Punjagutta and South Ex top in retail rental growth; Brigade Road nosedives

 Chennai: Punjagutta in Hyderabad has recorded the highest retail rental growth in India with an annual 29 per cent growth y-o-y while Bangalore’s Brigade Road has witnessed sharpest decline of 17 per cent in rental values. 

Globally, Punjagutta has placed 8th in the growth of retail rental values while South Extension in New Delhi took 17th position with an annual growth of 20 per cent y-o-y, according to global Real Estate consultancy firm, Cushman & Wakefield’s annual report ‘Main Streets across the World 2013’. 

The report, which analysed the most expensive locations in the top 334 shopping destinations across 64 countries, has revealed that Kutuzovsky Prospekt in Moscow has recorded the highest rental growth of 42% y-o –y.  

In the global ranking of the most expensive retail locations, Khan Market (1,250/sf/mnth) in New Delhi has emerged at the 28^th in the world, retaining its first position in India.  India however, has go down in the global ranking from 26^th to 28^th position due to the weakening of Rupee against US Dollar and largely stable rentals with limited increment in rental values in established retailing sectors, the report said. 

Hong Kong’s Causeway Bay has achieved the top position as the most expensive retail location in the world followed by New York’s 5th Avenue (2^nd) and Avenue des Champs Elysées in Paris (3^rd).

Sanjay Dutt, Executive Managing Director, South Asia, Cushman & Wakefield said, “While retail rentals globally registered a slower growth of 3.2% as compared to previous year on account of slowdown in economic uncertainties in the leading markets. The Asian markets saw a better average of rental increase at 4.5% in the same period.  Economic risks remain for 2014 but conditions are expected to steadily improve across most markets.  The retailers’ push towards the best and most sought-after locations will continue; however, limited supply and higher rental costs will create obstacles for some brands, leading a number of retailers to look at b alternative locations in close proximity to the main thoroughfares.  While cities will grow in importance, a stronger focus on the use of all channels including online will also be seen to both speed and support expansion.”

Main street location of Punjagutta (155/sf/m) in Hyderabad recorded the highest annual growth in retail rental values of 29% reaching its 2007 peak value for the first time in seven years due to renewed interest from retailers specially jewellery brands. South Extension has registered the second highest annual growth of 20% in retail rental values on account of consistent demand and churn.

Ahmedabad’s C.G. Road recorded an impressive growth of 15% in rental values due to increased interest from retailers to enter the market as many national and global brands are keen on entering the market and expanding their presence in the location.

On the flip slide, Brigade Road in Bangalore saw the sharpest decline in retail rental values of over 17% y – o – y across the globe due to lack of interest from retailers. Many brands have not moved out of the location to occupy space in nearby shopping centres. Mumbai’s Linking Road, which recorded a correction of approximately 12% y-o-y ranked 11^th in the survey for sharpest declines globally. 

Once popular with brands for opening their flagship stores, has been witnessing competition from some upcoming shopping centres in the vicinity which retailers prefer on account of better amenities and lower rentals. Linking Road suffers from aspects like poor accessibility, parking and other amenities. 

 INDIA RANKING: 

In India during the first half of 2013, prime rents in most cities remained stable as a result of steady demand from retailers, particularly from the fashion and food & beverages segments. Steady demand from fashion and F&B brands was also the catalyst behind rises in India (2.1%). Overall, activity was slightly more restrained than in other major markets. New Delhi generally outperformed other cities. However, rental movements varied across sub-markets, with double-digit positive and negative growth depending on the location. Occupier demand from fashion, jewellery and F&B retailers was evident during the year for both high streets and shopping centres.

Khan Market witnessed high demand from retailers but due to limited availability and transactions, rental values have only seen a marginal increase.  Despite a correction of 11% over last year due to lack of interest from retailers, Mumbai’s Linking Road (750/sf/m) has emerged as the second most expensive retail location followed by Connaught Place and South Extension.  

Sanjay Dutt further added, “New-age retailers are focused on providing an experience to their customers moving beyond just merchandise, therefore are showing preference for quality shopping malls that offer the right amenities. However, shopping centre has its development limited due to poor cash flow situation and over leveraged conditions of developers. Most investors, with the exception of few, are also showing limited interest in shopping centres. India’s main streets continue their appeal as new retailers are trying to create brand presence in key main streets. Large formats are selectively willing to go for stand alone or built to suit options as well.”

Sanjay Dutt further added, “Going forward we can expect some of the well managed shopping centres in key locations to start commanding significant rental values at par with main streets as Retail Malls are now increasingly positioning themselves as destinations with a few even going as far as putting added attractions like adventure rides etc. apart from high end cinema and F&B. Destination malls, specialty malls and luxury shopping centre developments are other formats being explored by NCR, Mumbai and Bangalore .Key  High street locations in locations with solid captive audience and adequate facilities for shoppers will remain high on priority for retailers and therefore a rise in their values over a period of time”