Robust Demand For Mall Space In Chennai

Chennai:  Chennai retail mall space market saw a robust retail real estate demand, which ensured that vacancy levels in the city improve by 2% even after addition of 1 mn sq.ft. of new retail mall space.

According to Cushman & Wakefield’s latest retail reports, the overall vacancy levels in malls dipped to 15.8% on account sustained leasing action in both main streets and malls. Despite the infusion of 1 million sq. ft. of mall space in this quarter in Chennai, the city witnessed the maximum q-o-q fall in mall vacancy levels by about 2% in the wake of healthy demand and upbeat transaction activity.

In Chennai, Velachery witnessed the launch of the city’s largest mall accounting for 1 million sq. ft. of new mall space with almost full occupancy level. This quarter witnessed the deferment of 5 malls amounting up to nearly 1.73 million sq. ft. with Chennai witnessing the deferment of 2 malls amounting to 530,000 sf. Although the overall mall vacancy level dropped by 2% to nearly 6.5%, the mall rentals maintained a status quo.

Main streets like Nungambakkam High Road and Khadar Nawaz Khan Road witnessed moderate increase in rentals in the range of 4-5% due to the prevalent high demand along with lack of new supply in these locations. Usman Road-North witnessed nearly 9% increase in rentals due to the scarcity of quality retail space options coupled with significant demand from jewellery brands. Rentals in most main streets and malls are expected to remain stable in the next quarter except Khadar Nawaz Khan Road, Pondy Bazar, and Cathedral Road-RK Salai, which may witness an uptrend as indicated by the enquiries.

Jaideep Wahi, Director, Retail Services, Cushman & Wakefield commented, “Malls now prefer to open with near full occupancy and a fall in the mall vacancy level, as seen in Chennai, is indeed a positive trend as a boasts of healthy demand and robust transactional activity. However, a close tab on the infrastructure activities is needed as they take a toll on the retail real estate in the short term, not only on the main streets but also on malls. ”

Given the surge in demand at Usman Road-North in Chennai, the main street rentals appreciated by about 9% over the quarter. Established main streets of Nungambakkam High Road and Khadar Nawaz Khan Road in Chennai and prime retail properties in FC Road witnessed quarterly rental escalation of 3-5% due to increased demand and limited space availabilities. This quarter also witnessed the deferment of two malls in Chennai amounting to 5, 30,000 sq. ft.

Nationally, there was only one mall of 1 million sq. ft. that got operational in Chennai while nationwide vacancy in mall spaces improved marginally by 1% over the last quarter. Activities were mostly concentrated on mall spaces rather than main streets due to non-availability of quality space in the main streets. 

This quarter witnessed the deferment of 5 malls amounting up to nearly 1.73 million sq. ft. with Chennai witnessing the deferment of 2 malls amounting to 530,000 sf.  While Pune witnessed the deferment of 1 mall of 700,000 sf mall space, NCR and Bengaluru witnessed the deferment of 1 mall each of 500,000 sf.