Malls bring in fresh blood, new brands

As was expected, Q1 FY 2223 seems to have taken off well. Many International and Indian brands in the fashion and accessories industry have reported growth of 10-15% over same period FY 1920. Over the same period last year, the growth is 40-120%, given that most of April & June 2021 were shut due to lockdown while the whole month of May was closed as a precautionary measure due to the severe second wave of the pandemic. The focus for brands off late has been more on malls when compared with high streets, given that there has been a slew of movie releases this calendar year, which drives huge footfalls to malls. The recent Quarter of FY 2223 also had a number of muhurat days, which helped propel sales for brands.

Malls have taken the worst hit in the past 2 years since Covid-19 stuck the country. On one side, Malls had to be kind enough to their tenants, by offering various kinds of doles including rental waivers, operate pure revenue share models, extended tenancy and so on. On the other hand, malls had to meet their fixed commitments such as maintenance & upkeep of its premises, staff management as well as paying their own creditors and banks on time. It is notable that very few malls across India had to completely shut down because of the ongoing pandemic stress. This reflects the true and healthy relationship between Mall management companies and their tenants – the brands.

However, the party seems to be over now. Most malls have decided to increase or have already informed tenants about an increase in rents. This is to cope with their losses for the past 2 years, along with the hope that the upcoming 2 quarters of the financial year are going to draw the moolah for them. Mall rents range from Rs. 180 -350 per sft on built-up area plus CAM – Common Area Maintenance. The built-up area is usually 130-150% of the trading or carpet area). Thus, for a 1,000 sft store in a mall, the rent would range around Rs. 2.50 – Rs. 4 lakhs pm across various mall formats. On the current pricing structure, Malls have started demanding brands for a higher rent, ranging from 10-30% of current levels.

Many malls are also redoing their tenant mix. International Brands like Tommy Hilfiger, Armani Xchange, Mango, among others are the preferred tenants for the premium ground floor spaces now along with a part occupancy for department store chains like Shoppers Stop, Lifestyle, Trends, among others. Most brands of Indian origin are being asked to move to upper floors and with an increase in occupancy costs. Alternatively, the brands can choose to vacate as well. Such is the frenzy for high quality retail trading areas, that many Indian brands have not only agreed to move to another location but also pay a partial increase in rents. Goes to show how confident the retailers as well as Mall developers on the ensuing consumer sentiment.

Larger areas being held by the likes of H&M, Marks & Spencer, Pantaloons, etc. are being lessened and the residual space is being distributed to vanilla stores. Higher efficiency in a limited space is the name of the game in current times. While there is a silent 4th wave of the pandemic is said to be in progress currently, both Malls and Brands seem to be undeterred and are continuing with their day today business operations without getting distracted. Many states such as Maharashtra, Tamil Nadu, etc. have made wearing masks in public spaces compulsory, though this is yet to be fully implemented.