by THO
While there has been an increase in the number of Grade A malls across the country, there has also been a 59% year-on-year rise in low performing shopping malls with approximately 13.3 million square feet of retail space categorized as ‘ghost shopping centers’. Here’s a look at why Indian shoppers are deserting Grade C malls and the use to which some of these assets are being put to in order to monetize the land parcels.
As of 2023, Grade A shopping center stock, with enviable occupancy, strong tenant mix, good positioning, and active mall management, contributed 47% to the overall shopping center space with 58.2 mn sq ft across the country. Grade B shopping center stock, with decent occupancy and tenant mix, contributed 31% with 39.7 mn sq ft. Grade C stock, on the other hand, with high vacancy rates, inferior tenant mix, poor mall management, contributed the lowest with 22%, as 27.2 mn sq ft leasable space is locked in these assets, a new survey by Knight Frank India has said.
Also Read: 59% increase in ghost shopping centers; low performing malls lock up value of ₹6700 crore
1 What are ghost malls?
Ghost shopping malls are low performing malls with a vacancy of more than 40%. The number of such malls increased to 64% last year from 57% in 2022 across eight major cities. There was a sharp increase in low-performing retail assets across eight major Tier I cities.
As many as 64 shopping malls with about 13.3 million square feet of gross leasable area have been categorized as ‘Ghost Shopping Centre’ in 2023. This has increased by almost 59% from 8.4 mn sq ft in 2022.
The Knight Frank survey indicates that underperforming malls were either demolished for residential or commercial projects (including co-working spaces) or permanently closed or auctioned off.
2 Why are Indian shoppers preferring only Grade A and not Grade C malls?
The primary reason for this consumer behavior is the increase in online shopping.
The decline in consumer footfall is also on account of poor design, brands that are unappealing to shoppers, ineffective management, lack of maintenance, uninviting exteriors, not to mention the inadequate infrastructure around the mall and intense competition from Grade A malls.
3 Grade C shopping center assets in NCR, Mumbai and Pune demolished to pave way for construction of housing inventory
According to a report by Knight Frank India titled ‘Think India Think Retail 2024: Shopping Centre and High Street Dynamics Across 29 Cities’, in 2023 some Grade C shopping center assets in Tier 1 cities such as the NCR, Mumbai and Pune were demolished to pave the way for construction of residential inventory to monetize the land parcels as demand for residential units has been strong since the pandemic.
Many of these ghost malls, across the country, have been prime targets for brownfield activity, wherein they are repurposed into alternative uses. “Such ghost malls are repurposed primarily due to shifting consumer preferences, changes in retail dynamics, and economic factors that render their original purpose unsustainable,” Vivek Rathi, National Director Research, Knight Frank India told HT Digital.
4 Cities that have the maximum number of ghost malls are…
The Knight Frank survey said that the 64 abandoned malls spanning eight cities occupy 75% of the total 125.1 mn sq ft. gross leasable area. According to the survey, Delhi-NCR has the highest concentration with 21 ghost shopping centers (5.3 million sq ft), trailed by Bengaluru with 12 (2 million sq ft), Mumbai with 10 (2.1million sq ft), Kolkata with 6 (1.1 million sq ft) Hyderabad with 5 (0.9 million sq ft), Ahmedabad with 4 (1.1 million sq ft), and Chennai and Pune with 3 each (0.4 million sq ft).
Also Read: New supply of retail space expected to increase by 45% by 2028: Report
Interestingly, Hyderabad saw a 19 per cent decrease in abandoned shopping centers. In tier 1 cities, the total number of shopping centers decreased over the year, despite eight new additions, resulting in a total of 263 complexes in 2023. In the tier II city category, Lucknow, Kochi, and Jaipur stood out as the top three cities in terms of available Gross Leasable Area (GLA) in shopping centers, with 5.7 million square feet, 2.3 million square feet, and 2.1 million square feet, respectively. Lucknow has become a significant player, commanding an 18 per cent share of the total GLA within tier II cities.
5 Zoning restrictions, strata ownership pose a challenge in repurposing ghost malls
Challenges in repurposing into alternative types often stem from regulatory hurdles, such as zoning restrictions and permit conversions or more particularly on account of strata ownership with multiple owners that makes it difficult to arrive at a common ground for repurposing or selling out, explains Rathi.
Additionally, structural considerations may arise, requiring significant renovations to adapt spaces originally designed for retail to accommodate residential, office, or educational purposes.
Financial constraints can also pose challenges, as repurposing projects often demand substantial investments. Once the decision is taken to move ahead, market demand for specific alternative uses is carefully assessed to ensure viability and maximize returns, he added.
