Home / Companies / News /  Rental income of malls could increase by 30% in FY23: ICRA

NEW DELHI : Credit rating agency ICRA on Wednesday said that malls can expect rental income to increase by 30% year-on-year in FY23 driven by improved recovery in business.

Malls have registered an uptick in footfalls as well as demand; many retailers have also gone back to pre-Covid rentals as malls report recovery.

“Driven by pent-up demand, high vaccination coverage and resumption of multiplexes, retail malls have witnessed a sharp recovery in their operational metrics since August 2021. As per an ICRA research report, the trajectory has largely sustained in H2FY2022 barring a brief pause due to Omicron. Further, the retail trading values in Q3 FY2022 reached the pre-Covid levels and surpassed the pre-Covid trading values in Q4 FY2022. The footfalls at retail malls are expected to reach pre-Covid levels in Q3 FY2023," the ratings firm said in a note on the sector.

For malls, rental incomes have recovered at a quicker pace post the second wave compared to first wave.

‘The rental income improvement is faster post-second wave with recovery at 74% for Q2 FY2022 (as against 34% for Q2 FY2021) and reaching 102% of pre-Covid levels in H2FY2022,“ said Anupama Reddy, vice president and sector head, Corporate Ratings, ICRA.

For instance, in financial year 2022, rental income in ICRA’s sample set increased by around 56%, reaching around 80% of pre-Covid levels, it said.

On same-store basis, the rental income is expected to increase by around 30% in FY2023 and is likely to surpass FY2020 levels by around 4%-6%, it added.

The note also pointed higher vacancy levels as brands went easy on expansion over the last two years.

“On the vacancy levels, the addition of new retail space was around 11 million sq ft in FY2021 and FY2022 for the aggregate of six cities, however, the incremental space absorption was only around 4 million sq ft during this period resulting in a significant increase in the vacancy levels to 23% in FY2022 from 18% in FY2020," it added.

With the normalcy in the trading values, the occupancy rate is expected to improve in FY2023, it added.

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