MUMBAI: The failure of retailers to exploit the fall in real estate prices triggered by the economic slowdown, has led to a further correction in property prices across major metros of India, real estate consultant, Cushman & Wakefield (C&W), has said in a report.
"Most retail micro-markets, both malls as well as main streets saw a further correction in rental values. Mumbai saw the sharpest decline in rental values for both malls (Goregaon -42 per cent) and main streets (Colaba Causeway38 per cent)," C&W said.
Mumbai witnessed the second-highest mall supply with an addition of 3,05,000 sq ft in Q1 09. However, it also recorded the highest mall rental correction, the report said.
Receding user-demand has severely curtailed uptake of space across most micro-markets, the report said.
"The trend of further correction is likely to continue in short-to-medium-time frame leading to further correction in both mall rentals as well as high-street rentals," C&W India Retail Services, Executive Director, Rajneesh Mahajan, said.
Delhi's National Capital Region (NCR) witnessed an up to 25 per cent decline in rental values, the report said.
"Increase in malls has impacted main street rental values, which have seen a downward trend especially in areas around South Delhi like Greater Kailash I M-Block market recording a correction of 25 per cent," C&W said.
While the main streets of Bangalore saw much wider corrections in the range of 6-28 per cent, Hyderabad recorded one of the highest mall rental corrections between 25 per cent to 29 per cent.
Kolkata saw mall rental values shrink by 12-25 per cent due to delays in mall projects, while those in central Chennai were pulled down by 8 per cent, C&W said.
It noted that only 1.4-million sq ft of fresh mall supply was added in the first quarter of 2009, mainly in Mumbai and NCR and five other major cities.
The fresh supply was much below initial expectation largely due to the slowdown in uptake of space by retailers, which led developers to reduce the speed of construction in already-underway projects, it said.
"Estimated mall supply by end-2009 is calculated to be 17.66-million sq ft, approximately 11-million sq ft of the same has been carried forward from 2008," C&W said.
Other developers, who are yet to begin construction of previously announced projects, may be reconsidering their retail mall plans, the report said.
"Most retailers are now renegotiating their rental commitments as per the actual business potential in the mall, thereby exerting downward pressure on the rental values," Mahajan said.
"Many developers have now begun to support retailers by reducing the fixed occupancy cost, as well as offering revenue-sharing opportunity with retailers to promote increase in occupancy," he added.
Source:The Economic Times