Mall executives and property consultants said top-tier malls have raised rentals, especially for categories of retail brands that are drawing more customers.
Many retailers, struggling with competition from e-commerce companies, were dealt a body blow during the lockdowns. Some didn’t survive and vacated space. But with the pandemic receding, offline stores have mounted a comeback, as shoppers throng malls to purchase items such as electronics, cosmetics and apparel that many customers prefer to feel and touch before buying.
“In certain categories like beauty, cosmetics, electronics and fashion, in some good malls, we’ve seen a rental swing of 10-15% higher than 2019-20. But this is in selective categories, brands and malls, and not a trend across the board. In malls in Delhi, Mumbai and Bengaluru, sales have come back very strongly. We’ve seen an uptick in rent numbers," said Pankaj Renjhen, chief operating officer and joint managing director, Anarock Retail.
Well-located malls, he said, could have one of their best years as pent-up demand helps revive business.
DLF Malls said its properties are now commanding a premium. “Rentals are going up by 20%. So if we have a dead-end lease, we’re taking 20% of a premium. I do believe it’s going up because our properties are unique and have gotten stronger during covid. We have signed 130 new leases during the pandemic," said Pushpa Bector, executive director, DLF Retail.
Typically, malls hike their rents by 15% every three years. “This was put on hold for 12-18 months during the covid period. That’s over now," said Mukesh Kumar, managing director and chief executive officer of Quest Properties India Ltd, which operates shopping centres in Kolkata.
Kumar, also chairman of the Shopping Centre Association of India, said all concessions to tenants have been withdrawn.
“New agreements are happening at the normal rate. Whatever is the market rate or whatever it was pre-covid, we are applying that today plus 10% in some cases," he said.
Most brands, he said, are seeing a big comeback, with stronger, well-established brands even asking for bigger spaces. “There’s been growth in terms of revenue for most brands—almost 15-20%, compared with pre-pandemic time. So rentals are on an upswing," he added.
Retail businesses reported a 23% jump in April sales from the pre-pandemic levels of April 2019, suggesting a strong uptick in consumer demand, according to data released by the Retailers Association of India last week. Quick service restaurant chains reported the sharpest recovery with a 45% jump in April sales from the same month in 2019, followed by electronics, consumer appliances, sports goods and apparel retailers.
Little surprise then that real estate has turned pricier. “When we started the offline journey, we actually thought that due to covid, rents are going to be down, and it will be easy to find locations for stores. That’s not been the case. It’s been a struggle. A lot of big brands in the market are still expanding. I think rents have been higher 15-20% as compared to pre-covid," said Sidhant Keshwani, CEO and managing director of women’s ethnic wear brand Libas.
With estimated rental recoveries over 85% of pre-covid levels, the October-December quarter was the best for mall operators since the onset of the pandemic. The third wave of the pandemic this year, however, led to an estimated 20-25% fall in rentals of shopping malls in the January-March quarter, according to estimates by rating agency Icra.
However, business has since rebounded. “We are following the signed leases for tenants who have been there. And for new leases, rentals are per market and mall conditions," said Abhishek Bansal, executive director, Pacific Group, which operates malls in Delhi-NCR.
