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7/27/2019 Indian Real Estate- Today, Tomorrow and the Way Forward (1)
1/366 > Shopping Centre News > august-september 2013
centrepoint
By Anshuman Magazine
has provided support to the
retailers seeking to establish
themselves in the Indian market
and also enabled mall developers
to attract international and
domestic retailers to set up
flagship stores in the country.In the run-up to the global
financial crisis of 2008, around
300 new shopping centres were
scheduled to be completed in
key cities of India. However, this
pipeline did witness stagnation
with the credit crunch, leading
to a shortage of modern retail
stock. In 2011 the development
pipeline sprung back to life as
construction work resumed on a
number of projects.
INDIAN REAL ESTATE:TODAY, TOMORROW
THE WAY FORWARDAND
RETAIL OVERVIEW: SUPPLY,
PRICING AND RENTAL TRENDS
The retail real estate market in India
has developed steadily over the past
decade as the quality of stock has
improved and local developers have
realised the importance of modern
shopping centre management such
as zoning, branding, marketing
and promotions, as well as the
all-important strategy of followinga pure lease model instead of the
earlier practice of divesting units to
individual investors. This evolution
has led to the creation of a number
of high-quality shopping malls in
major cities such as Delhi, Mumbai
and Bangalore, which have set
the benchmark for future retail
schemes.
The adoption of rental models
in India such as revenue sharing
As at the end of 2012, the supply
of modern retail space across the
countrys seven largest cities stood
at about 52 million sq.ft., around
70 percent of this space is in New
Delhi, Mumbai and Bangalore.
Leading cities including New Delhi,Mumbai, Bangalore, Pune, Chennai,
Hyderabad and Kolkata have seen
a steady rise in retailer enquiries
in the recent years. Shopping mall
rents in prime submarkets of New
Delhi have witnessed growth, whilst
values in high streets have increased
in Mumbai, Bangalore and Pune.
Transaction activity and size are
expected to increase on the back of
increase in consumer spending and
expanding mid-income purchasing
New Retail Supply Pan India - 2007-2013
2007 2008 2009 2010 2011 2012 2013
16
14
12
10
8
6
4
2
0
power. In Mumbai, premium
international brands continue to
focus on affluent southern parts o
the city, but the lack of quality reta
space remains a major challenge
to growth. Despite the scarcity of
quality supply, most retail chainscontinue to launch their first India
store in Mumbai usually in a stre
shop before expanding elsewhe
Domestic big-box retailers are
gradually expanding to tier II
locations, but the major foreign
names remain primarily focussed o
tier I cities. New supply is steadily
coming on stream in the NCR
and will provide opportunities for
retailers to operate in an organised
retail environment. High-street
formats continued to dominate th
retail landscape, whilst most luxur
retailers preferred to operate fromfive-star hotels and premium malls
Bangalore has a large quantum
of organised retail supply in the
pipeline which will provide retailer
with further opportunities for
expansion.
Rents for prime retail space have
recovered steadily after suffering a
dip in 2008-2009 as supply has no
kept up with demand. Although
high streets such as Khan Market
Opportunities and challenges existshand-in-hand in the Indian retailreal estate market that has grownsteadity over a past decade andseems to consolidate in the way
ahead. In order to build successfulshopping centres, mall developershave to look at them beyond anasset class of property.
ISIEmergingMarketsPDF in-iimidrchand from 14.140.95.130 on 2013-09-06 07:54:58 EDT. DownloadPDF.Downloaded by in-iimidrchand from 14.140.95.130 at 2013-09-06 07:54:58 EDT. ISI Emerging Markets. Unauthorized Distribution Prohibited.
7/27/2019 Indian Real Estate- Today, Tomorrow and the Way Forward (1)
2/3august-september 2013 > Shopping Centre News >
has seen them consolidate and
reduce the size of some stores.
Fashion remains a high growth
sector and major apparel brands
from the United States and Europe
continue to seek opportunities toenter or expand in major markets
across the country, including
some tier II locations. Domestic
home furnishing companies and
supermarkets also remain in an
expansion mode.
CHALLENGES FACED BY
RETAILERS
There is approximately 52 million
sq.ft. of retail stock in India spread
across leading metropolitan cities
and their surrounding regions.
However, even after the steady
growth in supply of organisedretail space over the past 10 years,
retailers of the size of Ikea or
Walmart often find it challenging
to secure space in a prime mall
in any of these cities. This is
essentially because the majority of
retail space developed in India to
date lags behind global standards
and does not provide the quality,
ambience, design, services and
post construction maintenance tha
global retailers are accustomed toThis is one reason why out of the
more than 300 malls in the countr
only a handful can be described a
successful retail projects. The total
size of these successful malls is jus
4-5 million sq.ft.
According to Technopaks
Opportunity India report, India
will require an annual supply of
about 20 million sq.ft. of organise
retail space in order to sustain
growth in the sector. This will
necessitate a concerted effort from
developers to construct successful
shopping centres to globalstandards. However, domestic
developers are still in the middle o
a steep learning curve with respec
to undertaking shopping centre
development. Many developers
view shopping centres simply as
India will require an annual supply of about 20 million sq.ft. of organised retail space in order to sustagrowth in the sector
High Street Rentals across Key Cities
Khan Market, Delhi
Linking Road, Mumbai
Brigade Road, Bangalore
Park Street, Kolkata
T Nagar, Chennai
Jubilee Hills, Hyderabad
1150
800
315
330
150
135
0 200 400 600 800 1000 1200 1400
Supply Comparison of Top Seven c ities
RetailSpace
(millionsq.
ft.)
NCR Mumbai Bangalore Chennai Hyderabad Pune
Completed Space Vacancy
16
14
12
10
8
6
4
2
0
30%
25%
20%
15%
10%
5%
0
Rentals across Prime Mall Developments
Delhi
Mumbai
Bangalore
Kolkata
Chennai
Hyderabad
350
510
160
287
180
65
0 100 200 300 400 500 600
and Connaught Place in New
Delhi, Linking Road in Mumbai and
Brigade Road in Bangalore continue
to command a premium due to
their favourable locations, most
international retailers desire larger
floor plates, back-up power systems
and a modern retail environment.As a result, there has been an
increase in demand for space in the
shopping malls.
Activity from domestic retailers,
particularly in tier I locations, slowed
slightly over the course of 2012 and
many groups have adopted a wait-
and-see strategy amid increasing
competition from international
groups and the slowing domestic
economy. However, domestic
groups still account for the bulk of
new take-up. Despite a high rental
spectrum, major cities continue
to witness gradual expansion
by international luxury goods,
apparel and F&B retailers. Recent
quarters have also seen a number
of well-established international
mass market brands entering tierII locations, partly due to the lack
of space options in tier I markets.
Additional new entrants are likely in
the coming months.
International F&B outlets have
continued to expand in 2012, both
at the fast food and fine dining
end of the market. Luxury retailers
remain focussed on tier I locations
but continue to refine their strategy
and product offering for the Indian
market, which in selected cases
Organized Retail Stock Distribution
Delhi
Mumbai
Bangalore
Chennai
Hyderabad
Pune
33%
33%
33%33%
33%
33% 12%
21%
20%
8%6%
33%
ISIEmergingMarketsPDF in-iimidrchand from 14.140.95.130 on 2013-09-06 07:54:58 EDT. DownloadPDF.Downloaded by in-iimidrchand from 14.140.95.130 at 2013-09-06 07:54:58 EDT. ISI Emerging Markets. Unauthorized Distribution Prohibited.
7/27/2019 Indian Real Estate- Today, Tomorrow and the Way Forward (1)
3/368 > Shopping Centre News > august-september 2013
centrepoint
another asset class of property
and no different to building
offices or residential units. In fact,
shopping centres have an organic
and perpetually changing quality
and need to be carefully planned,
developed, owned and managed as
a single property.
OPPORTUNITY FOR MALL
DEVELOPMENT
It is in this context that the role of
global retail chains such as Walmart,
Tesco and Ikea will be crucial.
These retailers possess extensive
experience of running successful
retail stores and properties in
markets such as the US, China,
Europe, Middle East and South East
Asia with local partners to createsuccessful shopping formats. By
utilising this knowledge, they will be
able to help usher in a revolution in
the development of organised retail
real estate in India. Success factors
for a retail mall in India include:
Planning and design:
Developers must conduct initial
feasibility studies taking into
consideration the demographics in
their catchment area, the targeted
consumers behaviour and the
prospective retailers preferences
and expansion plans towards their
proposed projects before theycommit any investment funds. The
macro-economic environment of a
particular location, its prospective
growth and purchasing power
of key catchment zones
must be studied
which most traditional high streets
are structured in India, with shops
selling a particular product range
clustered together and those selling
other products such as apparel
clustered separately. Trade mix and
tenant mix planning helps create
synergies to benefit consumers,
thereby leading to enhanced
footfall.Ownership strategy: Developers
should hold their projects in single
ownership so as to pro-actively
control their tenant mix and trade
mix. It is extremely important to
follow a lease only model in a
retail centre as this helps developers
control tenant positioning and
manage common areas more
effectively. Many developers tend
to view malls as just real estate
and as an investment from which
they wish to achieve a short-term
profit. However, the desire to sell
a portion of the mall on a stratatitle basis means the builder does
not maintain the facilities properly
and enables investors to resell their
shops, which ends up ruining the
tenant mix. In order to achieve a
more balanced and synergised trade
and tenant mix developers require
knowledge of shop alignment by
industry or market positioning.
Proactive tenancy leasing, screening
and management are also essential.
Retail management:
Professional mall managementrequires providing quality services
to customers. Developers should
consider the entire shopping
centre as a single entity and
work on improving footfall and
revenue streams for all zones
and locations within the mall.
Successfully managing a mall
involves understanding of shoppin
behaviour, analysing footfall and
revenue across the property and
launching initiatives to attract
business and improve the image
and marketability of the property.
Location and accessibility:Although no longer an exclusive
success factor, location and
catchment are of crucial importan
to mall revenues. Shoppers in
India are still willing to travel
long distances to visit shopping
malls offering them an attractive
shopping experience but the mall
should be positioned within or
next to an appropriate catchment
area for its target customers. In
New Delhi, shopping malls built in
proximity to operational metro line
with easy accessibility witness mor
footfall than those built in suburbswith less comprehensive public
transportation access.
before selecting the ideal location
for development. The design must
take into account circulation, store
visibility and an understanding
of the shopping behaviour in the
mall to structure the tenant mix
accordingly.
Zoning and tenant mix: It is
essential to plan and zone the mall
in a manner so that all tenantsbelonging to the same category are
positioned together. This is essential
from the point of view of
customers, who wish to
compare stores, products
and offerings. Such
an approach is inline
with the manner in
HigH-street formats continued to
dominate tHe retail landscape, wHilstmost luxury retailers preferred to
operate from five-star Hotels and
premium malls
About the AuthorANSHUMANMAGAZINE, CMD,CBRE South AsiaPvt Ltd
ISIEmergingMarketsPDF in-iimidrchand from 14.140.95.130 on 2013-09-06 07:54:58 EDT. DownloadPDF.Downloaded by in-iimidrchand from 14.140.95.130 at 2013-09-06 07:54:58 EDT. ISI Emerging Markets. Unauthorized Distribution Prohibited.