Study shows High Streets outperforming Shopping Malls in revenue efficiency
11 May 2023, Mumbai
Indian shopping malls are projected to attract higher consumption due to factors such as increasing urbanization and rising income levels. However, when it comes to revenue efficiency, high streets are expected to outperform organized and formal retail assets across the country, according to a recent study conducted by Knight Frank India.
In terms of total consumption, shopping malls are predicted to record over $11 billion during the financial year 2023-34, while high streets have a potential consumption of $2 billion. However, when comparing consumption on a per square meter basis, the story changes significantly. Operational malls are estimated to have a consumption rate of $1,273 per year per square meter, whereas high streets have a potential consumption rate of $4,099.
Despite high streets occupying only 6% of the total gross leasable area compared to the extensive shopping mall stock of approximately 93 million square feet, they offer 100% efficiency in terms of maintenance costs. On the other hand, shopping malls can range between 50% and 60% efficiency, depending on their grade, due to the high maintenance costs associated with common areas, central air conditioning, and escalators.
The study highlights the importance of customer experience in the retail industry. While high streets may lack certain amenities provided by shopping centers, the modernization of Indian cities has led to the revival of many high streets, offering improved access, parking facilities, store visibility, and more.
The study also ranks the top high streets in India based on factors such as access, parking facilities, assortment of retailers, and layout. Bengaluru's MG Road tops the list, followed by Hyderabad’s Somajiguda, Mumbai’s Linking Road, and South Extension in Delhi.
Among the 30 high streets surveyed, Ahmedabad’s SG Highway boasts the highest spending quotient. Interestingly, the study reveals that the top high streets demanding the highest rents do not necessarily provide the best retail experience.
While real estate rent corrections have occurred across various asset classes, the post-pandemic recovery has led to numerous transactions being closed at rents higher than before. High streets like Khan Market in New Delhi, DLF Galleria in Gurgaon, and Linking Road and Turner Road in Mumbai command substantial rents for retailers aiming to maintain their brand presence. For instance, Khan Market sees monthly per square foot rentals ranging between Rs 1,000 and Rs 1,500, while DLF Galleria attracts rents of Rs 800 - Rs 1,200, and Linking Road reaches up to Rs 1,000.
The study also identifies NCR, Kolkata, and Ahmedabad as markets with a high concentration of non-modern retail arenas. Ahmedabad and Kolkata, in particular, have yet to witness the entry and expansion of many large national and foreign retailers on their key high streets.
