Meltdown heat shrinks demand for mall space

The average vacancy rate in Mumbai is over 10% in malls. Malls such as Atria in Worli and many smaller shopping centres have been for months struggling to retain existing tenants as well as get new ones to occupy the vacant spaces,an outcome of the dwindling footfalls. In case of upcoming malls like One India Bulls Centre in Lower Parel,some well known retailers who had long back committed to renting space in the malls have not sealed the deal as they are demanding renegotiations on lease rents.

Similarly at R city,Runwal group’s 12 lakh sq ft mall at Ghatkopar,Wills Lifestyle has backed out of its commitment to lease about 2,000 sq ft of space while the electronic store Croma has downsized its space by 3,000 to 4,000 sq ft. “While most have honored their commitments,about eight to ten have backed out,” said Sandeep Runwal,director of Runwal group. The mall was supposed to open in January but it has been postponed to April.

“In general,the demand for bigger stores has gone down. So if the average size of a store was about 1,500 to 2000 sq ft earlier,it has now come down to 650-1,100 sq ft. The rentals have fallen 30% to 40% in some cases,” said Rajneesh Mahajan,director of retail services at Cushman and Wakefield. While some international brands like Paris-based fashion retailer Etam have decided to shut stores across the country others like Dockers and Adidas have downed shutters of their non-profitable stores. Recently the retail chain Subhiksha decided to vacate half the properties they presently occupy across the country stating the move would help them cut down on rentals.

Shubhranshu Pani,managing director for retail at Jones Lang LaSalle Meghraj says that with retailers feeling the meltdown heat,a significant trend is that rentals are no longer fixed and owners are willing to negotiate.

“Earlier,with the expansion plans,the average expenditure on rent for a small retailer was about 18% to 22% of their revenue. Now it has been brought down to a maximum of 15%. They have also cut down on their inventory as the offtake is low for many. For instance if a men’s apparel brand included accessories,belts and ties spread over 1500 to 2000 sq ft now it has been compressed to about 1200 sq ft,” said Pani. Madura garments (known for its popular brands such as Van Heusen,Louis Philippe,Peter England and Allen Solly) is one such example of the consolidation of multiple retail formats by large retail players.