Pall Mall

Oct 21 2013, 03:47 IST
Comments 0
SummarySurge in empty malls is as much a sign of Big Retail’s struggle as it is of developers running the malls badly

More than two decades after organised retailing took off—Shoppers Stop opened its first store in 1991—most chains are struggling to make money. While the high rentals have all along been a drag on the bottom line, the top line has never grown fast enough to leave much of a surplus; this has been true almost across all formats. Which is why retailers from Spencer’s to Pantaloon have been closing down unprofitable stores for several years now. With consumer spends falling, they’re becoming even more cautious, understandably holding back on opening new outlets.

Going by the oversupply of space, mall developers, unfortunately, don’t seem to have anticipated the pace of the scaling back. The abundance of mall space suggests they misread the demand environment completely and nowhere is this overestimation more evident than in Pune where the average vacancy is hitting 27%, a shade lower than the 30% in Ahmedabad.

The average actually masks the much higher 60%-80% vacancy levels in some of the city’s malls raising serious questions about the viability studies done by the developers; the 2,00,000 square feet Nucleus Mall in the Camp area—which saw its anchor tenant Shoppers Stop exit—is 60% empty while the Seasons Mall is half empty. Big brands like Tata’s Croma and Spencer’s have moved out of their respective malls and the Jewel Square Mall—housing brands like French Connection, Forever New and Mango—closed down late last year. What’s worrying is that the large investments made to build these—Seasons was built at a cost of R450 crore—are in jeopardy because even if the economy recovers these projects appear unviable given the extent of the oversupply. Which means bankers could be staring at some really big hits to their real estate loan portfolios.

Ads by Google
Reader´s Comments
| Post a Comment
Please Wait while comments are loading...