Developers Unable to meet Retail Space Target

Mixed Use Project - Retail @ STREET LEVELDLF, Parsvnath and other real estate developers have lagged behind by 54% in their target to open retail space even as retailers’ vacancy climbed to 16% last year. Cash-strapped real estate developers failed to deliver eleven million square feet of retail space in 2008, according to a study released by Cushman & Wakefield. Out of the proposed 74 malls in key eight cities at the beginning of 2008, only 34 were delivered through the year. Developers in NCR lagged the most with a supply of 4.7 million square feet compared with the earlier target of 7.1 million square feet. Developers may continue to restrict their supply, or go slow on retail space by a similar amount in 2009 across key major cities.

“For any developer, the vacancy level should not cross over 5%. The vacancy level of 16% suggests that most of the malls across India are finding it difficult to manage their operational cost,” said Rajneesh Mahajan, director of retail services at Cushman & Wakefield. The reason for the shortfall was the mismatch between the potential and actual occupancy. The Indian organised retail sector grew at 25% in 2007. Anticipating the growth of retail sector at above 35% in the coming years, developers had announced big retail projects. However, owing to economic slowdown, the growth of the retail sector has come down to 15% in 2008, resulting in developers deferring their projects for 1-2 years. “From the projected supply of 20.8 million square feet space in the first quarter of 2008, we will see a spill over of about ten million square feet development in 2009-10. Lack of funds leading to construction delays and cautious expansion by retailers have resulted in slow absorption of retail space in malls,” said Mahajan.