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.

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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.

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