Bollywood stars Tiger Shroff and Jacqueline Fernandez would have rarely travelled so far from the heart of Mumbai.
But on Aug.04, they were spotted in Dombivili, a town nearly 50 kilometres northeast of India’s financial capital.
The duo was roped in to launch a six-screen multiplex, the newest from India’s top cinema chain PVR Cinemas. The property is located inside Xperia Mall which, also, had a soft launch on the same day.
The 500,000-sq. ft. mall is a part of Palava, the “smart-city” being developed by the Lodha group, one of India’s biggest realty firms. Xperia has created quite a buzz in Dombivili as it will cater to not just the 25,000 families living in Palava but also to other residents of the neighbourhood.
With all the usual names such as McDonald’s, Subway, Big Bazaar, and Global Desi having booked a perch there, Xperia is only one of the many malls launched in the recent past across India.
After nearly three years of anaemic business, shopping centres have been making a comeback as the growing presence of foreign retailers, coupled with the ruling Bharatiya Janata Party government’s push to keep markets open 24×7, perks up demand and boosts retail market sentiment.
Since April 2015, four new malls, with a cumulative area of over three million sq ft, have been launched in major Indian cities. In April, the Delhi suburb Noida saw the opening of the 1.8 million-sq ft DLF Mall of India. Gardens Galleria opened late last year in the same place. Bengaluru saw the launch of the 600,000-sq. ft. VR Mall in early 2016 and Kolkata’s Acropolis Mall was inaugurated in September 2015.
All this suggests a mild recovery in the supply of retail space, real-estate consultancy Jones Lang LaSalle said in a note dated Aug. 08.
“This time around, malls are experiencing a healthy rate of pre-commitments (locking in on spaces before the mall opens) with more retailers looking to expand,” Anuj Puri, chairman and country head, JLL India, said in the note. “New completions, especially the superior (or Grade A) malls, have seen good absorption and overall vacancy is down across major cities in 2015. This points to a revival of interest in malls,” Puri said.
Demand is shooting up as foreign brands bet on India’s $600-billion retail market. What’s more, after nearly two frenetic years, investor interest in e-commerce has plateaued, giving offline retailers a reason to step it up with new store additions.
Then and now
Between 2008 and 2010, following the global financial crisis, developers deferred or even scrapped new retail projects as consumer and retailer sentiment took a hit. The year 2011 saw an uptick, with the country’s mall inventory peaking at 14 million sq. ft.
However, the numbers were down again by 2014 when the housing market plummeted, prompting real-estate companies to invest less in big projects. That year, the net addition of mall space was just two million sq. feet.
But things are changing today as companies look to diversify their portfolios. With the housing market in a slump—and expected to remain that way for a while—malls have become the prime alternatives.
So, K. Raheja Corp, owner of the Inorbit brand of malls, plans to invest about Rs.2,500 crore to expand its retail portfolio over the next four to five years, according to a report in the Mint newspaper.
Earlier this year, two large private equity (PE) deals led by Singapore-based GIC and by Blackstone Group signalled a renewed interest in malls. In May, total PE investment in Indian retail reality stood at $149 million, beating industry estimates, JLL said in a note dated July 6.
To be sure, supply levels aren’t back to what they were in 2011. But with more foreign retailers, such as Swedish fast-fashion chain H&M, willing to invest in new stores across India, these developers are betting that demand for retail spaces will go up. And others, such as Bengaluru-based Arvind Retail, which manages foreign labels such as Tommy Hilfiger, U.S Polo, GAP, and The Children’s Place in India, have revised estimates to open even more stores.
As more Indians go shopping over the next decade, developers are hoping they’ll hit the nearest mall first.