Shopping malls, high street look to 20% of vacant space
BENGALURU/NEW DELHI: Shopping malls and main streets could be looking at 15-20% of vacant real estate space as many retailers are trying to close unprofitable due to cash shortages due to Covid-19, seniors said retail and real estate executives.
With the new stringent standard operating protocols (SOPs) in place, retailers' operations are expected to increase by 30%. “The rent represents 10-15% of the general fixed costs for us. The new sanitation standards will further raise costs, ”said the CEO of a multi-brand sportswear chain.
While large box retailers that enjoy a revenue-sharing model with shopping malls will have some leeway to absorb the impact of the blockade, small and restaurants may have to pay the price by reducing the number of outlets. Since shopping malls were the first to close and will be the last to open, there will be them, said Shishir Baijal, president and MD, Knight Frank India.
Vineet Gautam, country head of Bestseller India that sells fast fashion brands Jack&Jones and Vero Moda, said there is uncertainty about how and when all stores will open. Retailers will need to save cash and will be slow since customers will be wary of visiting a mall or entering a store, he said.
Nitin Mohan, co-founder and director of BlackBerry, said retailers generally close 3-5% of underperforming stores in a year, which will now rise to 6-8%. We had planned to open 30 stores this fiscal year, but all expansion and capital spending plans have been suspended for now, he said.
Similarly, the American denim giant Levi's is also developing strategies along similar lines. “Weaker brands with low margins will optimize their position and leave expensive real estate behind. This will restore the market for a good three to five years. I think many large shopping malls will see that 20-30% of the space is empty, said Sanjeev Mohanty, Levi Strauss, MD, South Asia, the Middle East and North Africa.
While some retailers are looking to close unprofitable stores, mall owners said that others are looking to expand at a reasonable price. It will take time for companies to recover, there may also be pressure on rents in the short period, but we'll see how it goes, said Mukesh Kumar, CEO of Infiniti Malls.
“There is a possibility, every year a retailer opens some new stores and closes some that do not generate money. Given the current situation, everyone needs to save cash now. It is also a fact that for the next 4-5 months sales will be low. Considering that if it's a bad store and it's already been given 6-12 months, the retailer may not want to give it more time, said Shubhranshu Pani, JLL India MD (Retail Services).