Future of Destination Points in India

The onset of destination points is still in the nascent stage but has tremendous scope for growth over the years. The government’s five year tax relief for opening shopping malls and multiplexes will boost this trend to a great extent.

The number of shopping malls mushrooming across the country's landscape may have made you wonder where they will find so many shoppers and tenants. The fact is the mall culture is still in nascent stages in the country when compared to the developed and other developing countries.

In the last couple of quarters, retailers across India have resized stores, renegotiated rentals and exited unviable locations. Professional developers on their part saw the need to improvise in order to take their unique offerings closer to their consumers. The right retail mix, revenue sharing arrangements, professional CRM, collaborative marketing initiatives and wise zoning choices combined together to distinguish the successful destination points from among the mass of shopping malls.

India still has very few super malls, with at least 11.2 lakh sq. ft. in size, while the US had 50 of them and even South Africa had 21 way back in 2005, while Australia has 75 regional malls besides 15 super malls.

According to a study done by Asipac, a Bangalore-based real estate development consultancy, only the country's largest 12 malls qualify as regional malls (5-11.2 lakh sq ft), AlphaOne, Amritsar is ranked as the 9th Largest Mall in India besides being listed among the Top 25 Best Malls of India in Retailer Magazine and as per a survey powered by Franchise India Property.

The term ‘window shopping’ was coined due to the huge spur in shopping malls and the notion that it is made up of expensive stores. With the concept of ‘one-stop-shop’ coupled with entertainment options and comfortable shopping experience hoteliers, retailers and brands grabbed this opportunity with both hands. Even individual retailers found shopping malls a beneficiary prospect. All this combined has taken the idea of shopping malls to the next level of being destination points, what with shopping, food, entertainment, professional CRM and hospitality all coming together to provide the perfect outing for families, groups and individuals.

On the other hand, of the 200-odd malls that have mushroomed in the last five years, a majority are grappling with high vacancies and low footfalls. Some have shut shop and others are converting themselves into commercial spaces. Over 6.57 million sq. ft. of mall space is lying vacant in India across 8 top cities. Post meltdown, retail sales dropped by 11% and rentals by over 40%.

Jones Lang LaSalle Meghraj (JLLM), a global property consultant, says that out of 17.3 million sq ft supply of retail space across the country in 2010, only 9.3 million sq ft is expected to be absorbed. According to Real Estate Intelligence Service (REIS), a division of JLLM, there are 123 malls under construction in seven Indian cities – Mumbai, NCR, Bangalore, Chennai, Hyderabad, Kolkata and Pune -- encompassing 53.9 million sq ft of retail space. Another 42 malls having 32.8 million sq ft of retail space are under planning stages and have been announced for completion by 2013.

Internationally, malls and shopping centres are treated as assets and are owned by real estate investment trusts (reits). These reits own and manage the property and earn returns for its investors through lease rentals. While this should have been the case here as well, most developers in India treated it like any other real estate business and sold spaces before exiting. With rentals going up by 15% every two years, the model spelt disaster for most tenants.

Malls are fast learning that in order to have a healthy mix of retailers, differential rates have to be offered to a multitude of tenants. This attitude to be flexible in a nascent market will go a long way in ushering the much-awaited renaissance in large format retail. As a result of AlphaOne’s architecture, planning, facilities, location in Amritsar and most of all, the retail, entertainment and zoning mix that offers continuous luxury and delight in shopping, hospitality and entertainment options, this landmark development has received several awards and accolades. The technical aspects comprising of both civil and the services plans are all designed in consultation with the retailers while keeping the requirements of end-customers in mind. Advanced and planned facilities for parking, all-round accessibility and strategic zoning are fundamental to our retail mix as are choices in price points, customer relationship management; interesting marketing schemes and promotions in partnership with retailers, besides constant customer research and focus group discussions.