MUMBAI/BENGALURU: For the first time in India’s mall history, the supply of retail space has fallen, impacted mainly by the closure of failed malls and limited fresh supply. While five malls shut down last year, 10 others converted their space for use as offices, educational institutes, shopping clusters, hospitals and banquet halls. This has led to around 3.5 million sq ft of retail space, across 15 malls in India, being withdrawn from the operational stock. These malls were operational in Chennai, Delhi-NCR, Mumbai and Pune.
While 13 malls got completed last year, 15 were withdrawn from the operational stock, resulting in a net 0.3 million sq ft negative impact on the supply side, said a JLL India report.
“It is not the first time that a withdrawal of mall space was done but the quantum this time around was far higher than all previous occasions between the first quarter of 2010 and fourth quarter of 2015 put together. This is in large part due to the long continuing bipolar dichotomy in the Indian retail sector starting to reach its end. Therefore, a few more malls are expected to meet a similar fate in the next few years,” said Pankaj Renjhen, MD - Retail Services, JLL India.
While a handful of good malls continue to perform extremely well across the country, there are many average and poor-quality malls that have been seen floundering over the years, more so in recent years, as both mall designs and shopper expectations evolve.
According to Renjhen, shopping in a mall is much more of an experience now. With India positioning itself higher on the global retail ladder, neither retailers nor shoppers want to visit an average or poor mall. A mall’s success depends on maintaining the best possible tenant mix and having at least a few tenants from the entertainment and food and beverage (F&B) categories. It has been seen in recent years that retailers choose high-quality malls having mixed-use at the right locations. Many smaller-sized malls and those lacking tenants in the F&B, as well as entertainment categories, are finding it difficult to sustain something which is going to become tougher with time.
"Catchment for malls is continuously changing and we are facing competition from both online retailer and offline malls. We need to continuously strategize and reinvent ourselves to be relevant in the current market," said Suresh Sunagaravelu, executive director retail, hospitality and new business at Prestige Estates Projects.
For instance, the company has repositioned two malls in Bengaluru to cater to relevant customers. Forum value mall in Whitefield has been converted to a neighborhood mall, while Forum mall in Koramangala in Bengaluru is now being pitched as a bridge to luxury brand malls as opposed to only mass brands such as Reebok and Adidas.
Last year, the total net absorption of retail space in India was 2.7 million sq ft with Delhi-National Capital Region recording absorption of 1million sq ft followed by Mumbai at 0.6 million sq ft and Bengaluru at 0.4 million sq ft.
While 13 malls got completed in 2016, 15 malls were withdrawn from the operational stock, resulting in a net effect of -0.3 million sq ft reflecting on the supply side. Apart from aforementioned reasons, withdrawals also include instances of malls that no longer meet the Grade-A criteria.
“Usually a newer and bigger mall leads to a crack in revenue for the existing mall if one can sense the change and move accordingly to retain the footfalls. But, in most cases, this is not very easy as the novelty factor pulls the crowd to newer destinations.
Constant reinvention, therefore, is the key,” said a developer of a Mumbai suburban mall that shut operations last year.