Mall executives and property consultants said the top tier malls have increased rentals, especially for categories of retail brands that are attracting more customers.
Many retailers, battling competition from e-commerce companies, suffered a major setback during the lockdown. Some did not survive and they vacated the place. But with the pandemic easing, offline stores have made a comeback, as shoppers flock to malls to buy items like electronics, cosmetics and apparel, which many customers like to feel and touch before buying.
“In some good malls, in some categories like beauty, cosmetics, electronics and fashion, we have seen a swing of 10-15% higher rentals as compared to 2019-20. But this is in select categories, brands and malls, not a trend across the board. There has been a strong return in sales in malls in Delhi, Mumbai and Bangalore. “We have seen an increase in the number of rentals,” said Pankaj Renzen, chief operating officer and joint managing director, Anarock Retail.
The well-located mall, he said, could be one of his best years as demand surges help revive the business.
DLF Malls said its properties are now at a premium. “Fare is increasing by 20%. So if we have a dead-end lease, we are taking 20% of the premium. I believe it is growing as our qualities are unique and have been strengthened during COVID. We have signed 130 new leases during the pandemic,” said Pushpa Bector, executive director, DLF Retail.
Usually malls increase their rent by 15% every three years. “During the Covid period it was put on hold for 12-18 months. It’s over now,” said Mukesh Kumar, managing director and chief executive officer of Quest Properties India Ltd, which operates shopping centers in Kolkata.
Kumar, president of the Shopping Center Association of India, said all concessions to tenants have been withdrawn.
“New agreements are happening at a normal rate. Whatever is the market rate or whatever it was pre-Covid, we are implementing more than 10% in some cases today,” he said.
That said, most brands are seeing a big comeback, with strong, well-established brands seeking an even bigger space. “There has been an increase in terms of revenue for most brands – around 15-20%, compared to pre-pandemic times. That’s why the rent is going up.”
Retail businesses reported a 23% jump in April sales from the pre-pandemic levels of April 2019, according to data released last week by the Retailers Association of India, suggesting a strong growth in consumer demand. Quick service restaurant chains reported the sharpest recovery in 2019 with a 45% jump in April sales from the same month, followed by electronics, consumer equipment, sporting goods and apparel retailers.
Little wonder, then, that real estate has become valuable. “When we started offline travel, we really thought that due to Covid, the fares are going to come down, and it will be easier to find places for shops. It did not happen. It’s been a struggle. A lot of big brands are still expanding in the market. I think fares have been 15-20% higher than pre-Covid,” said Siddhant Keshwani, CEO and managing director of women’s ethnic wear brand Libas.
The October-December quarter was the best for mall operators since the start of the pandemic, with estimated rental recovery of over 85% of pre-Covid levels. The third wave of the pandemic this year, however, saw an estimated 20-25% drop in shopping mall rentals in the January-March quarter, according to estimates by rating agency Icra.
However, business has boomed since then. “We are following the leases signed for the tenants living there. And for new leases, the rent is as per the market and mall conditions,” said Abhishek Bansal, executive director, Prashant Group, which operates malls in Delhi-NCR.