Supply of retail space for luxury brands to double in 4 years: CBRE

Supply of retail space for luxury brands is expected to double in the next three to four years, according to property consultant CBRE.

Companies including DLF, Reliance Industries, Phoenix MillsBSE -0.28 %, Mumbaibased Maker Group and Shobha Developers have a lined up a host of projects — both malls and other commercial buildings — in cities like Delhi, Mumbai, Chennai and Bengaluru. These are expected to take off soon, creating additional supply for retailers. 

"The existing stock of luxury retail space in the country is approximately a million square feet; while around two million square feet is expected to be built up in the next three-four years," said Vivek Kaul, head — retail services India, CBRE South Asia.

CBRE pegged the existing stock of organised shopping centre space in the country at approximately 57 million square feet; while there are expectations of an additional supply of more than 16 million sq ft, luxury is expected to get a fair share of it.Companies selling luxury products in India often complain that lack of chic shopping centres dents their visibility and affects sales take-off. 

With additional space, the shortage of adequate retail area and high rentals (that falls in the range .`500-1,200 per square feet per month on carpet area) is expected to ease to certain extent.

While DLF, which operates Emporio — the only fullscale luxury destination in India — in Delhi, is building two new projects in Gurgaon and Delhi, Reliance IndustriesBSE 1.26 % and Maker Group have initiated projects in Mumbai's Bandra Kurla. 

"Many international brands are very keen to come to India and are waiting for completion of these projects. We are in talks with several retailers for the new properties," said Dinaz Madhukar, president of Emporio.

While Prada's global team has been scouting for right locations in India, Hermes, Chanel and Mont Blanc are understood to have shown interest in DLF's Chanakyapuri mall. 

Retailers are hopeful that rentals will dip. "Hope there will be some downward revision in rentals. The rent being charged today in India for luxury is comparable to global markets, but sales are not commensurate," said the head of a luxury brand. 

Darshan Mehta, president of Reliance Brands, said that for retailers to get excited about these projects, a key criteria is timely completion. 

"India is not like Japan, China or Singapore. Mall developments take much more time here," he said. In the meantime, existing malls and high streets are the by Provider"> only option. "Even brands do not want to commit to India, until they see real progress. Brands do not want childless marriages." 

And the rentals continue to irk most retail players. "Rentals are high, but realisations are low. Per square revenue realisation of a luxury store in India is one tenth of what a store in the similar location generates in Shanghai," said Mehta.

In Bengaluru, Shoba Developers in setting up a 2-lakh square feet luxury cum commercial mall, which is expected to be operational by 2018. "The retail space will cover one lakh square feet of space and will house some super luxury brands," said JC Sharma, vice chairman and managing director of Shobha Developers.

Similarly, the Phoenix Group is building a mall in Chennai that is expected to be ready by the second quarter of 2016. On completion, it will offers 2-lakh sq ft of retail space to luxury, bridge-to-luxury brands, designer labels and jewellery. "We are in discussions with a few international brands, such as Burberry, Canali, Bottega Veneta, Jimmy Choo, Tod's, Versace, Michael Kors, Paul & Shark and Hugo Boss," said Gayatri Ruia, director of the company.Currently, the supply of retail is limited in India and existing malls like Emporio in Delhi and Palladium in Mumbai (a mixed development) are running on full capacity.

SOURCE: THE ECONOMIC TIMES