New Delhi, Jan 1 (IBNS) Over 55% of the malls in Delhi-NCR region are vacant partly due to economic slowdown, poor designing, lack of robust revenue generation model and located in unattracted location, reveals the Associated Chamber of Commerce and Industry of India (ASSOCHAM) recent survey.
As per ASSOCHAM estimates, the total rate of vacancy in malls in Delhi-NCR is 55%, while in Mumbai it is 52% followed by Ahemdabad (51%), Chennai (50%), Hyderabad (48%), Bangalore (45%) etc. The position in the nearby town of these locations is much disturbing.
ASSOCHAM conducted a random survey of all the shopping malls in Delhi-NCR, Mumbai, Kolkata, Bangalore, Hyderabad, Ahemdabad, Pune, Dehradun, Chennai etc between October and December 2012.
The survey found that many upcoming malls have significantly been delayed and withdrawn due to lukewarm response from retailers. They will also face manifold hike in construction cost.
Commenting on the malls scenario, ASSOHAM Secretary General D S Rawat said that vacancy levels are due to poor location, poor design and poor parking facilities while some are operating at 60% occupancy others are struggling at less than 20% occupancy. The occupiers are finding difficult to manage economically.
The survey also highlighted some of the challenges the industry is facing, which include inadequate infrastructure, unavailability of retail space, multiple taxes, lack of clarity in policies and shortage of experts in areas such as supply chain and store management.
Now, they are shifting from lease/rentals models to revenue sharing models and this is encouraging large number of branding showrooms to open shops in malls.
"Biggest shopping mall can feel like a pretty lonely place, majority of retailers said that they are holding back on new store openings and focusing on existing stores," said the survey.
The sharpest decline in mall rental values are also recorded high in Delhi-NCR by 60%, while Mumbai also dropped by 58% in rentals followed by Ahemdabad (55%), Chennai (54%), Hyderabad (52%), Bangalore (49%), Kolkata (45%), Pune (42%) and Dehradun (40%), points the ASSOCHAM survey.
Nearly 82% of the retailers said that they are shutting down some of stores in areas where rentals are too high, and with the slowdown in consumption complicating things further, point out the survey.
Nationally, the vacant rates of shopping malls are 55% and will likely rise to 70% by 2015, according to the ASSOCHM analysis. More than 90 percent of shopping in India is still done at unorganised one-off shops, adds the survey.
Sunil Kumar Dhaiya, Co-Chairperson of ASSOCHAM Real Estate committee also specializing in malls, said that the real estate prices and construction costs are rising but the retail business is not growing enough to absorb this. There are just not enough footfalls.
"Retail rents are down 60-65% from peaks in 2010 and that´s especially painful for developers, when servicing loans is expensive at 12-13 percent interest," said Rawat.
Nearly 76% of the shop owner's said that increasing rents will not work because at the end of the day it has to be affordable for retailers to do business and the fate of the retail realty segment is intertwined with the retail industry.
The retail sector is forecast to grow rapidly, but mall rentals and valuations are not rising in of most markets, added Rawat.
According to the ASSOCHAM estimates, rental values of malls remained stagnant across Delhi-NCR, Ahemdabad, Mumbai, Pune, Chennai and Kolkata in the October-December 2012 quarter. However, certain micro markets in Ludhiana, Indore witnessed a growth over the quarter in the range of 10-15%.
"There are approximately 1,200 shopping malls in India, the growth in the retail sector has driven a mall building boom across the country, with the total number of malls expected to increase to 1,500 by 2015 from 1,200 in 2012," said the ASSOCHAM report.
The malaise of high vacant malls can be seen in micro markets, such as Ghaziabad, Noida and Gurgaon, where retail has not picked up. Clubbing this with the fact that spending was really low, the demand for malls is likely to remain dull for the coming next 2013, commented Rawat.
The survey added demand for mall space across most micro markets remained slow because of lack of fresh supply, conservative approaches from retailers and overall slowdown in consumer demand.
Slowdown in retail demand in many micro markets has led to rental values either remaining stable or correcting marginally in the range of 10 to 15% over the previous quarter, said the survey.