Malls in Delhi and the National Capital Region are commanding a premium now with an increase in the demand for legal, quality retail space. In the last one year, since the sealing drive started in Delhi, mall rentals have shot up by 50-100% to touch a high of Rs400-600 per sq. ft per month in some places.
“The rates vary from market to market,” said Vivek Dahiya, director, DTZ, a real-estate advisory. “But yes, there has been an increase in mall rentals, mostly because of an increase in the demand for quality, legal retail space.”
For instance, the Crescent mall near Qutub Minar benefitted a lot after the MG1 mall was demolished, Dahiya said. “Most of the designer stores from MG1 have shifted to the Crescent Mall after MG1 was demolished. This demand for legal space has contributed to the increase in rentals.”
According to Dahiya, the dramatic increase in rentals is a very recent phenomenon. “In the last two years, the average rental was Rs200 per sq. ft per month.”
Kunal Banerji, head of marketing and corporate communications at real-estate developer Ansal-API Group, also says the demand for retail space has gone up after the sealing drive in Delhi. “Retailers, including the smaller players, now prefer to invest in locations that are legal and safe from demolitions,” he said.
“Rentals have increased in the last one year because of a shortage in the supply of legal retail space,” added Anshuman Magazine, managing director, CB Richard Ellis.
In areas such as Saket and Vasant Kunj, which have very few operational malls, rentals have risen by over 120%. Mall developers here are leveraging on the first-mover advantage to charge a rental of Rs550-600 per sq. ft per month, according to data from a DTZ report.
“There is a lot of demand for retail space in these areas,” Vivek Kaul, head, retail, Jones Lang LaSalle India, said. “So mall developers here are able to charge premium rental.”
According to CB Richard Ellis, the average rentals for prime spaces in South and West Delhi are around Rs250-400 per sq. ft per month. In East and North Delhi, it is much lower at Rs150-250 per sq. ft per month.
In Noida, Greater Noida and Gurgaon, rentals have shot up by 100% from Rs125 per sq. ft per month to Rs150-400 in Noida, Greater Noida and Rs350 in Gurgaon, according to the DTZ report.
An increase in the cost of land has also contributed to the rise in rentals, Kaul said. “Besides demand for quality retail space, land cost is also one of the reasons for the increase in mall rentals,” he said.
Some analysts say this trend will continue for some time. “Since there is huge demand for retail space, the trend will continue,” Kaul said.
Dahiya, however, said that the rates have to settle down sometime in the near future, as the high rentals are not sustainable.