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retail | IST

Business Sentimeter: India's retail sector sees rebound in sales; malls wary of hiking rents

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It's been a rewarding festive season for the Indian retailers. And with more brands likely to boost offline presence now, the Indian consumer can look forward to more outlets. But interestingly, as these expansion plans take shape, it's not malls but high-streets that are in high demand.

It's been a rewarding festive season for the Indian retailers. With more brands likely to boost offline presence now, the Indian consumer can look forward to more outlets. But interestingly, as these expansion plans take shape, it's not malls but high-streets that are in high demand.
This is reflected in rental trends as well. According to Cushman and Wakefield, Mumbai saw rentals correct between 2 to 5 percent as recently as the third quarter, with any scope of a spike expected only by the end of 2022.
Meanwhile, Bengaluru and Chennai saw rental rates hold steady. However, Delhi and Hyderabad have managed to buck the trend. While Khan Market and Connaught Place have recorded rentals rising anywhere between 11 and 17 percent, Hyderabad's Jubilee Hills and Punjagutta saw rentals rise 4 to 6 percent.
Incidentally, all localities that have seen a spike in rental values like Connaught Place in Delhi or Indiranagar in Bengaluru and Jubilee Hills in Hyderabad are high-street retail locations. But that's not stopping malls from hiking rents. For instance, InOrbit said it expects its rentals to go up by as much as 15 to 18 percent, on the back of in-mall leasing exceeding 2019 levels.
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But for many mall owners and developers, hiking rental rates at this time may be a bit of a gamble - and not all malls will be able to command an upward revision. Retailers also believe the lasting impact of the lockdown has sensitised mall owners and developers to tread lightly.
The recovery may be slow but steady, but the threat of future waves leading to further lockdowns cannot be ruled out altogether, and that will always be a Damocles' sword hanging over both mall owner and retailer. Also, experts believe that given the nuances involved in how retail brands may choose to do business going forward, malls may well choose to hold off on hiking rents, even if only for the moment.
Watch the video for more.