By Mr. Shubhranshu
Pani, Jones Lang LaSalle India
Handling Mall
Vacancies..!
Increased vacancy
rates in malls can typically be attributed to 3 factors:
# Normal churn, which is desirable
# The available
spaces are not conducive to retail, or / exist in a center that has been
over-built
# Spaces that are not conducive for retail
have not been reinvented for alternate use. In an over-build situation, it will
take time to find takers for such spaces
 |
| Shubhranshu Pani, JLL India |
Mall owners guard
against vacancy in mall in the following ways:
** Launching the mall at 85 per cent plus
occupancy
** Choosing an initial set of brands that works
well in a given location - either on the basis of the format or / products
being suitable for the location &
catchment, or / because of store sizes are suitable for those brands, or
/ on the basis of an overall strategy for the region leading to lower drop-outs
** Good tenure completion strategy - As ongoing
occupier tenures complete, landlords look at churning in order to get new
brands into the mall. At this point, they may aim to position the mall at a
higher profile.
They would ensure
that this positioning is applicable for the given location and that the
concurrent increase in rentals is not beyond the normal growth of escalation.
Most vacant spaces in malls get reused. In the
case of malls that are older than nine years, landlords often consider
upgrading the entire center, or parts of the center. They may have an alternate
development strategy according to which they will remodel the spaces and
redesign / rezone the center.
The Learning Curve..!
India has enough
retailing in most micro markets, and there is sufficient experiential basis for
them for them to understand the benchmarks & figure out if their products will work well
or not. Experienced retailers right-size for efficiency, productivity &
economy.
The best-performing
malls are always in demand by retailers, and are in a position to pick their
tenants. Mall owners always have the choice of improving the tenant mix by
seeking out the kind of retailers that work best for the catchment in question.
They can also make
strategic improvements to the center, or offer something unique to make the
overall shopping experience more complete. These kinds of strategies usually
need to be formulated and implemented either by the existing mall marketing
manager or by professional agencies.
How The Revenue Share
Model Works?
Indian retail has
moved into a consumption-based mode. Retailers offer minimum guarantee and
revenue share, where the revenue share is a percentage of the profits generated
by actual performance.
Mall rentals in most
locations are high, and minimum guarantees in the first couple of years are
always above revenue share. This brings into play the retailers’ ability to pay
– therefore, the revenue share does not kick in over the short term. Revenue
share usually becomes a factor after anything between 3 (three) months to 3 (three) years of active tenancy, depending on how the
center is priced during its initial leasing.
The revenue share
model is a means to make the expensive real estate viable. There is an underlying
interest of the landlord to reach a higher rent, which the retailer is unable
to pay.
Good retailers take
the benefit of a reduced minimum guarantee, thus reducing their fixed cost
& thereafter ensuring that they
deliver superior returns by reaching revenue share and sharing the upside with
the landlord. More retailers should adopt this philosophy.
Retailer's Pre-Lease
Checklists..!
In today's scenario,
retailers should look for certain aspects in a mall before taking up space
there..!
^^ Professional mall management
^^ Professional maintenance of the center
^^ Scientifically formulated tenant mix
^^ Adequate parking
^^ Adequate location of the store
Questions retailers
should ask themselves before taking up a mall space:
^^ Who are the customers?
^^ Which retailers do well here?
^^ Is the landlord doing his share in terms
of upkeep, promotions, etc...?
^^ Is my store going to be easily accessible
to the customers?
^^ Of all the choices available in the mall –
which space is likely to be most accessible, and why? What happens to the
viability of my store if the circulation of the center changes and customers
come through a different entry?
^^ Am I taking the right size of store - or
can I take a smaller store and make its operation more efficient?
^^ Am I taking on a rent that I can afford –
at least from the second year onward?
^^ What will I do if it does not work for me –
what are my exit options and means to cut losses?
About the author
Mr. Shubhranshu Pani
is Managing Director (Retail) at Jones Lang LaSalle India
| Me. Shubhranshu Pani |
| Joint Managing Director - Retail |
| +91 22 6620 7575 |
| Email: shubhranshu.pani@ap.jll.com |
For Media Contact
Mr. Arun Chitnis -
Assistant Vice President, Marketing
Jones Lang Lasalle
India , Level 6, Amar Avinash Corporate Plaza
Bund Garden Road,
Pune 411 - 001.
Tel: (020) 30930441
Fax: (020) 40196101
Mob: +91 96571 29999
Website:
www.joneslanglasalle.co.in
Blog:
www.joneslanglasalleblog.com/realestatecompass
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