Kunal Majumder

Retailers are no longer interested in expanding in all directions and are more focused on sticking to locations and formats that work, feels Shubhranshu Pani, managing director of retail at international property consultancy Jones Lang LaSalle Meghraj.

“The tier II/III growth story in terms of retail is now on indefinite hold. Retail space developers will concentrate on focused developments in the metros and other proven catchments. Previous expansion plans will only be implemented once economic revival injects new liquidity and better sentiments into the market,” said Pani.

Fashion lifestyle category, which accounts for between 45-50 per cent of the country’s overall organised retail market, would see least 10-15 per cent in the next two years, Pani announces.

“Much depends on where the economy goes, but India currently has over a million consumers who invest regularly in fashion and lifestyle accessories. This number is unlikely to decrease, since baseline tastes do not change,” he explains.

Speaking on the realty front, Pani says retailers are now preferring single format stores on high streets compared to the malls.“Retailers have been contending with issues of viability and visibility and now give lesser importance to stores for branding purposes. High streets are the format of the future.”

Price the goods right, occupy the right spaces, use catchment-appropriate marketing and advertising, avoid overstocking and hire the right kind of people are the five mantras to override the economic slump, says Pani.

Rental falls
Retail rentals in the high streets and shopping malls of metro cities, in the past few months, have dropped significantly, according to a report prepared by globally renowned consulting firm Cushman & Wakefield. A further decline in the rentals of such properties is also expected during the current year (2009), predicts the report.
Some big retail names have defaulted their rent from September-October 2008 onwards, according to Association of Mall Owners of North India. Around 300 retailers operate out of 70 malls in north India.

Retailers Association of India (RAI) has called for a correction in rentals. RAI announced that if mall owners have not passed on the recent market correction in rentals, there may be a possibility that the retailers are trying to re-negotiate terms. According to RAI, 30-35 per cent of retailers want re-look at the terms of the contract with the mall developers.
The study reports a high overall vacancy rate of 16 per cent as at end of 2008. While, NCR had a mall vacancy of 24 per cent, it was 10 per cent in Mumbai. This has forced property rentals for retail space down from 20 to 40 per cent. A further drop of 10 to 15 per cent can not be ruled out, says Rajneesh Mahajan, Director, Retail services, Cushman & Wakefield.

· New Delhi-NCR has witnessed massive fall in retail rentals. While, the decline in the South Delhi was 12 per cent and 22 per cent in Noida, it was as high as 27 per cent in West Delhi. High streets like Connaught Place, Karol Bagh and Basant Lok witnessed the drop of 16 per cent, though it was slightly lower at 14 per cent in Khan Market.

· The drop in rentals in the Southern metro cities of Chennai, Hyderabad and Bangalore was a massive 33 per cent, 29 per cent, and 28 per cent respectively

· The drop in property rentals in Mumbai was as high as 44 per cent on Linking Road, while 41 per cent in South Mumbai areas of Kemps Corner and Breach Candy, and 38 per cent in Colaba Causeway. Even new shopping areas of Vashi and Goregaon registered drops respectively of 20 per cent and 17 per cent. The upcoming Northern suburb of Mulund also witnessed a drop of 14 per cent.