Nearly 100 shopping malls are likely to come up by 2012 in seven major cities of the country on expectation of increased demand from retailers, according to a report from property consultant Jones Lang LaSalle (JLL).
Pointing out that the global economic slowdown did impact the retail story 'momentarily', the consultant said the sector has witnessed a rapid adaptation to the ground realities and "is now poised at the right crossroads to take the next giant leap in the coming decade".
According to the report, there are 193 shopping centres are currently operational in Delhi-NCR, Mumbai, Chennai, Pune, Kolkata, Hyderabad and Bangalore.
"Ninety four shopping centres encompassing a total retail space of 37 million sq ft are expected to be operational during the next nine quarters between Q4, 2010 and 2012 across the top seven metropolitan cities of India," it added.
Against this supply, JLL pointed out that 24.9 million sq ft of absorption is forecast during the same period, which will increase the vacancy from 19.9% recorded in Q3, 2010 to 25.4% in 2012.
"A significant portion of the medium-term supply is under advanced stages of construction and has not become operational due to controlled demand from retailers. However, as demand for quality space strengthens, this supply is expected to become operational in medium term," JLL said.
Mumbai and Delhi-NCR, which constitutes 70% of the operational malls, account for only 43% of the new supply that is expected to come up by the end of 2012.
On rentals, the consultant felt that it might not decline further from the current level.
"Rents have found support at current level and there is low expected risk of further downslide. Hence, the corrected rents provide a suitable opportunity for retailers to execute their expansion plans in the region," JLL said.
On account of global economic slowdown, the rental values for retail space fell by 33.5% from the peak recorded in the third quarter of 2008.
JLL said that during 2009 several retailers demanded renegotiation on rentals and preferred revenue sharing models.
"While the terms of revenue sharing have made the landlord accountable for generating footfalls in the mall, it reward them by reducing the risk of near term vacancy and retaining probabilities of better revenues in the future," the report said.