Over 58 per cent of the total expected mall supply has been deferred this year, according to Cushman and Wakefield’s latest retail reports. The highest deferment was recorded in Mumbai and Hyderabad where none of the planned supply entered the market, followed by Chennai (87 per cent) and the National Capital region (75 per cent).
The real estate consultancy attributed the deferments to developers pushing their retail project plans to the next year owing to the time lag in the manifestation of actual demand following the implementation of the FDI in retail policy. However, certain mall developers such as Inorbit believe that mall supply has dipped this year, owing to increased competition and challenges such as expensive land, interest and construction costs.
“The quantum of property going into mall construction has reduced and we expect it to dwindle further going forward, as competition and challenges are increasing whereas returns are reducing. Moreover, today there are other alternative real estate sectors offering better returns than the shopping segment — such as residential and mixed land use,” said Kishore Bhatija, CMD, Inorbit Mall.
Bangalore tops
According to the report, the top eight major cities witnessed a total mall supply of 3.44 million square feet (msf) during 2012, of which Bangalore witnessed the highest mall supply of 1.86 msf this year.
A total of 10 new malls started operations this year and average mall vacancy across cities stood at 20 per cent a decline of 1 per cent over last year, partly aided by the large deferment of malls.
Ahmedabad witnessed the sharpest drop of 7 per cent in mall vacancy levels, even while it recorded the highest vacancy levels this year. Hyderabad, Mumbai and the NCR witnessed marginal improvements of 1 to 2 per cent each in vacancies on account of increased leasing activities. Bangalore and Chennai witnessed approximately 2 per cent rise in mall vacancies owing to the influx of new mall space and a general non-availability of quality mall space in these cities, according to the report.
Jaideep Wahi, Director, Retail Agency, Cushman and Wakefield India, said: “The expectation from FDI announcements in retail has been welcomed by developers, as it would generate greater demand for quality space. However, given that the actual demand resulting from these announcements would take 12-18 months to start manifesting, many developers with initial plans for retail have pushed their projects to the next year, thus widening the gap between expected to actual mall supply for the year. An expected 12 msf of new mall space is expected in 2013, which will be a mix of deferred spaces as well as new projects.”