In a first, supply for retail space falls in the country

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 This has led to around 3.5 million sq ft of retail space, across 15 malls in India, being withdrawn from the operational stock.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While 13 malls got completed last year, 15 were withdrawn from the operational stock, resulting in a net 0.3 million sq ft negative impact on the supply side, said a JLL India report.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.

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South Delhi micro market accounts for 38% of total retail stock of Delhi

South Delhi has emerged as a micro-market with the highest concentration of malls accounting for 38% of the total retail stock of Delhi, says a report by consultancy CBRE and CII.

The organised retail market of Delhi has gone up to nearly 11.4 million sq ft with about 57 malls, mixed-use prime investment, investment and semi-investment grade malls.

The South Delhi micro-market not only has the highest organised stock, but also the highest percentage of prime investment grade malls (73%), thereby justifying its popularity among retailers and consumers alike.

While other locations in Delhi cater to local catchment needs, malls in South Delhi are frequented by residents of suburban locations of Gurgaon and Noida as well, since these malls serve as lifestyle destinations also, says the report.

Delhi has also emerged as a base for entry and expansion activity of global retailers in the country, with more than 118 brands entering or expanding across the city since 2012. Shopping centres emerge as a clear choice for global players with more than 70% choosing the same for their entry/expansion activities. Most global brands entering the city prefer to locate in a shopping mall and then evaluate options across high streets for expansion activity. This trend is more pronounced across brands in the coffee and restaurant segment.

The share of coffee and restaurants as a segment has been fast rising from less than 30% in 2012 to more than 40% in 2014 and more than 50% in 2015. More than 45 entries and expansions have been witnessed in the city since 2012 including operators such as Wendy's, Starbucks, Burger King, Nandos among others.

While the city has the highest number of shopping developments as compared to any other metropolitan city in the country, almost 49% of organised space in the city constitutes of developments that have adopted strata sold or sale + lease model. More than 5.6 million sq. ft. of retail space in Delhi is strata sold which has impacted the tenant profile and success of a shopping mall as a whole.

Source: PropertyatNeoDevelopers.Wordpress.Com

Delhi eight among Asia Pacific's retail hot spots in 2014

Nineteen global retailers making their entry to the national capital's prime shopping locations helped the city retain its 8th rank among Asia Pacific's top retail hot spots.

According to global property consultant CBRE's Retail Hot spots in Asia Pacific 2014, established as well as emerging retail markets in the region saw 464 new retail entrants in 2014, 23 per cent more than 2013.

CBRE's Retail Hot spots in Asia Pacific 2014 reports on international retailer activity occurring in the APAC region.

The year saw Tokyo attracting the most number of new retail entrants (63), followed by Singapore (58), Taipei (49), Hong Kong (45) and Beijing (34).

"Prime shopping districts of New Delhi attracted 19 global retailers in 2014 over 16 entrants in 2013. New Delhi held on to its eighth position among the APAC region's top target markets, along with Kuala Lumpur and Bangkok," CBRE said in the report.

With 11 entries from global retailers, Mumbai too maintained its 14th spot in the region, along with Brisbane (Australia).

Overall, the spotlight continued to remain on emerging locations of India, China and Southeast Asia, the report said.

Commenting on the report, CBRE South Asia Chairman and Managing Director Anshuman Magazine said: "We are expecting a growth in retail sales across the region in 2015, albeit with a more cautious approach from retailers."

Retailers would be more strategic in store network planning and focusing on proven retail environments, he added.

"In terms of retail segments, we expect food and beverage (F&B) to remain the most active. Consumers in the region thrive on new concepts, with landlords keen on creating shopping destinations by offering more dining options," Magazine said.

The luxury and business retail segment saw the greatest share of new entrants at 22.6 per cent.

However, the coffee and restaurants segment's growth climbed steeply to 22.4 per cent in 2014, compared to just 14.8 per cent in 2013.

"Retailers from the US made the most new entries into Asia Pacific with 24 per cent, followed jointly by retailers from Italy and the UK with 11 per cent each, to be followed by French retailers at 10.5 per cent," CBRE said

Source: PropertyatNeoDevelopers.Wordpress.Com

Retail space absorption to reach 15 mn sq ft in 2015-17

Retail space absorption in the country is expected to "bounce back" in the near future and expected to reach 15 million sq ft in the 2015-17 period, according to a real estate survey.

The lack of clarity on policies on the retailing sector, coupled with the strengthening of the e-commerce sector dealt a blow to the retail business hence retail space absorption had slowed down.

The absorption fell to an all time low of 2 million sq ft in 2014 with developers also cutting supply of retail space on account of large vacancy in existing malls. The absorption in 2012 and 2013 was 5 million sq ft each year. Year 2011 saw an all time high with absorption of 11 million sq ft.

But with clarity emerging in the retail policy for multi-brand retail and the onset of the Goods and Services Tax system from next year coupled with rising consumer confidence, the take up of retail space is expected to bounce back.

If international multi brand retailers find execution in India viable and stick to their plans, "absorption could increase by another 11 million sq ft, resulting in sharp turnaround in the retail sector," according to the report.

The advisory firm had recently said that only 12 malls in Delhi NCR out of a total 100 operational malls were running successfully. Even in Mumbai, out of a total of 45 malls, only 10-15 malls were "good performing malls".

The top seven cities of India, viz, Mumbai, Delhi, Bangalore, Pune, Kolkata, Chennai and Hyderabad, account for a total of 255 running malls.

Source: PropertyatNeoDevelopers.Wordpress.Com

Real estate v/s stocks, gold: Which is right for you?

With many options of investment available in the market, real estate buyers and investors would like to know which is better - real estate or stocks or mutual funds or investing in the yellow metal. Which would you prefer for your financial portfolio? What should you keep in mind before investing?

Each type of investment has its pros and cons. There are several aspects of each that make them unique investments in their own way. To advise and guide you on the same, a live chat session was organised with Kalyan Chakrabarti, managing director, Red Fort Capital. The topic of the session was ‘Real estate V/s other investment options, in today’s market’.

How should one make a real estate portfolio? Chakrabarti said, “Ideally, at the basic level you should start with the home market i.e. a self owned house. As you increase your savings and are keen to build a portfolio, the key factors to keep in mind are whether you are chasing regular yield from your investment or are you keeping the real estate as a store of value.”

In case you are expecting regular yield, investing in a commercial/office/retail asset would be useful. If you wish to use it as a store of value, then it boils down to your opinion. If you have a long term plan, buying a piece of land is worth considering; for a shorter term you can go for a relatively smaller apartment unit,” added Chakrabarti.

How much should one invest in real estate? As per Chakrabarti, “This depends on what is your age, your stage of life and the nature and predictability of your cash flows. In any event, I would suggest a limit of 25-35 per cent should be self imposed. This is excluding your primary house.”

Real Estate V/s Gold:

Whether real estate will deliver good returns or gold depends on your risk appetite and the investment horizon. “For long term holding a well chosen property would be ideal. However, for short term holding or to have the advantage of liquidating your asset at short notice, gold is better,” advised Chakrabarti.

Adding to this, he cautioned that unlike gold, where quality and valuation standards are known and reasonably transparent, real estate requires you to spend time and energy understanding the market and trying to ascertain a value which looks reasonable. “As the investment you have in mind gets lower it makes sense to shift towards gold,” further added Chakrabarti.

Real estate V/s stocks and mutual funds:

Stocks and mutual funds are considered more volatile over real estate. While explaining the realty index on the stock exchange against real estate returns, Chakrabarti explained, “Realty Index is representative of how the overall listed developer community is doing in terms of share holder value creation. A large majority of developers are unlisted, while the listed developers in comparison are a miniscule minority”.

Chakrabarti said, “In my opinion, physical real estate/asset gives better returns over stocks”. Mutual funds have an advantage as they have the ability to liquidate which real estate does not have. But for those who have not yet invested or don’t have a first home yet, it is always good to go ahead and invest in one.

With this it was evident that every investment comes with an element of risk. You reduce the risk by being diligent while choosing your investment and keeping a diversified portfolio.

Source: PropertyatNeoDevelopers.Wordpress.Com

Price rise on cards; festive spirit brings buyers back in Gurgaon market

While in many other property markets across the country the developers are planning freebies & discounts to attract the buyers, in Gurgaon the demand and supply cycle of the property market is showing a different trend altogether. With very few inventory hangover of ready-to-move stocks available and the macro-economic outlook reviving, the buyers are back in the market and even though a price rise is on the cards the festive spirit is yet driving the home buyers to the market.

This is probably the only market in the North India where the boundaries of the city are increasingly being stretched to the new growth corridors and still there are many takers.  It is hence expected that the festive season would be the real turnaround time for Gurgaon real estate and the transaction would be much higher than the last few years when the macro-economic outlook was bearish and the overall sentiments played the dampener for the property market in general and the housing market in particular.

There has actually been a turnaround in the macro-economic outlook in the last one quarter and what it has actually done is that it has changed the buyers’ psyche vis-à-vis their investment in general and property market in particular. This optimism has also removed the apprehension of any price correction or crash from buyers’ psyche.

It is hence no surprise to the market watchers that the buyers are looking forward to take a plunge in the property market this festive season. And it is not sheer sentiments; rather the buyers have their rational reasons. They are now anticipating triple comfort – job security, low interest and inflation in control – that could make their home purchase easier. They have been watching the property market on the sidelines for long and feel that the time has come to invest as the market is evenly balanced for both the developers as well as the buyers now. It may not be the same in time to come once the actual change in the economic outlook is on ground with statistics.

Niharika Arora, a banking professional in the city has zeroed in on a property on Sohna Road. Not very religious otherwise, she still thinks for the biggest investment of her life festive spirit and the importance of muhurats does matter. Even at a rational level, her cost & benefit analysis makes her feel this is probably the best time in the last 3-4 years and the market is poised to see property prices appreciate in the next two to three quarters when the expected growth figure will be released. She feels as of now, the marginal price appreciation on the eve of festivals in the market is based on that optimism.

“In terms of demand and supply cycle property market of Gurgaon will always be under-supplied as the city is a magnet to the business houses and multinational companies. A price appreciation on the eve of the festivals is hence a logical conclusion when the macro-economic sentiments have improved. Among our peer group we have the feeling of job security now with the recovery in Indian economy and business transactions going up. Moreover, interest rates now onwards are poised to go down and the RBI has already indicated that inflation is on course of being tamed. Collectively, this makes the home purchase ideal now as I may end up paying more for the same property next year,” says Niharika.

The developers in the city also believe that the market is best positioned for the average home buyers on the eve of the festivals. Sanjey Roy, DLF spokesperson agrees that it is rather interesting that the marginal price appreciation that should have ideally dampened the spirit of the home buyers has actually revived the sentiments. The home buyers have carried home the point that all the doom and gloom over the property market is over and the marginal appreciation indicates the prices will not correct or crash, as prophets of dooms day forecasted for long. It means not only the value for money now but expected appreciation ahead as well.

“I agree the buyers coming back in the Gurgaon market is sentiment driven at the moment. But sentiment alone can not be credited for the gradual recovery of the city property market. The buyers are well informed today as far as the state of economy and the dynamics of property market are concerned. They are also aware that if they miss the house buying now, the prices are very much expected to go up in short to medium term outlook. I feel it is a combination of emotional and rational urge that is behind the buyers’ optimism on the eve of the festivals,” says Roy.

Geetambar Anand, CMD of ATS Group says in residential property investment, the customers focus on the properties that have potential for assured rental yields and capital appreciation. This includes the residential projects which are close to their workplace catchments, industrial hubs and locations with high aspirational value. In the coming season, project-specific price increase can be expected across these sub-markets – this pertains specifically to projects that are being delivered or are nearing completion. The mid-end and affordable housing segments will record healthy appreciation in capital values in the short term from a low base.

“As demand is expected to improve with the softening of the interest rates, improving sales will benefit developers; who should focus on execution of their on-going project portfolios. On the whole, the market sentiments augur well for the residential and the commercial property markets, more or less assuring relatively healthy absorption of residential and commercial spaces in the times to come.  The new infrastructure initiatives planned to be undertaken by the State Government will also play the crucial role in ascent of Gurgaon property market,” says Anand.

Analysts tracking the market in this part of the world maintain that the numero uno positioning of the Gurgaon property market can not be denied. In the last few years, Gurgaon has witnessed a substantially higher percentage growth in the capital values due to the extensive commercial activity for the retail & office spaces being leased and purchased. The increased development of the commercial belt resulted in a concurrent demand for quality residential space in these as well as the neighboring areas.

Prices on the southern peripheral road connecting to National Highway 8 have seen considerable appreciation over the past few months. For customers, this location holds good investment potential thanks to the enhanced connectivity that NH8 provides to Manesar and Dwarka.  In particular, the residential properties along the Dwarka Expressway have also attracted the smart considerations from the mid-income to expats as a buyer group. It is hence very much expected that the buyers’ enquiry will convert into sales this festive season despite of a marginal price rise.

Source: PropertyatNeoDevelopers.Wordpress.Com