Its boom time for landlords across malls and high streets as, after a two-year hiatus, rental rates are again increasing almost 15-25 per cent. Mall operators expect rental collections to reach pre-COVID levels in 2022-23, says Yogeshwar Sharma, CEO, Select Citywalk, one of the most popular malls in New Delhi. In fact, encouraged by response, some mall owners even plan to increase rentals by 5 per cent every year instead of a combined 15 per cent after three years, he adds.
During the last two years, retailers saved nearly 20 per cent of their annual lease due to rent concessions offered by mall owners. However, with retail sales outpacing pre-COVID levels, they expect rentals to surge again. Operator of several malls in the NCR, DLF Retail has already increased rents 15 per cent. In case of lease renewals, rents have been increased 20 per cent while for new tenants they have been increased 25 per cent, says Pushpa Bector, Executive Director.
Retailers plan expansion to ease margin pressures
For retailers, rents form almost 10 to 15 per cent of their monthly sales. High rentals compel them to make maximum utilization of retail spaces. Now, with rents expected to rise again, they expect profit margins to come under pressure. To resolve this, retailers plan to expand their product categories. This also enables them to control price hikes in offerings. With a dip in COVID cases, retailers expect growth in the March quarter to reach double-digits. They also expect to expand their retail spaces after almost two years.
Leasing to soar past COVID-levels
For retailers, apart from rentals, prices of fuel and other raw materials have surged significantly, affecting overall costs. Yet, many do not plan to increase product prices as it would affect current consumptions, trend, explains Devarajan Iyer, CEO, Lifestyle International. Real estate investment firm CBRE expects leasing in India to soar past pre-COVID levels to 5.1 million sq. ft. this year. This could also boost new store openings by around 25 per cent in 2022 compared to previous year, indicates the firm’s report ‘Real Estate Market Outlook 2022 – India’.
