Mumbai High St rentals drop most

The economic slowdown has significantly impacted retail rentals in India. So much so that Mumbai has seen the steepest decline in rentals worldwide in the last year, according to a Cushman & Wakefield India report.

The severest drop in rentals was in Colaba Causeway in south Mumbai. Here monthly rates dropped 63.5% in the year to June 2009, to Rs 350 per square foot. The other areas of Mumbai to see significant drops were Linking Road Bandra (63% to Rs 500) and Kemps Corner (60% to Rs 380).

High street locations in Delhi, Bangalore, Pune, Ahmedabad and Hyderabad also saw big falls in the last year.

The drop in rentals will come as a relief to the retailing business, which was suffering owing to high costs. Many retailers had witnessed a steep escalation in their cost of operations, forcing them to scale down operations, re-size formats or modify the business model to work out more feasible propositions.

“Colaba Causeway in Mumbai had witnessed significant increase during the growth period (over 180% in 2007-2008). However, retailers were not able to sustain operations in an environment of high rentals and reduced consumer purchases, which led them to negotiate and revise rates downward. Today, availability is generally up across the market and retailers are looking to take advantage of attractive rentals to enhance their presence in key locations,” said Jaideep Wahi, director of retail agency at Cushman & Wakefield India.

What is interesting is that the drop in rentals in India (in a wide range of 17% to 63%) over the last was much higher than in rest of the world.

The average rent in the 274 shopping streets monitored across 60 countries by Cushman & Wakefield fell 23%. Rentals in the Asia-Pacific were down 15.1%, Europe 5.8% and rates fell 12% in the US and Canada.

Main streets in Pune, Mumbai and the National Capital Region (NCR) continued to correct further in the last quarter, though the rate was lesser. NCR’s Basant Lok (-29%) and Mumbai’s Kemps Corner (-24%) witnesses the highest drop.

In Mumbai, Vashi and Thane, and Pune’s Koregaon Park witnessed stable rents in the last quarter.Despite stable footfalls in malls and main streets over the last couple of quarters, the average bill sizes fell by almost 15-20%. “The impulse buying trend has been affected.

However, what we are witnessing at present is a cyclical variation trend and not a structural bust therefore it will ultimately lead to more conditioned and mature growth in times to come,” pointed out Wahi.

The Cushman & Wakefield survey also ranked India 24th in the list of most expensive retail high streets, with Delhi’s Khan Market being the most expensive retail destination in the country.

New York’s Fifth Avenue retained its title as the world’s most expensive shopping destination followed by Hong Kong’s Causeway Bay and Avenue des Champs Elysees in Paris. Munich’s Kaufingerstrasse was the biggest riser into the top 10 global ranking moving to ninth from 12th with a 7.1% increase in rents.