It's a paradox of sorts. The retail real estate market in Bangalore is apparently stable; the size of the market may have grown over last year, but vacancy rates have not dipped enough to make an impact. Unoccupied space is growing proportionately.
According to real estate consultancy firm Cushman & Wakefield, 11.68 cent of the floorspace in malls of Bangalore still lies vacant (as of March 31, 2013). Things have improved only by a wafer-thin margin since December 31, 2012 when the vacancy rate stood at 12.72 per cent. Things, of course, are far worse in Ahmedabad and Pune where a third and a fourth of the mall floorspace is lying unoccupied. Hyderabad has a mall vacancy rate of only 0.45 per cent as of now.
The city did not see any new mall supply in the first quarter of this year. However, demand from apparel retailers was high, who took advantage of the expiry of leases in established malls located in Kormangala and Magrath Road, as well as existing vacancies in other malls. This resulted in the overall vacancy level dipping by 1.0 per cent.
If any mall space has been badly hit is Mysore Road where rental rates have fallen by 10 per cent. Jaideep Wahi, Director of Retail Services with Cushman & Wakefield, explained, “Mysore Road is among the popular retail destinations in Bangalore and is a key benchmark for demand for retail space. However, the ongoing road widening activity along with weak residential catchment and the resulting lower footfalls have caused this drop in the rentals. Additionally options as well as footfalls in malls in Bangalore has been providing a more lucrative alternative to main streets in Bangalore leading to more and more new entrants to choose shopping centres over main streets."
Among the main streets, the one that has seen a phenomenal drop in the average rentals is Brigade Road, where prices have plummeted by as much as 18 per cent. A real estate analyst ascribed this to the traffic and civic mess that the area has become.
Main streets were not seen to feature high on retailers’ preference as robust demand, primarily from apparel retailers, was witnessed in the established mall micro markets of Kormangala and Magrath Road. Malls in these two locations which have limited vacancy are likely to fetch higher rentals while other malls are expected to hold on to their current rentals, according to Cushman & Wakefield.
While most main street rentals remained stable in the first quarter of this year, the trend is expected to continue in the next quarter barring Marathahalli Junction, which may witness a slight drop in rentals due to infrastructural activities. Brands are also exploring options in nearby locations like Outer Ring Road.
Meanwhile, the location-location-location catchphrase still holds.
