Malls’ monthly rentals soften by 4 per cent

The revenues of shopping mall owners declined by around 50 per cent during the last fiscal as the retail sector was badly hit since the outbreak of the COVID-19 pandemic in March last year. This has led to average monthly rentals in shopping centers softening by 4-5 per cent across eight cities, although many malls saw rent correction of up to 25 per cent

Most mall owners, who generally lease space in their shopping malls on a revenue-sharing model with retailers having a minimum guarantee clause, gave complete rental waiver during the April-June period of 2020 because of the nationwide lockdown to control COVID.

The mall promoters offered huge discounts during the remaining nine months of the last fiscal as well, resulting in a huge dent in their overall income. Abhishek Bansal, Executive Director, Pacific Group says, rental revenues dropped by 50 per cent during the last financial year and will decline similarly during the second wave.

Harsh Bansal, Director, Unity Group also says, total rental income dropped by 50 percent during the last fiscal year. However, rental for fresh leasing has not declined its mall.

Shubhranshu Pani, Managing Director (retail services), JLL India, says, the impact of rentals on shopping centres has been manifold. For mall owners, the impact was around 50 per cent, mainly due to loss of rent, and operational costs. The contribution of multiplexes to rental incomes has been almost wiped out, he adds.

As per Cushman & Wakefield, mall rents on an average across the top eight cities have declined by about 4-5 per cent after the pandemic. Average rentals in superior malls have witnessed marginal rental corrections, but the good and average malls witnessed rental corrections up to 7-10 per cent.

Analyst expects mall owner’s revenues to rise given the low base in 2020. Harshvardhan Singh, Director-Commercial Advisory & Transactions - Retail, Savills India says, mall owners have not just been impacted by concessions given to tenants in terms of rent reductions but also by way of significant cuts in ancillary revenues from other sources such as pop-up stores, parking and signages. He says, malls were gradually getting back on their feet. However, the ongoing second COVID wave has once again derailed India’s retail growth.