Technology will diversify Retail real estate
Deva Jyotula, VP Retail at Korum Mall shared his views on the retail real estate market and how it is bound for mega growth in the coming years.
What are the reasons for the positivity of investors towards Indian retail real estate in spite of the ongoing consumerism slump?
PE flows into retail industry have had a new high in 2019. While commercial offices topped the charts, retail sector including malls witnessed second highest investments from PE funds in 2019. According to Anarock Research, “PE funds see the ongoing consumerism slump in India as a seasonal phenomenon and believe that the enthusiastic government backing to the retail sector will cause the tide to turn in the near future.” The main reason for higher investments in retail segment is increased spending and consumer demand revival in metropolitan due to consumer expectation apart from tier 2 and tier 3 cities. Also, the organized retail market is going to reach the level of 19 percent which is currently at 9 according to reports published by many retail consultants in India. This opinion was initially voiced by Mr. Anuj Kejriwal , Managing Director& CEO, Anarock Retail. Hence, this is also one of the pivotal factors of the positivity of investors towards Indian Retail Real Estate.
Are developers exploring new formats in retail developments for better ROI?
Developers are offering avenue or highstreets as an option apart from pop-ups and open formats since they are easy and quick to build, efficient in terms of operations and cam. According to Storefront, Pop-ups shops (temporary retail) is expected to generate 80 billion on an annual basis! Pop ups are one of the biggest trends developed in recent times. These are temporary retail spaces leased out to brands across spaces in a mall. They differ from your regular brick-mortar shops. Also, with brands like Apple wanting to expand their offline presence in India, malls would not want to lose out on the opportunity to lease out space to them. We as a group is also exploring mixed retail formats for our residential projects which include Highstreets and open formats.
Do you feel, there is a lack of superior Grade A mall spaces across cities. What are the reasons? Are Tier-II & III cities the new hubs of retail real estate & why?
Ans: Yes. The Grade A mall spaces are getting scarcer since real estate is getting more expensive and there are only a handful of companies that are focused on retail real estate. The Grade A spaces require efficient retail spaces, with focus on catchment, Mall location, effective brand mix and viable ROI for Mall as well as its tenants. The location and connectivity of the mall plays a pivotal role in attracting footfalls and brand mix. These factors decide if the mall would be able to earn profitable returns on the amount invested. In addition to this running successful retail real estate requires a skilled and industry savvy workforce both managerial and ground staff to run a mall! It is not always an easy task to recruit competent workforce for the task at hand if we are talking about geographies apart from metros. From a Demand Gen. perspective, the Grade A Mall spaces are higher in number in metros since sustenance of premium and bridge to Luxury is difficult for tier II and tier III cities across geographies.
Growing SME segment is ensuring demand for quality lifestyle and connectivity in Tier II and Tier III cities. The well travelled Global Indian and NRI community is ever increasing scope for the mall culture to flourish. This has given a rise in the purchasing power of people residing in these places. There is a traction for brands fashion and F&B brands for our projects for Indore, Ahmedabad, Hyderabad, Pune, Jaipur etc.
What are the emerging trends in retail realty?
Demand for retail real estate will continue to grow because of the lack of good / prime places in key metros. There is a continuous uptake in organized retail with FDI opening up and new International brands pouring in. Survival of only quality developments which are professionally run with investments in technology and world class experiential spaces are going to be the next leveling grounds in retail real estate (malls) Industry. Brands are constantly innovating in delivering an exhilarating customer experience, that makes them keep coming back for more! In doing so, retail spaces too have to upgrade themselves to provide the necessary infrastructure to support such unique initiatives by brands. Retail realty will undergo some massive changes in the next years to come, with the introduction of technology.