Retail rentals down 20%

With organised retailers treading a cautious path on their expansion, real estate rentals for the sector in major cities across the country fell by up to 20 per cent during the third quarter of the fiscal, says a study.According to a study, conducted by the global real estate consultant Cushman & Wakefield (C&W), traditionally strong retail high streets, such as Linking Road and Kemps Corner in Mumbai, Ganesh Khind Road in Pune and Cathedral Road and R K Salai in Chennai witnessed a drop in rentals ranging between 13-20 per cent.“This is prominently due to caution in expansion plans of retailers which is leading to a slowdown in demand,” the report said.
The downfall over the quarter was a phase of correction over the previously skyrocketing retail rentals, it added.“Mall rentals, too, witnessed a similar trend where rental values have corrected to realign to the achievable business potential of the given market. This was especially true for rentals in Mumbai markets such as Ghatkopar (-11 per cent) and Vashi (-10 per cent)...,” the report said.It added that NCR, which received the highest quantum of mall space in the quarter, saw rental correction of approximately 6-9 per cent in peripheral locations like Noida and Gurgaon.“Bangalore, Hyderabad and Kolkata retail markets remained stable with certain mall locations even seeing an appreciation in rental values. Ahmedabad situated on the other side of rental spectrum experienced the highest fall in rental values of 20 per cent in Kankaria Lake,” the report said.The third quarter of 2008 has been significant for the retail real estate sector as, for the first time in recent past, many established locations saw correction of values both in mall as well as high streets, the report said.“In the short run, we may continue to see restrained activities from the retailers, resulting in further reduction in rental values,” C&W director (Retail Services) Rajneesh Mahajan said. Delays in completion of new projects has also led to a reduction of the expected mall supply in 2008 by around 36 per cent to 10.57 million sq ft, from the previous quarter estimate of 16.77 million sq ft. “In third quarter of 2008, total supply for retail malls was 3.25 million sq ft which was dominated by NCR that received approximately 2.1 million sq ft. Only two other cities witnessed new addition to mall supply in the period which includes Mumbai (0.89 million sq ft) and Pune (0.25 million sq ft),” the report stated.
It added that despite no new supply in any other major city, the third quarter of 2008 saw the largest single quarter mall supply for the year 2008. “Approximately 2.4 million sq ft of supply is expected in quarter four of 2008,” it said.“Even though Linking Road remains one of Indias most expensive retail destinations, the drop in prices has largely been due to slower expansion and realignment of rentals to business potential by retailers in the last few months,” the report said.