Retail real estate across the country continued to reel under the current economic pressure.
According to a report prepared by Cushman & Wakefield, the world's largest real estate services firm, most retail micro markets, both mall as well as main streets have seen a further correction in rental values during the first quarter ended March 31, 2009.
Mumbai saw the sharpest decline in rental values for both malls and main street. Suburban Goregaon, witnessed a fall of 42 per cent, while rentals in places like Colaba Causeway corrected by 38 per cent.
In the national capital region (NCR), main street location of Greater Kailash, M Block witnessed a 25 per cent decline in rental values while mall rental values in Noida dropped by 17 per cent.
Ahmedabad saw a downturn in rental values in malls and main street rentals with corrections in the range of 20 per cent to 36 per cent over the last quarter.
Rajneesh Mahajan, executive director, retail services, Cushman & Wakefield India said: “Even while a correction in rental values is recognised as a potential catalyst for retailers to re-enter, receding end user demand has severely curtailed uptake of space across most micro markets."
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"Thus the trend of further correction is likely to continue in short to medium time frame leading to further correction in both mall rentals as well as high street rentals. Only established retail micro locations and successful malls are expected to hold steady largely on account of revenue potential and low vacancy," he further added.
Furthermore, in the same period only 1.4 million sq.ft. of fresh mall supply was added across seven major cities concentrated only in Mumbai and NCR. The fresh supply was much below initial expectation largely due the slowdown in uptake of space by retailers, which led developers to reduce the speed of construction in already underway projects.
A few other developers, which are yet to start construction of previously announced projects, may be reconsidering their retail mall plans. The slowdown in mall construction is expected to keep the supply low over 2009 and may help in maintaining a healthier supply to demand equation going forward.
The estimated mall supply by end of 2009 is calculated to be 17.66 million sq.ft., about 11 million sq.ft. of the same has been carried forward from 2008.