1.9 MILLION SQ. FT. OF FRESH RETAIL SUPPLY ADDED DURING H1 2018; GLOBAL RETAILERS INCREASE THEIR FOOTPRINT
1.9 Million sq. ft. of Fresh Retail Supply Added During H1 2018; Global Retailers Increase Their Footprint: CBRE Research.
CBRE Research report indicates that the year 2018 has seen a mitigation of the hurdles that had impeded the Indian economy’s growth from last year.
The year 2018 has seen a mitigation of the hurdles that had impeded the Indian economy’s growth from last year. The quarter ended March 2018 was especially positive from an economic perspective as the country’s GDP growth reached a two-year high of 7.7%, compared with 7% in the previous quarter. The continued sturdy economic performance prompted the government to raise its projected 2017-18 growth rate by 0.1 percentage point to 6.7%.
The upward momentum was largely attributed to the construction and manufacturing sectors, which grew by 11.5% and 9.1% respectively on a quarterly basis. In addition, sectors such as public administration, defense and other services (13.3%), electricity, gas, water supply & other utility services (7.7%), and trade, hotels, transport and communication (6.8%) also contributed to this strong momentum. However, the growth of real estate services (along with financial, insurance and professional services) sector dipped from 5.7% to 5% on a half yearly basis.
After declining slightly to 4.3% in March 2018, retail inflation (measured by consumer price inflation or CPI) continued to rise, owing to record high fuel prices across the country. It was recorded at 4.6% in April 2018 and at 4.9% in May 2018, making the RBI raise the repo rate by 25 bps to 6.25%. Consequently, the reverse repo rate increased from 5.75% to 6%. This was the RBI’S first repo rate hike in four years and marked a tactical shift in its policy stance.
The central bank also revised up the retail inflation target range to 4.8-4.9% for the first half of 2018-19 and to 4.7% in the second half, after considering the impact of house rent allowance (HRA) on central government employees. Additional 1.9 Million sq. ft. of Fresh Supply; Chennai and Hyderabad Lead Supply The Indian retail real estate market witnessed continuous foray of international brands, launch of retail developments and sustained demand for space in H1 2018. The first half of 2018 saw an addition of about 1.9 million sq. ft. of fresh supply across the seven key cities, led by Chennai, Hyderabad and the National Capital Region (NCR). The review period witnessed the launch of VR Mall (1 million sq. ft.) in Chennai, L&T
Hyderabad Next and L&T Next Galleria (totaling 0.65 million sq. ft.) in Hyderabad, and 32nd Avenue (0.25 million sq. ft.) in Gurgaonncr.
International Retailers and Local Theatre Brands in Expansion Mode
International brands such as Tom Tailor, Miniso,
Taco Bell, Mango, Marks and Spencer, H&M and Starbucks continued to expand operations by entering new markets across the country. Even homegrown departmental store chains such as Shoppers Stop, Central, Lifestyle, Max and Pantaloons were in an expansionary mode and opened stores in Chennai, Hyderabad, Mumbai and Pune. Leading international brands such as Dyson, Molton Brown, Berluti, American Eagle, Antony Morato, Daniel Wellington and Bath & Body Works made inroads into India with their first stores becoming operational during H1 2018. Meanwhile, multiplex operators such as PVR and Inox continued to take up space across various cities.
Select Prime Areas Witness Rental Appreciation
Rental trends varied across key high streets in major cities during H1 2018. Rentals appreciated in high-street markets such as Khan
Market, DLF Galleria (NCR), Commercial Street, Jayanagar 11th Main 4th Block, Kammanahalli/hrbr Layout (Bangalore), Jubilee Hills Road No. 36 (Hyderabad), Linking Road (Mumbai, MG Road and Aundh (Pune). On the other hand, rentals remained stable in most of the other high-streets across the country. Rentals across organized retail developments also displayed a varied trend – mall rentals remained stable in some cities (Hyderabad, Mumbai, Pune and Kolkata), and increased in others (Bangalore, Chennai and NCR) due to growing demand from domestic as well as international retail brands.
Key Trends Across The Retail Segment: Omnichannel Retailing:
Most prominent brands are moving towards Omnichannel retailing, a fully-integrated approach to shopping that provides consumers a unified experience across online and offline platforms. Omnichannel shopping extends from brickand-mortar locations to mobile apps, e-commerce marketplaces, onsite storefronts, social media, etc. in order to provide a full shopping experience to consumers.
Redevelopment of Properties:
Redevelopment of old properties/retail properties is on the rise, especially in Delhi-ncr, to transform the property into a viable retail asset by altering its positioning/tenant mix to make it relevant as per the target catchment.
Shorter Lease Terms:
Landlords are adopting shorter lease terms of 5-6 years as opposed to the 9-year lease term in the past in order to maintain a dynamic tenant mix and remain competitive in the current environment.
Leading International Brands in Tier II cities:
Rising consumer base and increasing spending potential even in Tier II cities has generated an opportunity for many retailers that are making a beeline towards several tier II cities. As these locations are uncharted and real estate costs are relatively lower than those in metro cities, several leading brands are setting up stores in cities such as Jaipur, Chandigarh, Kochi, Bhubaneshwar and Nagpur, among others.
Size is not the Only Determinant of Quality:
Apart from mall clusters and high street locations, an emerging asset class is making an appearance in the form of small investment grade developments. These developments provide a retail mix which includes top brands in apparel, F&B, furniture, accessories, etc. and are located within prime commercial districts of the city.
Investments in the Retail Segment:
Retail has garnered interest and confidence among institutional investors over the past two-three years, especially towards quality retail assets. Consequently, developers of several retail malls are re-evaluating their portfolio to create a retail space that has an optimum balance of tenant mix, target catchment and customer experience.