That the days of skyrocketing mall rentals are over is old news. Now, mall owners are looking to woo big brands with zero-rental schemes.
That the days of skyrocketing mall rentals are over is old news. Now, mall owners are looking to woo big brands with zero-rental schemes to stimulate footfalls and create the much-needed buzz in their retail spaces.
One of the big brands being wooed relentlessly is Kimaya Studio, a premium fashion chain, which has received zero-rental offers for not one but 2-3 years from various mall players in Hyderabad, Kolkata and Chandigarh. Pradeep Hirani, chairman, Kimaya, said that the company is one of the anchor brands at the Emporio Mall in Delhi and UB City in Bangalore. “Many malls are keen to sign us as an anchor brand for a 3-year zero-rental deal. We are evaluating the options,” he said.
Kimaya is searching for good bargains in Kolkata, Goa, Pune, Ahmedabad and Surat. The company’s norm of signing 9-year lease agreements will help it get the maximum out of the economic slowdown as rentals have dropped significantly from their highs in the last few years.
Looking to use the slowdown to expand its footprints, Kimaya opened 3 stores in January. Between August and December, it will roll out 3 new outlets - one each in Ludhiana, Chandigarh and Hyderabad - and 2 in Dubai, where it already has a presence. “It’s foolish not to expand now. Rentals have fallen across all stores,” Hirani said.
Another top women’s wear player, Biba Apparels Ltd, is looking to enter revenue-sharing deals with mall owners to link its store’s performance to the amount it incurs for the space.
Sanjay Bindra, director, Biba Apparels, said, “We are in talks with several malls who are offering us zero rentals. We have already signed zero-rental agreements with malls in Bangalore, Baroda and many other tier II cities where we will have a revenue-sharing arrangement based on the transactions.”
Some, like Pantaloon Retail Ltd, are first testing the waters before signing revenue-share agreements. Without providing details, Kishore Biyani, managing director, said, “Yes, we are getting zero-rental deals from malls, but they are for a period of 3-12 months after which there will be revenue sharing.”
Gibson Vedamani, the former chief executive officer of industry body Retailers Association of India (RAI), said such deals are a win-win situation for both developers and retailers, especially in such trying times. “Each mall has its own profile and wants the right mix of brands. Zero-rental offers for the initial period is a good strategy for malls to get in big retailers,” he said. Vedamani said the mall gets high footfalls because of the brand and the retailer can focus on improving the store’s performance.
Plagued by cash crunch, beleaguered grocery chain Subhiksha is exploring the possibility of cutting its operational costs with zero-rental deals even as its future hangs in balance. The company has already entered into some zero-rental arrangements for its stores. R Subramanian, managing director, Subhiksha Trading Services Ltd, said the company is looking only at deals where it gets 3 years of rent holiday and not at revenue-sharing arrangements.
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