The retail sector in Kolkata has adopted a wait and watch situation with retailers still wary of what lies ahead. What started as a big set-back for the retail industry in end-2008 with several malls and retailers shutting shop, the year 2009 was particularly bad for the industry with several cancellations of booked spaces and deferment of sanctioned projects.
Across the major cities, rentals hardly saw any upward movement since the markets crashed late 2008. Mall as well as main street rentals (except a few locations) continued to remain below the average rental rates of the fourth quarter of 2008.
Analyst reports point out that of the 5.7 million sq ft of fresh mall supply in 2009, the largest share of the supply — 1.8 million sq ft came up in Mumbai, followed by Hyderabad (1.1 million sq ft) and the NCR (0.9 million sq ft). Kolkata saw fresh supply of 0.7 million sq ft.
Harshvardhan Neotia, managing director, Bengal Ambuja Housing Development, said, “2009 was quite dismal with several cancellations of booked spaces. However, after July, things changed for the better and as we enter 2010 we can see slow and steady signs of recovery. But we are still far away from the euphoria of 2007-08.”
In 2009, Neotia opened City Centre II in Rajarhat, spread over 3.5 lakh sq ft. “Around 95 per cent of the mall has been leased out. We have around 60-70 shops operating already while 40-50 are waiting to start,” added Neotia.
At City Centre II, rentals are between Rs 50 to Rs 150 per sq ft, depending on the size and the area occupied by the retailer. Neotia’s estimates that rentals are down by 10-12 per cent since 2008.
Rahul Saraf, managing director of Forum Projects, said that 2010 will see inauguration of the ‘Courtyard’ project. It would have 1.65 lakh sq ft dedicated to creation of parking space for Forum on Elgin Road, and 45,000 sq ft for new retailers.
Shubhranshu Pani, managing director - retail services, Jones Lang LaSalle Meghraj, is of the opinion that 2010 will not see much of a change in Kolkata's retail outlook because most major projects that are in the pipeline will only see light of day in 2011. “We will see ongoing consolidation of existing developments. Developers are likely to see more success in finding occupants, and we will possibly see some recovery from the ill-effects of the oversupply situation and resultant lack of interest by retailers. The improving economy has not had as much impact on the conservative Kolkata shoppers' sentiments as it has in some of the larger cities.”
Also, though Kolkata is the gateway of the East, it has not been seen as a city of prime importance by national retailers, Pani said. In terms of business volumes, the economic adjustments of 2009 did not have much of an impact on Kolkata. Due to restricted supply in terms of retail projects, there was less pressure on developers in Kolkata to offer the revenue sharing or minimum guarantee model, despite the fact that retailers did campaign for it.
“The Merlin Group launched the Acropolis Mall on RB Connector, but there were no other major project launches apart from this,” Pani added.
However, retailers in Kolkata point out that this slowdown in mall construction need not be viewed as a negative since the slowdown has helped in maintaining a good supply demand equation, especially for markets which were staring at an oversupply situation.
