30% of proposed retail malls in India deferred

The retail real estate market recorded a deferment of more than 30% of retail mall space against projected supply for the first half of the year, says Cushman & Wakefield in a recent report.

Around 2.27 million sft mall spaces was added to the existing stock in the first half of 2012, while approximately one million sft of expected mall space was deferred to second half of the year or next year. The overall vacancy rate for the major cities as of H1 2012 stood at 19.6% marginally higher than the previous quarter, mentioned the report.

"This slowdown in mall construction need not be viewed as a negative growth indicator for the retail real estate segment. With high vacancy levels as well as cautious expansion plans of retailers, the deferment of supply is a necessary measure to bring stability in the retail market," says Jaideep Wahi, director-retail agency, Cushman & Wakefield India.

However, despite deferment in retail space, rental across most malls in cities like Delhi-NCR, Chennai, Bangalore, Mumbai and Kolkata remained largely stable, while some micro markets have seen a growth over the previous quarter in the range of 2-13%.

"Given the current uncertain economic conditions, the retail markets are showing a largely stable scenario. Retailers of foreign brands still remain committed to the Indian markets with the recent announcements by multinational retailers indicating the strength of the economy," says Wahi.

The highest appreciation in rental value was recorded at Camac Street and Elgin Road in Kolkata at 12.4% and 25% respectively due to renewals of existing tenants at a higher value. Other cities like Gurgaon, Pune and Bangalore saw increase in high street rents by 7-9%.

However prominent high streets in Hyderabad (Banjara Hills, Jubilee Hills, Ameerpeet and A.S. Rao Nagar) saw a rental fall of 4-7% compared to the previous quarter due to significant amount of new construction becoming available in these markets.