Retail space booms, so does high street

But residential and office space remain dull.

A remarkable divide is emerging on the real estate scene in the city. The market for both office and residential space has been stagnant in 2008 in most areas and down 10 per cent to 20 per cent in areas with an oversupply like Whitefield. But, the demand for retail (shopping) space is continuing to boom as it has been doing for five years now.

This is having a significant impact on the demand for retail space on high street comprising of prime traditional shopping areas in the central business district (CBD) like Commercial Street, Brigade Road and M G Road. These areas fell behind in terms of demand when the shopping malls arrived and then the non-CBD areas took off.

But despite 1 million square feet of mall retail space coming up in the city over the last five years through the opening of malls like Forum, Garuda, Sigma, Prestige Eva and Esteem, the high street is seeing a comeback. Demand is strong for both newly built space and properties getting vacated.

Real estate analysts attribute this continuing demand for retail space, which is buoying demand even on traditional high street, to strong players settling into long-term relationships while newcomer builders who sprouted when the present property boom commenced five years ago falling by the wayside during the present lull.

Because of the continued buoyancy in demand, retail rental values are likely to go up for the second year this year, though by not as much as the 23 per cent recorded last year, according to Mayank Saksena of Jones Lang LaSalle Meghraj.

"Demand for space in the city is being driven by emerging long-term relationships with a 5-10 year perspective between developer and retailer. They are also aligning their business interests to suit their expansion to other markets in the south," adds Saksena.

The pressure on high street first eased when the shopping malls came and then in early 2007, due to the emergence of newer areas in the non-CBD sector like Koramangala, Indiranagar, Malleswaram and Jayanagar for setting up large format stores. But now retailers, after reworking their strategy so as to be in both the places, have pushed up high street demand, says Saksena.

"As for the outlook, high street is expected to remain bullish, as evidence by retailers' confidence. The year-on-year increase of rental values is expected to slow down as competition increases in the market," said a Jones Lang LaSalle Meghraj (JLLM) property report.

In 2007, "Retail activity saw an expansion away from prime high streets to secondary and emerging locations, primarily due to a lack of space and unaffordable asset pricing in prime areas. Also, retailers plan to maximise their profit margins by leasing space at low rentals in secondary areas as well as increase their presence in the city."