Mall rentals stabilise, vacancy high

While rentals of retail space have stabilised in most of the country, mall vacancy has shown a marginal increase from 17.3% in the second quarter (April to June) to 17.5% in the third quarter (July to September), says a Cushman & Wakefield retail report released on Tuesday. In the July to September period, rentals stabilised in Chennai, Bangalore, NCR and Kolkata, as well as select locations in Mumbai, Pune and Hyderabad. The third quarter saw a drop in vacancy levels in Bangalore, Mumbai, Hyderabad and Pune, but NCR, Kolkata and Chennai witnessed an increase in average vacancy levels. This can be attributed to increase in supply in some markets. Total supply in Q3 was 1.9 million sq ft, an increase of 16% over Q2.

Jaideep Wahi, director, agency, retail services, Cushman & Wakefield, commented, "Rents in major cities and markets are expected to maintain stable values in the coming months. Over 60% of the anticipated supply in the third quarter was delivered, a marked improvement from the previous months. Major retail markets in India are likely to witness the first rental upswings around mid-2011."

In the third quarter, Mumbai saw a couple of mall launches with anchor tenants occupying space. Korum Mall at Thane has Westside and Star Bazaar as anchor tenants. SOBO Central, a 1,00,000 sqft departmental store, opened at Tardeo. After witnessing subdued demand for the past months, Mumbai witnessed a spike in mall leasing activity across most micro markets in the third quarter, resulting in stabilisation of average mall rentals across most micro markets.

Delhi and NCR witnessed retail rental correction in the third quarter without any exceptions. There was no new supply in NCR, as developers deferred supply of 9,30,000 sq ft of retail space due in the second half to next year. Rentals in malls declined 6% during the quarter across all micro markets. West Delhi continues to have the highest correction. South Delhi saw a correction of 5%. Most main streets experienced a correction of up to 10%. Basant Lok witnessed the highest correction on rental values.

In Bangalore, rentals stabilised in malls and main streets. Leasing activity was low and vacancy rates dropped over the previous quarter. Hyderabad saw additional supply of 6,50,000 sqft at Madhapur. Rentals remained relatively unchanged. Vacancy was 14%, against 17% in Q2.