Retail Dude

There are somethings money cant buy, for everything else there is the “Great Recession”.

After noticing tremendous spurt in retail rentals over the years, finally the recession period has brought a smile to the retailers. Retailers are going bullish over expansion plans, as they are getting prime coveted retail space at prices 35 per cent lesser than the last year. Infact a news headline todays says, Benetton will open a store every 3 days this month. Beat that…Phewwww.

Whatever the retailers are booking now, will be delivered a year down the line, and therefore will reduce their rental cost substantially. Despite the slowdown and high inflation, compainies remain attracted by the growth opportunity in organised retail. 

The much needed correction finally has happened to the retail rentals. For the record, lease rentals for a specialty/small store should be around 12-15 per cent of the revenue. However, retailers were paying over 20 per cent making their business. Grocery and Apparel retailers were paying 10 to 20 per cent of their sales as rent against an ideal payout of 6 to 12 per cent respectively. Meanwhile, even as they expand, retailers are also closing or shifting unviable stores. RPG group’s Spencer’s Retail has shifted 30 stores in the last year in West Bengal, Kerala and Karnataka to other locations due to high rentals and lower footfalls. Industry sources say initially most malls in the same micromarket had similar rental rates. But as they became operational, the rentals started to get aligned with revenues and footfalls. Further according to me, due to increased interest rates and fluctuations in the industry market has negated growth of demand for residential space. The realtor has definately been hit for sure. But nevertheless, its a green go for growth in retail.

Cheers!

Sudip

Excerpts from BS, ET and DNA

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