In the last two years, 30-40 malls across the country have either been shut or have become non-functional, though thrice that number have been opened in the same period.
The reasons for shutting the malls include bad planning, the sale model adopted by developers and poor management.
'Thirty to forty malls have been shut in the country in the last two years due to various reasons. Otherwise, this country can take 2,000 new malls,' said Susil Dungarwal, founder and chief mall mechanic, Beyond Squarefeet Advisory, a mall management company. Most of the malls that were shut were in Ahmedabad, the Delhi-National Capital Region (NCR), Chennai and Mumbai, with Ahmedabad recording seven closures, he added.
Palm Beach Galleria Mall in Mumbai and Spencer’s Plaza in Chennai were among the failed malls. Most retailers at these malls opted for neighbouring malls that offered better services, Dungarwal said. City Centre mall in Navi Mumbai was closed for renovation. Now, it was expected the project would be converted into a commercial one, consultants said.
New malls delayed
In the last year, about 50 malls have come up across the country. Bappaditya Basu, senior vice-president at Jones Lang LaSalle, says most malls that came up this year or the last were planned in 2005-06, but were delayed due to the economic slowdown. 'Nobody is planning new malls now. In cities such as Kolkata, you do not see any new malls coming up,' Basu said. 'Retailers who want to open stores in 2015-16 are not getting any properties.'
According to a recent report by realty consultant DTZ, seven malls (with a combined area of 2.58 million sq ft), scheduled to be completed in the second quarter of 2013, were delayed by up to six months, as it was felt demand for these spaces would improve. Last year, about 58 per cent, or 4.8 million sq ft of the expected overall supply, was deferred for the same reason, Cushman & Wakefield had said earlier.
Mumbai and Chennai were the only cities to record new supply in the second quarter this year, increasing the national stock two per cent to 62.9 million sq ft of grade-A retail space.
Many mall developers have converted their projects into residential and commercial ones, retail consultants said. Prozone Liberty converted some of its retail projects into residential ones, while South-based TTK Group dropped its plan for a mall on a 6.3-acre site in Dooravani Nagar, Bangalore, deciding to go for a residential project at the same site. 'Developers have converted mall projects into residential, commercial or office projects,' Dungarwal said.
Consultants said developers such as EWDPL, which develops malls in tier-II and -III towns, and Kolkata’s Avni Group have kept their mall projects on hold, owing to the economic slowdown.
Samantak Das, chief economist & director (research & advisory services), Knight Frank India, says malls are seeing low traction. 'It (malls) is the worst-hit asset class. We know office is stagnating. But malls are much more…in the office segment, owners at least negotiate and hold back tenants. But for malls, retailers cannot sustain the rents due to low consumption,' he said. Vacancy in malls in the NCR and Mumbai metropolitan regions stood at 15-20 per cent, he said, adding, 'In some areas such as Navi Mumbai, we have seen 30-40 per cent vacancy. The worrying factor is vacancy levels are not coming down. They may go up.'