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Shopping malls rentals down by 30%, vacancies up by 25%: Study

By Religare
|

Slowdown in consumer, coupled with online shopping that provides convenience of delivery at door steps, have led to troubles for the shopping malls which are suffering 20-25 per cent vacancy rates and 30 per cent drop in rentals in the last one year, according to ASSOCHAM latest findings.

The Indian trend is in line with the declining number of foot falls in retail space in over 200 shopping malls across the United States, UK and other countries. In the US, the malls are facing 46 percent vacancy rates whereas malls in United Kingdom (UK) got impacted by 32 per cent, reveals the latest findings.

 

On the other hand, the Indian e-commerce industry appears to be unaffected by the demand slowdown and is likely to clock a compounded annual growth rate (CAGR) of 35 per cent and cross the USD 100-billion mark in value over the next five years, the ASSOCHAM- PricewaterhouseCoopers (PWC) study said. It valued the e-commerce industry in India presently at USD 17 billion.

Continuing on the strong growth momentum of 2015, the e-commerce industry is estimated to see a 72 per cent increase in the average annual spending on online purchases per individual in 2016 from the current level of 65 per cent, the study said.

The online shopping mainly focusses on purchasing electronics, books, music, apparel, sporting, outdoor goods etc.

"It is true that the online shopping has shown handsome growth while the brick and mortar malls are witnessing slowdown. It looks that the growth in e-commerce looks impressive because of quite a low base and increasing penetration of internet", ASSOCHAM Secretary General D S Rawat said while releasing it.

In the US, UK, internet retailing has taken 48 per cent and 39 per cent of industry growth since 2005 which is mainly driven by the different structural market factors such as high population density, high rental costs and long working hours, adds its paper.

"The challenges of suburban sprawl, worsening automotive traffic, rising fuel prices and the increased difficulty of time management in modern families have made going to the mall a planned activity", adds the paper.

Mobile technology is also having a huge impact on brick and mortar retail. Amazon recently reported that roughly 8-10 per cent percent of their total sales are being generated by mobile devices, and expect this trend to continue upwards, highlights the study.

 

About 45 per cent of malls in India are expected to be converted into non-retail space within next 15 years and replace them with movie theatres, restaurants, discount retailers etc, adds the paper.

As per the report, the construction of several malls have significantly been delayed and withdrawn due to lukewarm response from retailers.

It said the industry is also facing problems like multiple taxes, lack of clarity in policies and shortage of experts in areas such as supply chain and store management, adds the paper.

The biggest shopping mall can feel like a pretty lonely place, majority of retailers said that they are holding back on new store openings and focusing on existing stores.

Story first published: Monday, September 7, 2015, 23:00 [IST]
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