The second wave of Covid-19 has pushed India’s shopping malls into an abyss of financial hardships that will be hard for many such businesses to recover from.
Shopping malls across India have remained shut or operated partially for most of the last 18 months. Now, even though they are permitted to reopen in some states, shoppers are not very keen on visiting these establishments as they prefer open-air areas to ensure Covid safety.
“Just before the second Covid-19 wave, at least 80% of the footfalls in malls had returned but later due to localised lockdowns malls had to shut down across the country. And even when they are being gradually opened post the second wave, social distancing norms continue to dent footfalls,” said Anuj Puri, chairman of real estate consultancy, ANAROCK Property Consultants.
Given the uncertainty around fresh waves of Covid-19, Puri said the recovery in the retail sector will be “full of challenges.”
The impact of Covid-19 on malls in India
In just April and May—when the second wave of Covid-19 was at its peak—shopping centres and malls in India had incurred losses of around Rs3,000 crore ($451 million). The overall loss since the last year is much wider and increasing because retail establishments in several states have continued to remain shut due to localised lockdowns.
For instance, in Maharashtra, malls have clocked a loss of around Rs15,000 crore so far, as per the Shopping Centres Association of India (SCAI), a non-profit organisation for developing shopping centres across India. The state has over 75 malls.
Now, what will make recovery for malls harder is the fact that retailers are becoming more inclined towards high streets given that such areas are open-air and considered safer in the context of Covid-19. High streets in some cities also offer rentals that are much cheaper than inside malls.
Between April 2020 and May 2021, some of the leading retail brands closed over 120 lease deals at prominent high street markets across India, as per ANAROCK’s estimates.
“Social distancing norms and the fear to be within a closed environment among people have also acted as drawbacks for the malls. No wonder, in a calibrated move post the pandemic, we saw various leading retail brands across categories eye prominent high street markets over malls for expansion across India,” Puri of ANAROCK said.
As of now, there is nothing that mall owners can do to save themselves, experts said. “Whenever there is a rise in Covid-19 cases followed by lockdowns, the footfall in malls gets reduced by over 25%. Proportionately sales are also impacted. However, one thing that becomes a must for malls and shopping centres is to reduce the leverage on their assets, that is they should reduce getting loans,” suggested Shubhranshu Pani, managing director of retail services at a real estate firm JLL India.
The loss of business has also cost jobs. Until June, over 100,000 jobs in shopping malls had been lost due to the Covid-induced shut down in the southern state of Karnataka alone.
“In the peak lockdown period, the mall industry had to lay off around 50% of its staff, since we do not have financial means to continue. The salary of existing employees also had to be reduced. But now as the cases are coming down, we are re-hiring people,” Mukesh Kumar, CEO of Infiniti Mall, Mumbai, and chairman of the board at SCAI, told Quartz.
So far, only 20% of the staff has been rehired on “at-par” salary levels since the mall operators are still struggling, he said.
As per the Retailers Association of India, a non-profit organisation, each mall in India employs around 4,500 people. India has more than 250 malls across the country, according to Statista, a German data and market research firm.
What’s next for shopping malls in India amid Covid
Experts believe mall owners should re-strategise their policies and come up with new solutions to beat the pandemic-related financial blues.
For instance, Sanya Aeren, chief advisor at real estate firm Berkshire Hathaway HomeServices Orenda India thinks that delivering a hybrid experience of virtual and real shopping setup can put mall owners ahead of their competitors. “Strategic planning for attracting a huge demographic of visitors and buyers is yet another way of populating their business,” she added.
Another means to earn money for mall operators is to tweak their business model a little, experts say. For instance, a large chunk of revenue now comes from restaurants and multiplexes inside a shopping mall but since scepticism around stepping in close spaces is growing and multiplexes haven’t started opening up in full capacity, mall operators could look towards investing in co-working spaces more.
“An increasing number of developers and investors are looking at monetising their vacant retail spaces in shopping malls and realise that co-working spaces fit perfectly as the ideal solution. They both add value to each other as co-working spaces start bringing instant revenue for the landlord and footfall to malls which is overall beneficial for the mall management and other retailers operating from the mall,” explained Nakul Mathur, managing director of Avanta India, a co-working space firm.