Malls in Delhi and Mumbai get choosy; opt for short term leases to take out unpopular stores
Feb 27, 2014
Source : The Economic Times

 

DELHI: Malls in Delhi and Mumbai are getting choosy about their occupants, having realised the folly of giving in to the inclination to fill vacancies with the first tenant agreeable to the lease price.

As a result, prime space in the most prominent malls in the two cities, which number about 25, is seeing a transformation as brands that have lost relevance such as Debenhams get pushed out to make way for labels such as Zara, which buyers can't seem to get enough of.

Malls are increasingly opting for short-term leases because they've realised the need to ensure that unpopular stores get winnowed out. In addition, they are also holding onto unfilled space or even paying incumbents to vacate.

Apart from Superdry, Brooks Brothers and Pink that have already arrived, malls are looking to the next batch of potentially most-sought-after brands — H&M, Gap and Uniqlo — that are expected to start stores in the coming months. It has been six months since a franchisee store of US apparel brand Forever 21 vacated its store in Ambience mall in Vasant Kunj in New Delhi.

The bar for a new tenant seems to have been set quite high — even the brands listed above may not make the cut. "We are waiting for the right brand that is not necessarily H&M or Gap but a suitable tenant," said Deepti Goel, head of the mall.

"We would rather wait for twothree months than give it to any retailer who doesn't fit into our larger picture." The DLFBSE -1.13 % Place mall in Saket has either left space vacant or signed short-term lease agreements so that it can take it back in case it wants to do a deal with new brands.

Meanwhile, Select Citywalk mall next door went to court to evict anchor-tenant Pantaloons department store. Its petition in the Bombay High Court cited a clause in the contract allowing the mall to terminate the agreement in the event of the tenant undergoing an ownership change.

Select Citywalk wants to get back the 25,000 sq ft space as Future Group sold the Pantaloons retail business to the Aditya Birla group last year. Among the most-anticipated entrants, Swedish fashion apparel retailer Hennes & Mauritz AB received government approval for a wholly-owned subsidiary in India last year.

 

While the retailer is planning to roll out its H&M-branded stores in the country later this year, Gap and Uniqlo are in talks with Indian companies for partnerships. Getting new brands in plays a critical role in encouraging shoppers. "Brands like H&M will make the whole mall look vibrant and bring freshness to the malls," said Kishore Bhatija, chief executive of InOrbit Malls India, which operates the eponymous malls in Mumbai, Pune, Bangalore and Hyderabad.

"It's a good strategy for malls and for the consumers."

InOrbit is even prepared to pay retailers to vacate space so that it can accommodate more suitable brands. "At the end of the day, if you break a commitment then you should also be happy to pay and compensate the retailers," said Bhatija.

He said two prominent malls - one in Delhi and the other in Mumbai - have paid retailers to make way for Zara, a brand that has been able to redefine the anchor-tenant relationship in India in recent years thanks to its success. Mall operators said a Zara store not only brings footfalls but also generates higher persquare-foot sales than a traditional anchor-tenant at a department store or hypermarket.

And Zara knows it's on to a good thing. It will only agree to move in on a 6-8 per cent revenuesharing deal with no rentals involved. Plus, the mall operator has to pay for fixtures such as flooring, racks and lighting at the store.

A spokesperson for Inditex, which runs Zara, declined to comment. H&M is also pushing the malls hard on lease agreements, asking them to settle for revenuesharing and that too for a 25-year contract, according to two Mumbai mall operators.

 

 

 

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