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India’s haunted malls have caused $524 million loss: Knight Frank

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  • A total of 57 shopping centers in the top eight cities in India are largely unused.
  • The Highest Number of Ghost Malls is in Delhi NCR, Pune and Hyderabad.
  • Aside from the ghost malls, the overall health of the mall has improved after the pandemic, increasing from 255 in 2018 to 271 currently.
  • Organized retail sales volumes are expected to reach $136 billion in FY28.

A total of 57 malls, or 21% malls, in the top eight cities in India are in a dilapidated state and have resulted in losses of more than $524 million, according to Knight Frank Indiathe latest report ‘Think India, Think Retail 2022’.

If a shopping center has a vacancy rate of more than 40%, it is called a ‘ghost shopping centre’. The highest number of haunted malls are in Delhi NCR, followed by Pune and Hyderabad.

Lack of due diligence, deficiencies of malls such as size and ownership patterns, design issues, erroneous layouts with dark alleyways, lack of customer management, low occupancy and lack of permanent tenants – all contributed to the emergence of these ghost malls.

“All attempts to revive these assets and attract a good mix of retailers and visitors have failed. As a result, the monetization potential of such shopping centers is well below the expected threshold,” the report said.

In some cases, cancellation orders have been issued to close a few large format stores that comprise an entire shopping center. Closure of operations, demolition of stores in the mall and auction of the mall due to failure to pay dues to the local mall authority are also underway, the Knight Frank report said.

The report also includes some suggestions for using these ghost shopping centers.

“The vacant spaces of ghost shopping centers can be used for thrift stores, food and clothing banks, exhibition, presentation and event spaces. Day-care, elderly care, animal shelters and even primary and secondary schools can be opened. Workforce training centers and human development centers for government services may also crop up in ghost shopping malls,” said Shishir BaijaliChairman and MD of Knight Frank India at the unveiling of the report.

It is also possible to lease vacant spaces for long-term commercial use to local businesses that cannot afford high rents in prime office parks or popular business districts, the report said. Demolition of the existing structure and sale of land to minimize losses was another suggestion put forward.

Shopping centers grow despite the rise of e-commerce

The report also stated that the overall health of the mall has improved after the pandemic, with the exception of the ghost malls. There were 255 malls in 2018, but it’s now increased to 271 – covering more than 15 million square feet.

Despite the rise of e-commerce, India’s brick and mortar stores still account for 95% of retail sales, the report said. Retail will continue to account for 10% of India’s GDP for the next five financial years. Organized retail sales grew at a CAGR of 24% between FY 2017-22.

Organized retail in India is still growing despite a blow during the pandemic. After Covid, the recovery in shopping center operating metrics was healthy, with consumption growing 20-25% in January-June 2022 over the same period in FY2020, the report said.

“With this large-scale pent-up demand, the development of shopping centers has experienced a new rigor after standing still for almost 2 years. Over the next 12 months, we expect an addition of 8-9 million square feet of retail space. This is not just limited to the tier 1 markets. Tier 2 and 3 cities are also poised to support medium to large-scale mall developments,” said Rajneesh Mahajan, CEO of Inorbit Malls.

From Knight Frank ResearchOrganized retail sales volume is estimated to grow at a CAGR of 17%, from $52 billion in FY22 to $136 billion in FY28. New Delhi, Mumbai and Bangalore have the maximum number of malls with Hyderabad performing best in maximum occupancy in Grade A or premium malls.

India has a total retail area of ​​92.9 million sqm in 271 operational shopping centers in the eight main markets: Ahmedabad, Bengaluru, Chennai, Hyderabad, Kolkata, Mumbai, National Capital Region (NCR) and Pune.

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