As retailers battle with a slowing sales and declining growth in 2012, they are approaching real estate developers to renegotiate rents.
Industry experts say the retailers are bargaining for rents to be lowered by anywhere between 10% and 30%.
“There is a concern among certain retailers and they wish to renegotiate their rents,” said Gayatri Ruia, development director, Palladium of Phoenix Mill, a BSE-listed company.
Phoenix Mill charges a rent anywhere between Rs 300 and Rs 600 per sq ft at their Lower Parel mall in Central Mumbai and Rs 100-300 per sq ft for the Kurla mall.
“There is a downward pressure on rents and real estate developers may directly reduce rents or work out some revenue sharing model with them,” said Ashwin Puri, CEO, Pioneer Property Zone, a retail management company.
“We have been approached by a prominent retailer, who wishes to reduce the rent,” said Vikas Oberoi, chairman, Oberoi realty that has a mall in Goregaon in North Mumbai.
“Many retailers in 2012 are stuck with unsold stock from last quarter of 2011 and this will spawn a lot of earlier-than-usual sales, with a definite impact on profit margins. We expect various cost-saving measures by retailers to kick in from April onwards,” said Shubhranshu Pani, MD, Retail Services, Jones Lang LaSalle India.
The rents are under pressure also because the supply of malls and commercial property continues to rise and retailers become more cost conscious. “Retailers like us are increasingly opting out of the mall environment where the average rentals are higher. The challenge for us is to spot locations where the average rental is as low as Rs 200 per sq ft,” said VD Wadhwa, MD, Timex Group.