New Mall Space to In­crease in the Coun­try by 40 Per­cent: JLL

Delhi NCR, Hyderabad, Chen­nai will wit­ness the high­est sup­ply, whereas new mall sup­ply in Mumbai is set to de­cline by y-o-y in 2018, ac­cord­ing to a study by JLL In­dia…

Shopping Center News - - CONTENTS - – By Shop­ping Cen­tre News

In a re­cently com­pleted study by JLL, one of In­dia’s largest real es­tate ser­vice ͤrms, re­tail sup­ply in the next three years (2018 – 2020) is ex­pected to be at 19.4 mil­lion sq. ft. (msf). In the same pe­riod de­mand will be ap­prox­i­mately 15 msf. The study re­vealed that 2018 will see the high­est sup­ply since 2011.

The steady growth of sup­ply will be ac­com­pa­nied by an equally sta­ble growth in de­mand which is also ex­pected to be at around 15 msf in the pe­riod of 2018 – 2020. Fur­ther, it ex­pects a par­al­lel ra­tio­nal­i­sa­tion of ex­ist­ing mall spa­ces which will help the mar­ket avoid an over­sup­ply sit­u­a­tion. As a nat­u­ral course of events, it ex­pects a few malls to close down or tem­po­rar­ily sus­pend their op­er­a­tions for re­pairs, ren­o­va­tion and up­grades. This will help the mar­ket cre­ate the nec­es­sary bal­ance to main­tain the rental val­ues.

The to­tal newly com­pleted malls in 2017 was recorded at 5.6 msf which is ex­pected to see an in­cre­ment of close to 40 per­cent y-o-y and rise to 7.8 msf by the end of 2018. The largest con­tri­bu­tion to this will be com­ing from the two south­ern cities of Hyderabad (2.2 msf) and Chen­nai (1.5 msf) which will see sig­niͤ­cant in­flux of mall sup­ply. Delhi – NCR will be wit­ness­ing the high­est sup­ply of 2.3 msf of new mall space in 2018, al­beit record­ing a de­cline of 28 per­cent y-o-y since 2017.

While re­tail mall space has now started to see a rise in the mar­ket, we have also ex­pe­ri­enced some ra­tio­nal­i­sa­tion in sup­ply in the last year. 2017 saw with­drawal of nearly 5 msf of re­tail space with a clos­ing down of 28 malls. Most of the ra­tio­nal­i­sa­tion took place in the mar­kets of Delhi – NCR and Mumbai ow­ing to the fact that these mar­kets have sig­niͤ­cant mall stocks with a con­sid­er­able per­cent­age of the same per­form­ing below par.

“The re­tail sec­tor of In­dia is go­ing through a fresh pe­riod of growth which is backed by strong eco­nomic fun­da­men­tals. As we have seen an in­crease in in­ter­est from in­vestors which was seen with in­vest­ments of over US$ 750 mn in 2017. En­cour­aged by the ur­ban­i­sa­tion, young pop­u­la­tion and ris­ing pro­por­tion of nu­clear fam­i­lies in ur­ban lo­ca­tions, over 70 per­cent of con­sump­tion growth in the next 15 years is ex­pected from pop­u­la­tion aged 15-59 years, with in­creased per capita con­sump­tion. This along with the open­ing up of the FDI route for re­tail brands en­ter­ing into In­dia, will fur­ther boost re­tail in­vest­ments,” said Ramesh Nair, CEO and Coun­try Head, JLL In­dia.

De­spite an ex­pected de­cline in Delhi – NCR, the city is ex­pect­ing to see an ad­di­tion of 2.3 msf of new mall space in 2018. Most of these malls will be in the pe­riph­eral re­gions and would be cater­ing to the grow­ing catch­ments of Noida, Gu­ru­gram and Greater Noida.

While Delhi – NCR al­ready has the high­est in­ven­tory, the growth of re­tail sec­tor points out to the fur­ther pos­si­bil­i­ties of growth. In the same space, Mumbai which has in the past few years seen as slow­down in re­tail de­vel­op­ment ac­tiv­i­ties will con­tinue to wit­ness re­main cau­tious. 2018 will see a de­cline of 13 per­cent y-o-y in new mall com­ple­tions, fur­ther main­tain­ing the sta­tus quo in the mar­ket.

Chen­nai will ex­pe­ri­ence a surge in new com­ple­tion mall spa­ces with over 1.5 msf of new malls be­ing added. Chen­nai has seen ex­tremely re­strained de­vel­op­ment ac­tiv­i­ties over the last few years, mostly due to strong pref­er­ence by re­tail­ers for tra­di­tional high street lo­ca­tions. Hyderabad is the other ma­jor mar­ket to see sig­niͤ­cant growth adding 2.2 msf of new mall sup­ply in 2018.

This comes at the back that the city has not seen any new sup­ply in the last year and has had a his­tory of spo­radic ad­di­tions from time to time.

“De­spite the on­slaught of new re­tail for­mats like e-com­merce, tele- mar­ket­ing and oth­ers, we will con­tinue to see a steady growth in brick and mor­tar form of re­tail as the sec­tor is pegged to grow to INR 1 tril­lion by 2020, at a CAGR of ap­prox­i­mately 15 per­cent. We ex­pect the open­ing up of FDI will be in­stru­men­tal in achiev­ing and sur­pass­ing these growth es­ti­mates,” con­cluded Ramesh Nair.

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