Some mall owners in Kolkata have started rolling back rentals by 10 - 25 per cent, while the national trend is 30-40 per cent decline in rentals, in an attempt to handhold bleeding retailers.
Other mall owners are getting into revenue-sharing arrangement with retailers.
The hardest hit are retailers which set up shop outside central Kolkata in the hope of lower rentals, but due to recession, sales and footfalls have dipped so much so that breakeven time has extended by at least two years.
South City Mall rentals are now 10 to 25 per cent lower following a petition by a group of around 20 shop-owners.
According to Sanjeev Mehra, the vice-president (mall operations) of South City Mall, “We have reduced rents for our smaller, non-anchor stores for a temporary period.”
According to Rahul Saraf, MD of Forum mall, “Forum is one of the very few malls in Kolkata where sales have not dipped significantly because of its locational advantage and retail mix. So we have not felt the need to roll back our rentals although we are strongly negotiating revenue sharing model in order to help retailers tide over the recession.”
When Forum opened six years ago, rentals were around Rs 100 per sq ft which touched Rs 325 per sq ft as on January 2008.
According to Bappaditya Basu, VP and associate director - retail, Jones Lang Laselle Meghraj, for most mall developers in Kolkata it is a 'wait-and-watch' situation right now.
"Unlike big developers like DLF and Unitech, who have exposed their slowdown, most mall developers in Kolkata still have enough money to sustain themselves, and therefore not many have taken a call on reducing rentals drastically. Nationally, retail rentals have fallen by 30-40 per cent," Basu said.
“Kolkata will see slower retail activities in 2009 with only the existing players announcing activities or expansion. During the slowdown, most big mall developers and retailers are likely to concentrate on markets, like Mumbai and Delhi, where return on investment is faster,” Basu added.
Another interesting trend in retail for 2009 would be conversion of shopping malls in commercial spaces, in case adequate retailers do not book space in time, pointed out Basu.
Avani-developed mall in central Kolkata as well as ‘Haute Street’ on Eastern Metropolitan Bypass, are being converted into commercial spaces for office lease. These were earlier developed as shopping malls.
“However, the catch is, even for commercial spaces, there are not enough takers, because Kolkata, so far has the image of an MNC-unfriendly state with regular strikes, and other political issues," Basu said.
Commercial real estate space absorption in 2008 across major Indian cities witnessed 6 per cent year-on-year growth at 36.70 million sq ft but demand for office space is expected to remain subdued in 2009 due to decline in pre-lease commitments, according to a recent Cushman & Wakefield year-end report.
Pre-lease commitments of 2007 accounted for 30 per cent of the total space absorbed in 2008, the report said. Office space supply in 2008 was at 59.80 million sq ft, up 34 per cent on year.
The absorption appears to be higher than last year on account of the pre-lease commitments that were signed last year. In cities like Mumbai, National Capital Region, Pune and Bangalore, pre-commitments have a large part to play in the supply-absorption dynamics. This year, however, the fresh pre-commitments have declined as compared to last year and the impact of this will be felt in the space absorption trends during 2009.
Among the cities, Bangalore witnessed the highest absorption in the country with 10.40 million sq ft, while Mumbai recorded the highest growth over last year, close to five times the absorption recorded in 2007, the report said.
Bangalore and Mumbai were the only two cities that recorded an increase in absorption from 2007. In Chennai, peripheral region vacancies went up over 40 per cent.
