India's Retail Apocalypse: Ghost malls on the rise, warns Knight Frank
A new report by Knight Frank India highlights the downside of unplanned mall growth in the country's retail landscape. It reveals a sharp rise in the number of ‘ghost malls’ and shopping centers with vacancy rates exceeding 40 per cent. The report, titled ‘Think India Think Retail 2024’, reveals a 59 per cent year-on-year increase in ghost malls across eight major cities. This translates to a staggering 13.3 million sq. ft. of vacant retail space, resulting in a loss of revenue exceeding Rs 67 billion ($802.5 million) for developers in 2023.
"The data suggests a worrying trend," says Gulam Zia, Director at Knight Frank India. "Many smaller shopping malls are teetering on the brink of closure, impacting not just tenants but also leading to potential job losses and economic disruption, especially for small retailers and service providers within these malls."
NCR worst hit but Hyderabad bucks the trend
The report further identifies the National Capital Region (NCR) as the most impacted area, accounting for the highest concentration of ghost malls at 5.3 million sq. ft. – a 58 per cent increase from 2022. Other major cities like Mumbai and Bengaluru also saw a significant rise in vacant retail space. However, there's a silver lining. Hyderabad, a major metropolis in South India, witnessed a commendable 19 per cent decline in ghost mall stock, indicating a potentially more resilient retail market in that region.
The report doesn't just present statistics; it also offers a glimpse into the human impact of this trend. One case study explores the plight of Golden Heights Mall in a Tier I city. Launched with much fanfare a few years ago, the mall is now a shadow of its former self, with most stores shuttered and foot traffic dwindling. Local shopkeepers who had invested heavily in the mall are facing financial hardship.
While the increase of online shopping is undeniably a factor, Knight Frank's report highlights a number of other challenges. Weak consumer demand, rising operational costs for retailers and an oversupply of retail space in certain markets are all contributing to the rise of ghost malls.
A call for reinvention
The report concludes with a call for mall owners and developers to adapt. Rejuvenation strategies like curating experiential retail formats, incorporating entertainment and leisure options, and exploring mixed-use development models are seen as crucial for stemming the tide. The report suggests exploring options like:
Revamping the tenant mix: Focus on attracting experience-based stores, entertainment options and co-working spaces alongside traditional retail outlets.
Repositioning the mall: Catering to a specific niche or offering an unique experience to attract customers.
Repurposing the space: In extreme cases, converting the mall into a mixed-use development with residential or office space alongside retail.
"The Indian retail sector needs a course correction," Zia emphasizes. "Landlords must be proactive in reinventing their properties to cater to the evolving needs of consumers. Embracing innovation and flexibility will be key to ensuring the survival of malls in the digital age."
Knight Frank's report serves as a stark warning for India's retail sector. The future of shopping malls hinges on their ability to adapt and transform themselves into vibrant community hubs that offer experiences beyond just shopping.
