Rent of retail space up 11-17% in Delhi's upscale markets in July-September

Rentals of high-street retail are inching back to pre-Covid levels in Delhi-NCR on the back of revival in business, as rents in upscale Khan Market, South Extension and Connaught Place have risen 11-17 per cent during July-September compared to the previous quarter, according to Cushman and Wakefield.

"Rentals inching back to pre-Covid levels as market activity strengthens," global property consultant Cushman and Wakefield (C&W) said in its report 'Marketbeat- Delhi-NCR, Retail Q3 2021' (July-September).

The Delhi-NCR market recorded improved retail activity during the September quarter, the consultant said, adding that early signs of recovery could be seen with a pick-up in retail leasing.

"With rentals inching back to pre-Covid levels and accommodation on commercial terms narrowing, the only direction for retail in the coming months is upwards," said Vibhor Jain, Managing Director, North, Cushman & Wakefield.

"Increased vaccination and a low caseload have certainly played an important role in the return to normalcy and higher consumer confidence," the report said.

On rent scenario, the consultant found that the rentals of high street location Khan Market increased 12.5 per cent to Rs 1,350 per square feet during the July-September quarter as against the previous quarter.

In South Extension I & II, the rent rose by 16.7 per cent quarter on quarter (Q-o-Q) to Rs 700 per square foot during the third quarter of the current calendar year.

Connaught Place in central Delhi saw an increase of 11.1 per cent in rentals to Rs 1,000 per square foot. The annual increase in rentals in these three locations was the same in percentage terms.

The consultant highlighted that landlords are gradually withdrawing the benefits they gave to retailers on rentals and other commercial terms due to the Covid pandemic.

"Landlords are demanding the pre-Covid rents after supporting retailers with rent waivers or staggered rentals to tide over the pandemic period. With the fears of third-wave subsiding to a great extent, landlords want to limit any further rent waivers, especially after the income loss borne by them during last five quarters," C&W said.

The consultant said that normal lease terms are likely to resume as the pandemic abates and the business outlook improves.

"Retailers with a revenue-share arrangement with landlords have also begun to share a higher proportion of the revenue with increased consumer spending. However, some new transactions are being structured at staggered rentals on a case-to-case basis depending on the negotiations between retailers and landlords," the report said.

The main street recorded new leases and store openings of close to 0.13 million square feet across prominent markets including Khan Market, South Extension, Green Park, Defence Colony among others.

"Occupancy levels in prominent main streets is rising fast with the resumption of business activity," the report said.

Malls also recorded a significant improvement as retailers opened new stores in some of the recently completed developments coupled with few store relocations, totalling 0.43 million square feet.

"There have been instances of store resizing with a few retailers demanding smaller stores. Fashion & Apparel (particularly athleisure) and Food & Beverages (F&B) were the prominent retail categories active in both main streets and malls," the report said.

Adidas, Nike, Skechers, Puma, Reebok expanded their retail presence across multiple locations.

"Khan Market, which saw an exodus of retailers during 2020, recorded new space take-up by F&B retailers during this quarter. Big Chill, Third Wave Café, Dighent Café were among new cafes that took space in Khan Market," the report said.

The consultant felt that traction in retail leasing signals cheer for the upcoming festive season, especially as the sector was hit the hardest by the pandemic.

"Prominent malls have now begun to witness footfalls as high as 70- 75 per cent of pre-Covid levels during weekends. Retail sales have also witnessed an improvement with the expectation of further increase as the city gears up for the festive months," the report said.

Discretionary spending that took a hit last year is also on the rise, it noted.

North Delhi recorded the addition of a new mall supply of 0.3 million square feet taking the overall mall inventory for Delhi-NCR to 27.1 million square feet at the end of Q3.

"Robust leasing by several brands in the new development along with additional space take-up by retailers in the existing malls led to a 37-basis points reduction in city vacancy, which now stands at 16.58 per cent in the third quarter," the report said.

US-based Cushman & Wakefield is among the largest real estate services firms with approximately 53,000 employees in 400 offices and 60 countries.

In 2019, the firm had revenue of USD 8.8 billion across core services of property, facilities and project management, leasing, capital markets, valuation and other services.

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