The trend in the absorption of retail space in malls remained dormant in third quarter as limited options in existing malls have made the city’s high street locations more attractive to retailers. However, with significant amount of mall space in the advanced stages of construction, preleasing in upcoming malls is taking place at a brisk pace. Therefore, the malls scheduled to become operational over the coming quarters are expected to open with good occupancy levels, according to a survey by Jones Lang LaSalle.
Vacancy rates in third quarter remained stable at 11.2 per cent given the lack of major leasing activity in the quarter. They have been declining for the past year as Chennai has seen no new malls entering the market for almost 12 months now.
During third quarter, Pothys, a large Chennai-based department store, leased around 60,000 sq ft at GN Chetty Road in T Nagar. In addition, retailers such as Sony Center and Blackberry ready-made store opened stores in CBD locations, while a prominent eat-out outlet, Adyar Ananada Bhavan, opened a restaurant in Chrompet on GST Road.
Retailers on Chennai’s high streets have started preparing to cater to increased demand during the upcoming festive season, erecting temporary structures to accommodate their expanded product portfolios and extra inventory.
No new supply was added in third quarter, although a massive 2 million sq ft is expected to be on the market in the short-term as Prestige’s Forum Mall in Vadapalani, the Market City Mall and the PS Grand Mall in Velachery, and the Ten Square Mall in Koyambedu are all expected to become operational over the next six months.
Domestic macro-economic conditions and, more importantly, the lack of quality mall space resulted in no major transactions in the quarter, which in turn kept financial indicators stable. Nevertheless, with pre-leasing taking place at significantly higher rates, it is expected that rents may increase in the short term as the new malls become operational.
Cautious leasing by retailers largely kept high street rents stable, although emerging high street locations on GST Road, Velachery and the neighbourhood are expected to see rental growth in the short term.