No new retail realty supply this year

Mumbai The boom in the retail real estate market, which has manifested itself in the frenzied construction of malls in Mumbai in recent years, has hit a trough. According to a latest report, there would be absolutely no new retail real estate supply hitting the market this year.

The report on retail realty market released by property consultants Cushman and Wakefield on Wednesday points out that both high street and mall rentals will remain stable even as the limited new supply that was slated to be released this year has been deferred to next year.

At the beginning of the year, it was expected that 1 million sq ft of fresh mall supply would be available once the under-construction Viva city mall in Thane becomes functional by the second half of 2012. However, the mall is now expected to commence only in the first quarter of 2013. Also slated to be launched next year is the next phase of Nirmal Lifestyle in Mulund.

This is a far cry from the trend in recent years with malls such as Phoenix market city and Kohinoor mall in Kurla, Magnet phase 2 in Bhandup, Glomax in Kharghar, Growel phase 2 in Kandivli and Infinity 2 in Malad being launched over the past two years alone. The new retail supply stood at 2.5 million sq ft in 2011 and 1.3 million sq ft even in the slowdown-hit 2010.

The report states that retail rentals have remain unchanged during the second quarter of the year due to lower transaction activity and are predicted to remain stable in the short to medium term owing to the current vacancy of 10.4 per cent.

It further adds that factors such as the slump in the GDP growth, rising inflation, weakening currency and a general slowdown in the Indian economy are likely to push the government to bring in economy-boosting reforms such as FDI in multi-brand retail.

Jaideep Wahi, director (retail agency) at Cushman and Wakefield, said the dearth of funding for developers coupled with the demand slowdown for retail space is responsible for the subdued supply. “A lot of international brands are, however, expected to take up space in the wake of the decision to allow 100 per cent FDI in single brand retail,” he said.

He added that while the deterrent clause on 30 per cent mandatory sourcing from small and medium enterprises is being currently sorted out, the problem is also the prohibitive cost of real estate that will force international retailers to enter into joint ventures with Indian partners.

Quality space in high streets such as Colaba Causeway and Linking Road in Bandra still find a lot of takers, Wahi said.

Data shows that while the year-on-year rentals in the malls have either remained unchanged or increased marginally, rentals in Colaba and Bandra high streets have registered a whopping 75 per cent and 24 per cent rise respectively.

Another report by Jones Lang LaSalle, also released on Wednesday, adds: “Due to lack of quality malls in the city, retailers’ demands seemed to be polarised towards standalone formats, high streets and mixed-use developments (in Mumbai).”

Source:www.expressindia.com