Of the two dozen outlets Tata-run Trent plans for its departmental store Westside this financial year, about two thirds would be standalone properties in high footfall areas. Croma stores, another Tata-owned chain of electronics and durables stores, plans to open a dozen of the 18 stores this year in standalone properties. And, of the 15 stores Chennai-based electronics retailer Viveks plans to open this year, it is looking at malls for only four to five.
Faced with slow economic growth, high common area maintenance (CAM), which includes electricity and maintenance charges, built-up charges and high rentals, retailers selling discretionary items such as clothes and durables increasingly prefer standalone properties over malls.
A source with Trent says CAM charges in malls have risen to Rs 40 per sq ft, against Rs 10-12 per sq ft considered viable for department stores like Westside. “Malls in cities such as Mumbai are now asking for a rent of Rs 400 per sq ft a month. A couple of years earlier, this stood at Rs 120 per sq ft. Office rents have moved in the reverse direction. Nothing explains the increase in mall rents,” the source said.
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Source: Industry |
Harminder Sahni, managing director of management consultancy Wazir Advisors, says after reducing built-up charges, retailers get 65-70 per cent of the carpet area in malls. However, in standalone properties, they get a carpet area of 80-85 per cent. In luxury malls such as Delhi’s Emporio, the ratio between carpet area and built-up charges is even lower at 50:50, he adds. Departmental stores and stores selling durables, jewellery and furniture can be opened on a standalone basis, as these have turned into destination stores (shoppers come to buy particular items), Sahni says.
Rakesh Biyani, joint managing director, Pantaloon Retail, says standalone properties make more sense, given the concern on high rents and operating charges. “We have been looking for standalone properties. But getting the right property is a challenge,” he says. This financial year, Pantaloon Retail plans to open about 100 large stores across formats such mall-based Central, departmental store Pantaloons and Brand Factory.
Another reason why retailers are opting for standalone properties is the delay in opening new malls. According to a recent report by global property consultant Cushman and Wakefield, realty developers delayed adding nearly 44 per cent of the 2.27 million sq ft of shopping mall space they were scheduled to add in the January-June period. Now, this one million sq ft would be ready either in the second half of this year or 2013. The report adds a fifth of the space in malls in major cities lies vacant.
“It is easier to work with a single landlord and get the standalone property up and running. A standalone property requires one occupancy certificate, while a mall needs multiple approvals,” says Ajit Joshi, chief executive of Croma, 70 per cent of whose stores are standalone properties.
B A Kodandaraman, chairman and managing director, Viveks, says, “In standalone stores, you make your own assessment, depending on the population and the select size of a store. But in the case of a mall, you have to think about many things.”
However, mall developers and some retailers say malls have their own advantages. “If your mall is in a good location, has good infrastructure and is doing well, you may not see any issues there,” says Shishir Shrivastava, chief executive and joint managing director at The Phoenix Mills, which runs malls such as High Street Phoenix and Phoenix Market City in Mumbai and other parts of the country.
“In standalone stores, there are issues with parking, facilities, etc. We provide central air conditioning to retailers, and this adds to their efficiency,” he adds.
Vasanth Kumar, executive director of Max Retail, the value retail chain of the Landmark group, says, “In many cities, malls attract up to 100,000 people on weekends. Where else can you get this number?...Besides, many of the stores have nine-year leases. You cannot break these easily.”
Jaideep Wahi, director (retail agency), Cushman & Wakefield India, says international brands such as Zara, which require 20,000 to 30,000 sq ft floor plate and good frontages, opt for malls because high streets do not offer that kind of “built-to-suit’ properties. “Besides, rents have firmed up in both key malls, as well as high streets in the country,” he says.
