheonix Market City, K Raheja, Infinity Mall and Neptune Magnet Mall in Mumbai,MGF Metropolis in Gurgaon, Phoenix Market City and Ascendas Park Square in Bangalore.

Most of these large developments were dominated by multiple anchor tenants in the form of hyper markets like Big Bazaar, Pantaloon, Shoppers Stop, Reliance Mart and Lifestyle leasing large retail zones at attractive rates, the report said.

“The supply introduced into the market was a consequence of the positive sentiments amongst retailers on spatial expansion and enhancing their footprints across the country,” according to the retail report.

Anshuman Magazine, Chairman & Managing Director, CB Richards Ellis South Asia Pvt Ltd, said, “The increased retail activity across key cities is an indication of the growing confidence of both domestic and international retailers in the India growth story.” He added that on the back of growing urbanisation and an increase in the acceptance of organised retail, retailers have been expanding their operations across the country.

“The government allowing 100% FDI in single brand retailing has been a welcome step, however, the caveats put by the government like making it mandatory for retailers to source 30% of their requirements locally are a dampener on the announcement,” Magazine pointed out.

The transaction activity and size are expected to increase on the back of increase in consumer spending and expanding mid-income purchasing power, the CBRE report said. However, despite an anticipated increment in demand, a downside remains in the form of large, retail mall supply pipeline in most leading cities, it added.

“This might lead to a demand – supply mismatch which might eventually lead to long term pressures on retail rents in select micro markets.”