The three major cities in South India have witnessed no new mall supply between January to March 2009. The cities include Chennai, Hyderabad and Bangalore. These cities are likely to witness 4.35 million sq.ft. mall supply by year end, according to Cushman & Wakefield recent report.
Retail real estate across India continued to reel under the current economic pressure while retailers continued to show their apathy towards expansion plans, added the report. Bangalore witnessed no new supply but some sporadic leasing activities in the existing malls thereby keeping rentals across established locations like Mysore Road and Vittal Mallya Road stable. Rental values in upcoming locations however recorded some correction.
Another trend has seen rentals of traditional main streets like Brigade Road and Commercial Street having remained stable even in these market conditions, while those of comparatively emerging locations like Vittal Mallya Road, Indiranagar - 100 Feet Road and Koramangala - 80 Feet Road have depreciated quite steeply.
The report added, retail activity being relocated to adjoining roads from main streets that have been affected by the ongoing metro construction. Bangalore is likely to see about 2 million sq ft of mall supply in 2009, of which approximately 0.3 million sq ft is expected in the Whitefield micro market during second quarter of 2009. The limited supply set to come in by the year-end together with the lack of large spaces at operational malls will keep high streets and existing malls active. But the correctional phase of both main streets and mall rentals will most likely continue in the mid term.
Chennai did not witness any new mall supply during the first quarter of 2009, mall rentals also dropped by eight per cent in Chennai while western and southern regions remained stable. Main streets also remained largely stable with most micro markets showing no rental changes.
A drop in values was recorded in Usman Road - South (11 per cent), Adyar Main Road (10 per cent%) and Purusavakam High Road (13 per cent). Demand for space has been low and expansion plans on the high street remained limited to a few micro markets.
While vacancy levels in malls have historically been very low, the additional mall supply expected this year is likely to cause a drop in the demand for existing mall space. Select retailers may relocate, preferring to mark their presence in the new developments, resulting in a relatively higher vacancy in the currently operational malls, the report added.
Hyderabad recorded some of the highest mall rental corrections ranging from 25 per cent to 29 per cent due to restrained demand from retailers. Main street rentals also saw corrections between 5-20 per cent largely due to re-negotiation and restrictive demand.
