The overall take-up activity in malls in Q4 2013 was lower than Q3 2013 and was largely concentrated in newly opened malls. High-street in most cities, on the other hand, witnessed a rise in demand from both domestic and international retailers. The rise in demand for high-street locations can be attributed to the lack of availability in prime malls.
Despite the slowdown in the economy, several single brand retailers remained active in 2013. International retailers such as Starbucks opened over 25 stores during the year where as retailers such as Michael Kors, Emilio Pucci, Stuart Weitzman and KidZania opened their first outlets in India.
Q4 witnessed cumulative new supply of 1.09 million sq ft as compared to 1.59 million sq ft in Q3. However, the cumulative new supply recorded in 2013 was 51% higher than that in 2012. With several malls currently under construction, 9.8 million sq ft of mall space is likely to become operational in 2014 spread across the seven major cities in India.
The cumulative vacancy level of the seven cities remained in double digits. However, Bengaluru, Chennai and Hyderabad recorded low vacancy levels of 6.67%, 6.5% and 4.5% respectively, at the end of Q4 2013. With supply outpacing demand and high availability in underperforming malls, vacancy levels in Mumbai, Pune, Hyderabad and Kolkata increased by 4.0% to 6.0% in 2013.
With high vacancy levels in existing malls and tepid demand, the average prime mall rents across the seven cities grew by 6.0% in 2013. The prime high-street rents, on the other, hand grew only by 3.0% during the year.
Due to tough economic conditions, retailers have been cautious with their expansion plans in 2013. However with the Delhi government announcing its plans to ban Foreign Direct Investments (FDI) in the retail sector in Delhi, most retailers have now adopted a “wait and see” strategy due to the prevailing uncertain political environment in the country. With the general elections due in May 2014, the first half of the year is therefore expected to remain slow.
Source : DTZ (Groupe UGL)