Bengaluru: As many as 26 malls are scheduled to become operational this year in what will be the highest supply of shopping space in more than five years in the country.
The southern cities of Hyderabad, Chennai and Bengaluru will see the largest chunk of the total of 10.86 million sq. ft of shopping space. Eight new malls covering 2.6 million sq. ft will open in Hyderabad after a long lull, while five each will begin operations in Bengaluru (2 million sq. ft) and Chennai (2.5 million sq. ft), according to estimates by property advisory Cushman & Wakefield.
Retail real estate has seen a return of investor interest in 2016 as demand outgrew fresh supply and the e-commerce euphoria waned. That momentum is expected to help growth this year, even as residential sales and launches remain subdued.
“Money has started to flow back into the retail sector, aided by factors like relaxation of FDI (foreign direct investment) regulations,” said Anshul Jain, managing director, India, Cushman & Wakefield.
“Shopping malls are a complex asset class and developers who made the first set of malls faltered with the design and operations. Today, there is significantly better understanding of retail malls by developers and investors,” Jain said.
Among the malls scheduled to open in 2017, the L&T Seawoods mall in Navi Mumbai and Virtuous Retail mall in Chennai are the largest. In 2016, Blackstone Group LP agreed to buy 1 million sq. ft of retail space in L&T Realty Ltd’s Seawoods project in Navi Mumbai for Rs1,450 crore. Xander Group Inc.’s retail development arm Virtuous Retail is building the 1 million sq. ft mall in Chennai.
To be sure, some of these malls have been delayed and their operations deferred to this year. Yet, in terms of supply, 2017 will be an important year in India’s retail real estate story, backed by the supply and the investments it is expected to attract.
“While demand is very strong, supply continues to be a constraint. It will take another 3-5 years for more supply to come in across cities,” said Pankaj Renjhen, managing director-retail services, JLL India.
Strong investor interest is evident as profitable exit routes exist in good quality shopping malls, Renjhen said.
A number of developers such as Mumbai-based K. Raheja Corp. and Phoenix Mills Ltd, Delhi-based DLF Ltd and Bengaluru’s Prestige Estates Projects Ltd are on an expansion spree, building new malls or buying out under-construction or operational ones, while global investors such as Blackstone Group, Xander Group Inc. and GIC Pte Ltd are also looking to expand their investment portfolios in the retail space.
Prestige Estates, for instance has two malls lined up for opening this year—a 3.65 lakh sq. ft mall in Mysore and a 6.5 lakh sq. ft one in Bengaluru.
“All our malls have performed well last year, except the one in Mangalore. The impact of demonetization was felt for 2-3 weeks after which business has picked up,” said Suresh Sunagaravelu, executive director retail, hospitality and new business at Prestige Estates Projects.
Sunagaravelu said Prestige plans to position its Shantiniketan mall in Bengaluru a bit differently, more as a community centre with a lot of open space, as there are already quite a few malls in the Whitefield micro-market.
“Mysore is a challenging market, and we are building the largest mall there and plan to bring in some international brands as well,” he said.