Malls are no more magical
From the last two decades, shopping malls have been one of the most enticing destinations for shopping and entertainment. But in the past few months, due to economic slowdown and a bad market scenario, few malls in India have been shutting down or leasing out to corporate offices and banquet halls.
The actual boom for constructing malls started from 2004 since the retail rates prevailed then was around Rs 6,000 per sq ft whereas the residential rates were about half of it. Noticing that the retail outlets offer high margin, developers started coming up with shopping malls all over. But later, retailers realised that it was not profitable to book retail spaces at such high rates, and then started to negotiate with the builders for lower rates, after which the segment started slowing down. Then due to economic slowdown in 2008, the mall business decreased further, leading to shutting down of many retail stores.
Factors such as economic slowdown, low footfalls-to-sales conversion, falling rupee, ineffective revenue models, lack of special-purpose malls, etc. have together affected the magic of malls.
Malls closing down
Many mall owners across the country are failing to justify the rents they charge tenants for the mall spaces, due to which, the retailers are closing down their outlets in malls. The retailers are not seeing good sales as buyers are not spending much eagerly like before, due to slowdown and high costs. The sales are dropping while the rents are high; this has become the major challenge being faced by many retailers.
For instance, Star City Mall in Mayur Vihar, Delhi has been opted to be leased out to corporate offices and banquet halls. The Full Stop Mall on Palm Beach Road, the Marine Drive of Navi Mumbai has been witnessing brands backing off from the mall. While malls in Mumbai like Milan Mall at Santacruz West have closed down, City Mall in Andheri and Palm Beach Galleria in Navi Mumbai are striving to operate. Gold City Mall in Vashi, Navi Mumbai was turned into an office space as it failed to attract retailers for long. HDIL’s Dreams Mall at Bhandup is full of commercial offices while Raghuleela Mall has converted half the shopping area into an IT park.
Slowdown hits malls
While about 120 new malls became operational since 2011, around 30-40 of existing ones had closed down. According to retail experts, poor sales model and management of the malls were the key reasons for the failure of the malls. The mall failure was witnessed the most in Ahmedabad while Delhi-NCR, Chennai and Mumbai too faced similar trend.
Oversupply of malls
While there is a requirement of five malls in a city, there stand over twenty. This is the present scenario of mall supply in India.
It is estimated that by 2015, around 600 malls will be operational across the nation, while so far only 150 are functional. Some malls are non-functional while some have been converted into official, commercial and residential spaces.
Falling footfalls: Declining sales
The expected sales from the daily footfalls observed in and across various malls have been depleting in the face of the economic meltdown. Though malls which are strategically located in prime city centers are still witnessing a boom, those in faraway places from cities or those located in ‘dull’ commercial zones are seeing decreasing footfalls.
In the prevalent market trend, the younger generation people find it interesting to loiter around malls though many are not actually looking to buy, which means the footfalls-to-sales conversion ratio is decreasing gradually. However, mall management demands smarter strategies to get a higher footfalls-to-sales conversion ratio.
New mall launches slowed down
Because of the current market scenario, the developers who had planned to launch new malls are forced to think twice. Some of the developers have decided to postpone the launches while some have decided to quit the idea. According to sources, many mall launches have been delayed in Chennai and Kolkata. Launch of nearly six malls have been delayed in Chennai. The developers have decided to launch them after two or more years.
Mixed-use formats gain importance
On the flip side, malls which have a good mix of retail outlets along with eateries and groceries, etc. which offer better shopping experience are still functioning good. Many developers have been choosing mixed-use development strategy to survive long during such sluggish phases. The mixed-use formats with combinations like commercial-retail, residential-commercial, residential-retail, hospitality-retail, residential-commercial-hospitality, etc. also help in fund-flow to developers.
Owners offer freebies
Some mall-owners have even offered the provisions such as discounts on rents or free tenancy to retailers for a few months, with maintenance charges, hoping that the nation’s economy would make a better shift by then.
http://www.commonfloor.com/mayur-vihar-delhi/rvp-51bc87bfe90fa
