Mall owners, landlords rejoice as rentals surge again after two years

18 April 2022, Mumbai:

It's boom time for landlords across malls and high streets as, after a two-year hiatus, rental rates are again increasing by almost 15-25 percent.

Mall operators expect rental collections to reach pre-COVID levels in 2022-23, says Yogeshwar Sharma, CEO, of Select Citywalk, one of the most popular malls in New Delhi.

In fact, encouraged by the response, some mall owners even plan to increase rentals by 5 percent every year instead of a combined 15 percent after three years, he adds.

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During the last two years, retailers saved nearly 20 percent 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.

The operator of several malls in the NCR, DLF Retail has already increased rents by 15 percent. In the case of lease renewals, rents have been increased by 20 percent while for new tenants they have been increased by 25 percent, says Pushpa Bector, Executive Director.

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Retailers plan expansion to ease margin pressures

For retailers, rents form almost 10 to 15 percent 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.

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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 consumption, and trends, explains Devarajan Iyer, CEO, of 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 percent in 2022 compared to the previous year, indicates the firm’s report ‘Real Estate Market Outlook 2022 – India’.

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