Mall developers fast switching from space sale to space leasing

With rising competition among developers and the advent of international retail chains, comprehensive mall management is set to become the norm

When malls were first constructed in the country, developers preferred to sell off space to retailers and investors, and book profits. While they were able to quickly recoup their investments, this was disastrous for the mall. As ownership became fragmented, nobody was responsible for maintenance and promotion. Also, once space is sold, tenant mix and zoning can8217;t be controlled. Hence, many of the early malls failed to generate adequate footfalls and sales. Currently, there are about 80 odd malls in the country and property consultancy Jones Lang Lasalle Meghraj JLLM estimates that 90 per cent don8217;t measure up to international standards. These days the more aware developers are only leasing space. And since their aim now is to maximise long-term returns, they are beginning to adopt comprehensive mall management.

According to JLLM senior research manager Abhishek Kiran Gupta: 8220;Until now, mall developers equated mall management with facility management.8221; But the former means much more. While facility management entails just managing the structure, mall management includes right positioning figuring of which customer segment the mall will target, a proper tenant mix attracting the right retailers, zoning placing retailers at the right place within the mall, promotion and marketing, facility management, and financial management.

In future, as per a JLLM report titled Mall management: A growing phenomenon in Indian retail industry, mall management will play an even more significant role as competition grows . By 2009-10, India will have 300 malls with 60 million sq ft of retail space.

A push factor is at work too. Says Gupta: 8220;International retailers are coming to India. They will set up shop only in malls that adhere to international best practices in mall management.8221; Already, a few malls have undertaken mall management 8212; some comprehensively and others piecemeal. Select Citywalk in Saket, south Delhi, which will open this year, is one mall which, according to industry experts, has undertaken the exercise of positioning and attracting the right tenant mix diligently. Research provided Select with in-depth knowledge of its customers8217; tastes and preferences, and influenced their decisions on which retailer to invite to the mall. Said Select Infrastructure President 038; CEO Pranay Sinha: 8220;Our research told us that we should target the south Delhi housewife, and then the south Delhi family. We decided to bet big on certain product categories, such as home-related products, as our research revealed that Delhiites are very fashion conscious about their houses.8221;

Forum Mall in Bangalore has benefited from its right design and tenant mix. It is a dog-bone shaped mall, with the anchor tenants at the two ends and vanilla retailers in the middle. Despite competition from six new malls, Bangalore8217;s first mall continues to be among the highest revenue earners.

K Raheja Corp8217;s Inorbit Mall in Mumbai exemplifies a high standard of facility and traffic management, which allows it to command a higher-than-average rental. Regular promotional activities have ensured steady traffic at Ansal Plaza on Khel Gaon Marg, south Delhi.

In India, mall management is currently provided by international property consultants IPCs like JLLM, Knight Frank, and so on.

Paradigm Shift

Story continues below this ad

8226; Once space is sold, tenant mix and zoning can8217;t be controlled

8226; To maximise long-term returns, they are adopting mall management practices

8226; With more malls being built and competition increasing, mall management will become a key determinant of success

8226; Foreign retailers will demand international standard mall management