indian real estate- today, tomorrow and the way forward (1)

7/27/2019 Indian Real Estate- Today, Tomorrow and the Way Forward (1)

1/366 > Shopping Centre News > august-september 2013

centrepoint

By Anshuman Magazine

has provided support to the

retailers seeking to establish

themselves in the Indian market

and also enabled mall developers

to attract international and

domestic retailers to set up

flagship stores in the country.In the run-up to the global

financial crisis of 2008, around

300 new shopping centres were

scheduled to be completed in

key cities of India. However, this

pipeline did witness stagnation

with the credit crunch, leading

to a shortage of modern retail

stock. In 2011 the development

pipeline sprung back to life as

construction work resumed on a

number of projects.

INDIAN REAL ESTATE:TODAY, TOMORROW

THE WAY FORWARDAND

RETAIL OVERVIEW: SUPPLY,

PRICING AND RENTAL TRENDS

The retail real estate market in India

has developed steadily over the past

decade as the quality of stock has

improved and local developers have

realised the importance of modern

shopping centre management such

as zoning, branding, marketing

and promotions, as well as the

all-important strategy of followinga pure lease model instead of the

earlier practice of divesting units to

individual investors. This evolution

has led to the creation of a number

of high-quality shopping malls in

major cities such as Delhi, Mumbai

and Bangalore, which have set

the benchmark for future retail

schemes.

The adoption of rental models

in India such as revenue sharing

As at the end of 2012, the supply

of modern retail space across the

countrys seven largest cities stood

at about 52 million sq.ft., around

70 percent of this space is in New

Delhi, Mumbai and Bangalore.

Leading cities including New Delhi,Mumbai, Bangalore, Pune, Chennai,

Hyderabad and Kolkata have seen

a steady rise in retailer enquiries

in the recent years. Shopping mall

rents in prime submarkets of New

Delhi have witnessed growth, whilst

values in high streets have increased

in Mumbai, Bangalore and Pune.

Transaction activity and size are

expected to increase on the back of

increase in consumer spending and

expanding mid-income purchasing

New Retail Supply Pan India - 2007-2013

2007 2008 2009 2010 2011 2012 2013

16

14

12

10

8

6

4

2

0

power. In Mumbai, premium

international brands continue to

focus on affluent southern parts o

the city, but the lack of quality reta

space remains a major challenge

to growth. Despite the scarcity of

quality supply, most retail chainscontinue to launch their first India

store in Mumbai usually in a stre

shop before expanding elsewhe

Domestic big-box retailers are

gradually expanding to tier II

locations, but the major foreign

names remain primarily focussed o

tier I cities. New supply is steadily

coming on stream in the NCR

and will provide opportunities for

retailers to operate in an organised

retail environment. High-street

formats continued to dominate th

retail landscape, whilst most luxur

retailers preferred to operate fromfive-star hotels and premium malls

Bangalore has a large quantum

of organised retail supply in the

pipeline which will provide retailer

with further opportunities for

expansion.

Rents for prime retail space have

recovered steadily after suffering a

dip in 2008-2009 as supply has no

kept up with demand. Although

high streets such as Khan Market

Opportunities and challenges existshand-in-hand in the Indian retailreal estate market that has grownsteadity over a past decade andseems to consolidate in the way

ahead. In order to build successfulshopping centres, mall developershave to look at them beyond anasset class of property.

ISIEmergingMarketsPDF in-iimidrchand from 14.140.95.130 on 2013-09-06 07:54:58 EDT. DownloadPDF.Downloaded by in-iimidrchand from 14.140.95.130 at 2013-09-06 07:54:58 EDT. ISI Emerging Markets. Unauthorized Distribution Prohibited.


2/3august-september 2013 > Shopping Centre News >

has seen them consolidate and

reduce the size of some stores.

Fashion remains a high growth

sector and major apparel brands

from the United States and Europe

continue to seek opportunities toenter or expand in major markets

across the country, including

some tier II locations. Domestic

home furnishing companies and

supermarkets also remain in an

expansion mode.

CHALLENGES FACED BY

RETAILERS

There is approximately 52 million

sq.ft. of retail stock in India spread

across leading metropolitan cities

and their surrounding regions.

However, even after the steady

growth in supply of organisedretail space over the past 10 years,

retailers of the size of Ikea or

Walmart often find it challenging

to secure space in a prime mall

in any of these cities. This is

essentially because the majority of

retail space developed in India to

date lags behind global standards

and does not provide the quality,

ambience, design, services and

post construction maintenance tha

global retailers are accustomed toThis is one reason why out of the

more than 300 malls in the countr

only a handful can be described a

successful retail projects. The total

size of these successful malls is jus

4-5 million sq.ft.

According to Technopaks

Opportunity India report, India

will require an annual supply of

about 20 million sq.ft. of organise

retail space in order to sustain

growth in the sector. This will

necessitate a concerted effort from

developers to construct successful

shopping centres to globalstandards. However, domestic

developers are still in the middle o

a steep learning curve with respec

to undertaking shopping centre

development. Many developers

view shopping centres simply as

India will require an annual supply of about 20 million sq.ft. of organised retail space in order to sustagrowth in the sector

High Street Rentals across Key Cities

Khan Market, Delhi

Linking Road, Mumbai

Brigade Road, Bangalore

Park Street, Kolkata

T Nagar, Chennai

Jubilee Hills, Hyderabad

1150

800

315

330

150

135

0 200 400 600 800 1000 1200 1400

Supply Comparison of Top Seven c ities

RetailSpace

(millionsq.

ft.)

NCR Mumbai Bangalore Chennai Hyderabad Pune

Completed Space Vacancy

16

14

12

10

8

6

4

2

0

30%

25%

20%

15%

10%

5%

0

Rentals across Prime Mall Developments

Delhi

Mumbai

Bangalore

Kolkata

Chennai

Hyderabad

350

510

160

287

180

65

0 100 200 300 400 500 600

and Connaught Place in New

Delhi, Linking Road in Mumbai and

Brigade Road in Bangalore continue

to command a premium due to

their favourable locations, most

international retailers desire larger

floor plates, back-up power systems

and a modern retail environment.As a result, there has been an

increase in demand for space in the

shopping malls.

Activity from domestic retailers,

particularly in tier I locations, slowed

slightly over the course of 2012 and

many groups have adopted a wait-

and-see strategy amid increasing

competition from international

groups and the slowing domestic

economy. However, domestic

groups still account for the bulk of

new take-up. Despite a high rental

spectrum, major cities continue

to witness gradual expansion

by international luxury goods,

apparel and F&B retailers. Recent

quarters have also seen a number

of well-established international

mass market brands entering tierII locations, partly due to the lack

of space options in tier I markets.

Additional new entrants are likely in

the coming months.

International F&B outlets have

continued to expand in 2012, both

at the fast food and fine dining

end of the market. Luxury retailers

remain focussed on tier I locations

but continue to refine their strategy

and product offering for the Indian

market, which in selected cases

Organized Retail Stock Distribution

Delhi

Mumbai

Bangalore

Chennai

Hyderabad

Pune

33%

33%

33%33%

33%

33% 12%

21%

20%

8%6%

33%



3/368 > Shopping Centre News > august-september 2013

centrepoint

another asset class of property

and no different to building

offices or residential units. In fact,

shopping centres have an organic

and perpetually changing quality

and need to be carefully planned,

developed, owned and managed as

a single property.

OPPORTUNITY FOR MALL

DEVELOPMENT

It is in this context that the role of

global retail chains such as Walmart,

Tesco and Ikea will be crucial.

These retailers possess extensive

experience of running successful

retail stores and properties in

markets such as the US, China,

Europe, Middle East and South East

Asia with local partners to createsuccessful shopping formats. By

utilising this knowledge, they will be

able to help usher in a revolution in

the development of organised retail

real estate in India. Success factors

for a retail mall in India include:

Planning and design:

Developers must conduct initial

feasibility studies taking into

consideration the demographics in

their catchment area, the targeted

consumers behaviour and the

prospective retailers preferences

and expansion plans towards their

proposed projects before theycommit any investment funds. The

macro-economic environment of a

particular location, its prospective

growth and purchasing power

of key catchment zones

must be studied

which most traditional high streets

are structured in India, with shops

selling a particular product range

clustered together and those selling

other products such as apparel

clustered separately. Trade mix and

tenant mix planning helps create

synergies to benefit consumers,

thereby leading to enhanced

footfall.Ownership strategy: Developers

should hold their projects in single

ownership so as to pro-actively

control their tenant mix and trade

mix. It is extremely important to

follow a lease only model in a

retail centre as this helps developers

control tenant positioning and

manage common areas more

effectively. Many developers tend

to view malls as just real estate

and as an investment from which

they wish to achieve a short-term

profit. However, the desire to sell

a portion of the mall on a stratatitle basis means the builder does

not maintain the facilities properly

and enables investors to resell their

shops, which ends up ruining the

tenant mix. In order to achieve a

more balanced and synergised trade

and tenant mix developers require

knowledge of shop alignment by

industry or market positioning.

Proactive tenancy leasing, screening

and management are also essential.

Retail management:

Professional mall managementrequires providing quality services

to customers. Developers should

consider the entire shopping

centre as a single entity and

work on improving footfall and

revenue streams for all zones

and locations within the mall.

Successfully managing a mall

involves understanding of shoppin

behaviour, analysing footfall and

revenue across the property and

launching initiatives to attract

business and improve the image

and marketability of the property.

Location and accessibility:Although no longer an exclusive

success factor, location and

catchment are of crucial importan

to mall revenues. Shoppers in

India are still willing to travel

long distances to visit shopping

malls offering them an attractive

shopping experience but the mall

should be positioned within or

next to an appropriate catchment

area for its target customers. In

New Delhi, shopping malls built in

proximity to operational metro line

with easy accessibility witness mor

footfall than those built in suburbswith less comprehensive public

transportation access.

before selecting the ideal location

for development. The design must

take into account circulation, store

visibility and an understanding

of the shopping behaviour in the

mall to structure the tenant mix

accordingly.

Zoning and tenant mix: It is

essential to plan and zone the mall

in a manner so that all tenantsbelonging to the same category are

positioned together. This is essential

from the point of view of

customers, who wish to

compare stores, products

and offerings. Such

an approach is inline

with the manner in

HigH-street formats continued to

dominate tHe retail landscape, wHilstmost luxury retailers preferred to

operate from five-star Hotels and

premium malls

About the AuthorANSHUMANMAGAZINE, CMD,CBRE South AsiaPvt Ltd


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