New Delhi mall vacancy inched up 6bps to 16.1% in Q4 2020

With most rental waivers coming to an end, developers and landlords mull over a way forward.

Retail activity in New Delhi has maintained a steady pace whilst continued retailer churn is expected to leverage market conditions. According to Cushman & Wakefield, the temporary disruption caused by COVID-19 brought opportunities for several retailers in both malls and main streets who relocated to more favorable locations/shopfronts in the same project/main streets.

The quarter recorded new store openings of around 0.23 msf across malls with apparel and accessories, particularly athleisure, emerging as the prominent retail categories. Levi’s, Onitsuka Tiger, Decathlon, Nike, Fabindia, Woodland was among the new stores that opened during the quarter. Italian lifestyle brand Carpisa Ventures marked its entry in the country with a store in Mall of India, Noida.

Here’s more from Cushman & Wakefield:

Main streets saw new store openings of close to 0.03 msf with various instances of retailers relocating to better shopfronts in the main street. Khan market saw transactions by Manan Design, Ruwaa, Karigari, Rule the Rolls and Café Turtle. However, landlords in the city’s popular market are now becoming cautious against leasing at discounted rentals, in anticipation of a recovery in the coming quarters, despite spaces still being available here. Mall footfalls remained limited and need based, though the festive period of Diwali saw a welcome response with weekend footfalls for some prominent malls in the city reaching upto 70% of the pre-COVID levels with conversion rates seeing an 8-10% improvement.

The quarter also saw re-opening of cinemas, though lack of fresh content and stringent operating protocols are challenges on the road to recovery for this segment. In anticipation of low occupancy, multiplex operators restarted with limited number of movie screenings in auditoriums to save running costs. Hypermarkets, electronics, gym equipment stores, athleisure wear retailers and take-away and home delivery in F&B continued to outperform other segments during the year as consumer purchases were higher for these products. Store resizing, retailer churn and acquisition of strategic spaces by select large retailers largely defined the retail demand for Delhi NCR in 2020.

Mall vacancy increased during the quarter; no new supply addition

No new mall supply was added to Delhi NCR during the quarter. Mall vacancy increased marginally by 6 bps q-o-q to 16.1% due to some spaces being vacated along with downsizing by a few retailers. Behavioral shift towards online purchases and the challenging business conditions are compelling some retailers to re-align with new strategies like ‘Phygital’, which integrates online and offline models and is highly relevant in the current times. Outdoor dining with permissions and upon payment of a fee is another change in the operational plans for some F&B retailers, particularly in South Delhi, and is likely to augur well for this segment that has been hit hard by the pandemic.

Rental waivers coming to an end; developers and landlords to decide on the way forward

Renegotiations, partial rent waivers and revenue sharing arrangements on a case-to-case basis helped retailers and developers navigate through 2020 which incurred a severe blow on revenues for retailers amidst tight liquidity position for developers. Many of these waivers, which are likely to come to an end post Q4 20 / Q1 21, may be revisited next year with some modifications and rollback depending on the improvement in business and consumer sentiments. The evolving COVID situation along with the rollout of the vaccine will be the key determinants of business activity, footfalls and demand for physical retail and in turn the gradual shift towards pre-COVID market rents, a call that is yet to be taken by developers.