Cushman & Wakefield’s latest retail report finds that the first quarter of 2015 saw the addition of one shopping mall to the overall mall inventory across the top eight cities in India — Ahmedabad, Bangalore, Chennai, Hyderabad, Kolkata, Mumbai, NCR and Pune.
According to Sanjay Dutt, executive managing director, South Asia, Cushman & Wakefield, “The retail market is expected to see steady growth over the next few quarters, albeit at a slower pace. Since retail space takes a significant time to develop and subsequently leased, it may dissuade developers from taking up extensive projects. Restructuring of debt and reassessment of development plans is common among developers who have previously announced their retail space plans. However, for investors, this scenario may actually present a good opportunity to invest and build a retail portfolio.”
While limited fresh mall space entered the market in the first quarter, there has been an increase in mall vacancy by 0.4 per cent points over the previous quarter and it now stands at 14.7 per cent. With the exceptions of Mumbai and Ahmedabad, all markets recorded a decline in vacancies. Speaking of Chennai’s retail landscape, A. Shankar, National Director-Strategic Consulting, JLL, says the city is fast catching up with the more mature retail markets of Mumbai, Delhi and Bangalore. Major foreign and domestic retailers and mall developers have entered the city in recent times, but the supply of quality retail malls remains a challenge. “Apart from the prime areas of the city, which have already seen a healthy penetration of malls, the suburban areas are growing significantly, with more than one lakh residential units under construction now and likely to enter the market in the next three to four years. Bigger residential catchments in the suburban areas combined with more reasonable rental rates are expected to act as key driving forces for retailers to increase their presence in the suburban areas,” he says.
This growth will be aided by falling vacancy, growth of office and residential markets in suburban areas, and development of quality retail malls. “Tambaram and Chrompet along the GST Road have always been traditional residential locations and are increasingly seeing organised retail activity. OMR is in the nascent stages when it comes to retail development, but with an upcoming mall project near Thoraipakkam and increased residential settlements, we foresee rapid retail growth in this corridor,” adds Shankar.
Noel Vessaoker, Centre Director, Phoenix Marketcity Chennai, says Chennai has an excellent brand-conscious market that is expected to grow in the coming years. “We are constantly seeing new, international brands enter the market. Mall rentals in the city are on par with other metros with mall occupancies between 90-95 per cent. This will naturally lead to an appreciation of rentals.”
Chandan Jain, managing director, Vijay Shanthi Builders, says, “Since there was a shortage of organised retail space supply in the city until a few years ago, the rentals did not experience huge fluctuations as compared to other major cities. However, it has been observed that over the years, the absorption rate for such spaces has been increasing and the vacancy rate has been lower.” Adds Shankar, “The market will see some more supply added to the inventory in next two to three years. On the supply side, the Gold Souk Grande mall is expected to become operational by 2015 with a built-up area of 0.8 million sq. ft. This project will be the first Grade A mall on GST Road. The mall has already recorded healthy pre-leasing, with increasing residential activity along the road.”
Along with the well-established Express Avenue and Phoenix Market City malls, the city is also home to Ramee Mall, Alsa Mall, Chandra Metro and Abirami Mega Mall. Despite being located in prominent areas, these doing very well. What could be the reason? Given the high land prices in Chennai, developing a mall is not a viable choice for a developer, says Dr. R. Kumar, managing director, Navin Housing and Properties. “Malls, in my opinion, should have around 3,00,000 sq. ft. of space or more. Any retail space of smaller size will have space constraints and poor brand availability. They are more like shopping centres and not malls in the real sense.”
Manoj Sai Namburu, chairman and managing director, Alliance Group, says, “Express Avenue and Phoenix Marketcity are professionally run malls and the rest are just glorified shopping centres. The demand for space in malls is going to increase steadily over the next 9 to 10 years and the demand may plateau in about a decade, when e-commerce becomes a force to reckon with.”
Also, residential areas close to malls constantly deal with traffic jams and other issues such as parking and congestion. Chennai is not paying much attention to traffic management, and unless traffic planning around malls improves, life for residents and traffic won’t get easier. “We must take a cue from cities like Dubai, Hong Kong and Singapore. The Metro Rail should be integrated with other modes of transport and access to malls provided with separate flyovers. Better parking space and ease of vehicular movement improves the functioning of a mall. There must be a collaborative effort from developers, residents and authorities,” says Kumar.
Rentals in Chennai
Location | Rental (per month) |
CBD | INR 150-250 per sqft |
SBD | INR 40-230 per sqft |
PD | INR 37-110 per sqft |
Operational Malls
Name of Mall | Location | Area (in sq.ft) | Anchor Rentals (in INR) | Vanilla Rentals (in INR) |
City Center Mall | R.K.Salai | 350,000 | 70-80 | 120 - 140 |
Ampa Mall | Aminjkarai | 350,000 | 40-60 | 150-170 |
Express Avenue Mall | Whites Rd | 800,000 | 70+ | 140-250 |
Spectrum Mall | Perambur | 150,000 | 40 | 75-100 |
Ramee Mall | Anna Salai | 150,000 | 55-70 | 110 – 150 |
Forum Vijaya | Vadapalani | 700,000 | 60-80 | 120-150 |
Coromandel Plaza | OMR | 250,000 | 35-50 | 60 – 80 |
Market City, Chennai | Velachery | 1,100,000 | 70+ | 120 - 300 |
PS Grand | Velachery | 250,000 | 60-90 | 140 - 150 |
Upcoming Malls
Name | Size (sq.ft) | |
01 | Holiday Inn (Hotel cum Retail) (u/c) | 40,000 |
02 | Brigade Vantage (u/c) | 100,000 |
03 | Proposed Mall (on hold) | 500,000 |
04 | Allied Marina Grand (u/c)* | 400,000 |
05 | Grand Souk Mall (u/c) | 800,000 |
06 | Gateway Mall (Proposed)* | 400,000 |
Total | 2,430,000 |
*Not confirmed
Source: Strategic Consulting, Jones Lang LaSalle, 2015
