19 January 2023, Mumbai
Brands and malls differ over rentals, while malls want an increase in rentals every year, retailers want to retain the current system of rental hikes every three years. Malls typically sign nine year agreements with the retailers with a rental hike of 15 per cent every three years. But by increasing the rent five per cent each year, retailers will have to shell out about 17 per cent in lease cost in three years.
Large retailers are opposing the move given the number of stores they operate. Brands, since they invest a lot in fit-outs, feel an annual rental hike will make the business unviable. This means every month brands will have to keep the rental hike in mind.
Some malls have started something like staggered rentals so that they can hike the rentals every year. However, in the first year, they don’t put much pressure when the brand is trying to settle in. But once they start doing well, the malls push for a rental hike.
Mall developers aim at pushing for a 20 per cent rental hike every three years given the inflation and cost of raw materials. They say the cost of everything has gone up and fresh efforts have to be always put in to sustain. Since retailers are doing good, they feel, they should not be hesitant in absorbing the hikes.
