The Retail #RealEstateMarket, in India has developed steadily over the past decade as the quality of stock improves and local developers realize the importance of Modern #ShoppingCenter Management, such as zoning, branding, marketing and promotions, as well as the all-important strategy of following a pure lease model instead of the earlier practice of divesting units to individual investors… This evolution has led to the creation of a number of high quality shopping mall developments in the major cities of Delhi, Mumbai and Bangalore which have set the benchmark for future retail schemes..
The adoption of rental models (such as revenue-sharing) has provided support to retailers in India seeking to establish themselves in the market, and has also enabled shopping mall developers to attract international and domestic retailers to set up flagship stores…!!
Retail Real Estate Supply: 20072014 (P) : CBRE Research
In the run-up to the global financial crisis of 2008, around 300 new shopping centers were scheduled to be completed in key cities across India. This pipeline was decimated by the credit crunch, however, leading to a shortage of modern retail estate stock. In 2011, the development pipeline sprung back to life as construction work resumed on a number of projects. At the end of 2013, the supply of modern retail space across the country’s seven largest cities stood at about 54 million sq. ft. Around 70% of this space was in New Delhi, Mumbai and Bangalore…
Leading cities including New Delhi, Mumbai, Bangalore, Pune, Chennai, Hyderabad and Kolkata have all seen a steady rise in retailer enquiries in recent years. Shopping mall rents in prime sub-markets of New Delhi have witnessed growth, while values in high streets have increased in Mumbai, Bangalore and Pune. Transaction activity as well as sizes are expected to increase on the back of an increase in consumer spending and expanding mid-income purchasing power. In Mumbai, premium international brands continue to focus on affluent southern parts of the city; but the lack of quality retail space remains a major challenge to growth. Despite the scarcity of quality supply, most retail chains continue to launch their first Indian store in Mumbai and New Delhi usually in a street shop or mall before expanding elsewhere. Even as domestic big box retailers gradually expand to tier II locations, the major foreign brands remain primarily focused on tier I cities.
New supply is steadily coming on stream in the NCR, and will provide opportunities for retailers to operate in an organized retail environment. High street formats continue to dominate the retail landscape, while most luxury retailers prefer to operate from five star hotels and premium malls. Bangalore has a large quantum of organized retail supply in the pipeline which will provide retailers with further opportunities for expansion..
Amongst #RetailCategories, international #F&B outlets have continued to expand in 2013 both at the fast food and fine dining ends of the market. Luxury retailers remain focused on tier I locations but continue to refine their strategy and product offering for the Indian market, which in selected cases has seen them consolidate and reduce the size of some stores. Fashion and apparel remains a high growth sector and major apparel brands from the US and Europe continue to seek opportunities to enter or expand in major markets across the country, including certain tier II locations…
Lack of Quality Retail Real Estate Impedes Market Entry by Global Retail Giants:
There is approximately 54 million sq. ft. of retail stock in India spread across leading metropolitan cities and their surrounding regions. Even after the steady growth in supply of organized retail space over the past ten years, however, retailers of the size of Ikea often find it challenging to secure space in a prime mall in any of these cities. This is essentially because the majority of retail space developed in India to date lags behind global standards, and does not provide the quality, ambience, design, services or post-construction maintenance that global retailers are accustomed to. This is one reason why out of the more than 300 malls in the country, only a handful can be described as successful retail projects. These include Select CityWalk, DLF Emporio and DLF Promenade in South Delhi, Ambience Mall in Gurgaon, Inorbit and High Street Phoenix in Mumbai, and Forum in Bangalore. The total size of these successful malls is just 45 million sq. ft. About 31% of the upcoming supply addition is expected to be centered in smaller cities such as Pune, Chennai, Hyderabad and Kolkata over 2014, with approximately 1011 million sq. ft. of organized retail supply lined up across leading cities..
According to research estimates, India will require an annual supply of about 20 million sq. ft. of organized retail space in order to sustain growth in the sector. This will necessitate a concerted effort from developers to construct successful shopping centers to global standards. However, domestic developers are still in the middle of a steep learning curve with respect to undertaking shopping center development. Many developers view shopping centers simply as another asset class, no different from building offices or housing units. In fact, shopping centers have an organic and perpetually changing quality that needs to be planned, developed, owned and managed as a single property..
It is in this context that the role of global #RetailChains, such as Tesco and Ikea will be crucial….These retailers possess extensive experience of running successful retail stores and properties in markets like the US, China, Europe, Middle East and South East Asia, with local partners to create successful shopping formats..
By utilizing this knowledge they will be able to help usher in a revolution in the development of organized retail real estate in India..