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  1. 1. GOOD<br />MORNING<br />INDIA<br />
  2. 2. India Organized<br />Retail Market<br />Diagnosis & Outlook<br />Group - 01<br />
  3. 3. Objective of the study<br /> An attempt to foresee the demand-supply* dynamics of the modern retail market in India till 2012 <br />Presumption – penetration of organized retail will be higher in regions with a higher proportion of middle and high income house holds<br />*Organized retail space represents the supply side<br />
  4. 4. Indian Retail Market<br /><ul><li>Retail sector is categorized into two segments
  5. 5. Unorganized retails
  6. 6. Organized Retails
  7. 7. Dominance of unorganized Retail
  8. 8. Expected growth rate of the total retail market during 2009-12 is around 30% p.a.
  9. 9. According to MCI - a positive sum game between organized vs. unorganized retails</li></li></ul><li>Indian Retail Market<br /><ul><li>Retail sector is not only expanding but also modernizing
  10. 10. The economic slow down of 2008-09 has brought some important changes in rental in ORMs
  11. 11. Post Slowdown retail (organized) sectors is showing some significant trends :</li></ul>Focus on food and related products<br />Attention on tier1 and tier 2 cities<br />
  12. 12. NCR<br />KOLKATA<br />MUMBAI<br />HYDERABAD<br />PUNE<br />BENGALURU<br />CHENNAI<br />
  13. 13. NCR<br />
  14. 14. Market Review<br />Buyers have adopted new edge shopping<br />Retail space & Multiplex under same roof<br />Retail space Multiplex Amusement park<br />Exclusive Malls for Designer- wear<br />
  15. 15. (NCR)<br />
  16. 16. Operational Mall Analysis<br />
  17. 17. Outlook<br /><ul><li>Indian economy has been showing signs of stability, thereby creating a positive impact on consumers' sentiments as well as on the retail industry
  18. 18. Developers are now contemplating projects across the NCR which have dedicated commercial office space within the same premise
  19. 19. Sizeable vacant stock in malls of various micro-markets of the NCR still remains a major concern
  20. 20. Retailers are now entering into a lease contract which is a revenue sharing format
  21. 21. Coming year is very good for ORM of the NCR for demand-supply equation</li></li></ul><li>Hyderabad "City of Pearls"<br />
  22. 22. Market Overview<br />Hyderabad, the capital city of Andhra Pradesh with more than 4 million people is one of the largest metropolitan cities.<br />Besides being one of the most preferred IT destination it has undergone a sea change on the Real estate front due to:<br /><ul><li>Increase in job opportunities due to increase in IT sector.
  23. 23. Increase in per capita income level.
  24. 24. Exposure to various retail brands & market trends.
  25. 25. The emergence of new concept retailing like the SVM@36 Mall at Jubilee Hills which is primarily a gaming mall and the KFC Freeway pick-up counter at Hi-tech City, Madhapur</li></li></ul><li>Operational Mall Analysis<br />Majority of the large format malls are present in the peripheral & suburban regions of the city.<br />* CBD : Central Business District<br />
  26. 26. Upcoming Supply Analysis<br /><ul><li>Approx. 3.62 mn.sq.ft. of retail supply is expected to enter hyderabad by 2012, with the peripheral markets accounting for 66% of the total supply
  27. 27. However, the total potential supply in the peripheral region is anticipated to be completed by the end of 2012, only 22% of the supply is expected to enter the market.
  28. 28. This is because a large quantum of key residential projects in the peripheral areas has been deferred due to the economic slump. Since most of the major retail malls are highly dependent on the residential catchments of the area, the deferment of these residential projects in turn led to the deferment of several retail projects as well.</li></li></ul><li>Rental Profile<br /><ul><li>Of late, due to the high rentals payable and low revenue generated by retailers, the concept of revenue-sharing has emerged.
  29. 29. However, in Hyderabad, only the new malls which were launched in 2009 have a revenue sharing model.
  30. 30. Most of the food courts in Hyderabad are on a revenue sharing model.</li></li></ul><li>Interesting trends in the high streets of the city during the economic slump:<br /><ul><li> Micro Market switch carried out by some of the tenants because of:
  31. 31. High rentals quoted by landlords in Banjara Hills and Jubilee Hills at the time of signing.
  32. 32. During the slump, a lot of tenants, who could not sustain rentals for the space they had occupied, decided to vacate and switch to a different micro-market offering much lower rentals.</li></ul> The inclusion of the Sub-lease clause due to the difficulties faced by tenants during the slump<br /><ul><li> A tenant can sublease a portion of the property to a mutually agreeable 3rd party in case they are unable to sustain in the micro-market.
  33. 33. The landlords are also open to this idea as otherwise they would lose the current tenant to a different location eg. Pepe Jeans sub leased a portion of its premises to Cakes & More in Jubilee Hills and Heritage to Reebok in Himayatnagar.</li></li></ul><li>Product Category Distribution<br />Tenant profiling of the malls was carried out in order to understand the space occupied by various product categories.<br />
  34. 34. Mall: Operational Profile<br />With the onset of the economic slowdown, cost has been a major concern for mall developers and retailers alike. From the perspective of a retailer the costs involved are:<br />Hence it can be concluded that:<br /><ul><li>Rent is an important factor out of the various components of cost for a retailer.
  35. 35. Retailers are also liable to pay Common Area Maintenance (CAM) charges on a monthly basis for the common area used by all tenants (such as the lobby, elevators, restrooms or parking lots).
  36. 36. The least CAM charges are witnessed in Old CBD areas, whereas the highest are recorded in the peripheral micro market</li></ul>It is estimated that the Organized Retail Market will double from the existing Rs. 14 billion to Rs. 28 billion by 2012. However, during the same period, the Real Estate Retail Potential will increase to Rs. 58 billion. This mismatch, will lead to an oversupply situation of 3.41 mn.sq.ft. in 2012.<br />
  37. 37. KOLKATA “City of Joy”<br />
  38. 38. Market overview<br />Conflicting nature of affluence, coupled with restrictive government policies.<br />First mall in the city (Forum, Elgin Road) launched in 2003 and today it boasts of around 8 large format malls.<br />Recession: Lack of interest shown by retailers, lack of funding across the board, rise in construction cost, lack of consumer demand and acute catchment problem.  'wait-and-watch’.<br />Several malls presently being converted into office and residential spaces.<br />'Haute Street' on the Eastern Metropolitan Bypass turned into commercial space for office lease.<br />
  39. 39. Operational Mall Analysis<br />3.4 millions square feet of retail space.<br />
  40. 40. Upcoming Supply Analysis<br /><ul><li>Cumulative space blocked due to delay in completion timelines.
  41. 41. Spill over spaces from previous years, expected to be completed way back in 2006.
  42. 42. Eastern Kolkata maximum (39%) and Rajarhat 0.4 mn. Sq. ft.
  43. 43. Residential and IT hub  Office cum retail spaces.</li></li></ul><li>Upcoming supply analysis(Negative anticipation)<br /><ul><li>Lack of funds
  44. 44. Undeveloped infrastructure
  45. 45. Economic downturn
  46. 46. Number of high-profile retail projects taken off the market and reconfigured.
  47. 47. Firangee Bazaar, a retail project scheduled to come up on EM Bypass, converted to office space.
  48. 48. Space Mall by the Space Group converted to residential use.</li></li></ul><li>Rental Profile<br /><ul><li>Relatively stable market.
  49. 49. Retail rentals dipped to 10% during 2008-09 compared to national average of 30-40%.
  50. 50. Variations among rentals on different floors. Ground floor rentals 15-40% higher than first floor rentals.
  51. 51. High rentals and low revenues  Revenue sharing.
  52. 52. Rental correction to the tune of 8-12%
  53. 53. Price rose rapidly  Deadlock in new transactions.
  54. 54. Several stores reportedly seen closures in these markets.
  55. 55. 3,500 sq.ft. flagship Adidas lifestyle store on Camac Street shut shop on grounds of 'irrationally high' rentals.</li></li></ul><li>Product Category Distribution<br />Malls (% of retail stock area)<br />Anchor tenants<br />Majority: Apparels and accessory brands. <br /> Multiplexes. <br />Vanilla Tenants<br />Majority: Apparels and Footwear stores.<br />F&B (restaurants & coffee shops)<br />High streets (number of stores)<br />Majority: Apparels and accessory<br />F&B<br />
  56. 56. Outlook<br /><ul><li>Year 2010 not expected to witness much change in Kolkata's retail outlook.
  57. 57. Most of the prestigious projects in pipeline will see the light of the day only in 2011 and 2012.
  58. 58. Economic adjustments of 2009 did not impact Kolkata much.
  59. 59. Economic improvement has not had as much an impact on the conservative Kolkata shoppers’ sentiments as in bigger cities.
  60. 60. Slowdown in construction not negative
  61. 61. Helped in maintaining good demand-supply.
  62. 62. ATD: Revenue generated per square feet.
  63. 63. Rs. 416 (Rajarhat) to 782 for vanilla and Rs. 375 (Rajarhat) to 570 for anchor.
  64. 64. By 2012: RERP (83 Billions) > ORM (76 Billions)  Medium Oversupply of 0.69 m. sq. feet.</li></ul> Growing confidence  More occupants Recovery from ill-effects of over-supply.<br />
  65. 65. PUNE “City of Virtue”<br />
  66. 66. Market Overview<br /><ul><li> One of the fore-runner in the development of organized retail in tier II.
  67. 67. Past few years ,the onset of several new format retailing.
  68. 68. Retail projects in Pune comprise smaller area format and few operational malls .
  69. 69. 2.77 millions square feet of mall space.
  70. 70. Major large format malls located primarily in the eastern region and others in central Pune.</li></li></ul><li>Upcoming supply analysis<br />
  71. 71. Rental Profile (Malls & Highstreet)<br /><ul><li>Variations in rentals in different locations.</li></li></ul><li>Product Category Distribution<br />Malls (% of retail stock area)<br />Anchor tenants<br />Majority: Apparels and accessory brands. <br /> Multiplexes & Hypermarkets. <br />Vanilla Tenants<br />Majority: Apparels and Footwear stores.<br />F&B (restaurants & coffee shops)<br />High streets (number of stores)<br />Majority: Apparels and accessory<br />Personal care, watches & jewellery<br />
  72. 72. Outlook<br /><ul><li>Retailing Pune Has shifted its focus from small retail stores to large format mall
  73. 73. Organized retailing is picking up in the western region of the city due to large-scale IT/ITES development
  74. 74. In forthcoming months the city is expected to witness a gradual incline in rental values, primarily in central and eastern market.</li></li></ul><li>MUMBAI “City of Dreams”<br />
  75. 75. Market Overview<br /><ul><li> Financial capital of the country and contributes to around 5% of the country’s GDP
  76. 76. Remains foremost in terms of the real estate development
  77. 77. Current Total Organized Market Area is 8.72 mn.sq.ft. Expected to increase by around 129% over the next 3 years
  78. 78. Pace of the retail estate development has outgrown the organized retail business over the last 4.5 years
  79. 79. Classified into 4 regions – Island City, Western Suburbs, Central Suburbs and Navi Mumbai
  80. 80. Vacancy rate is high in Central Suburbs, Western suburbs and Navi Mumbai</li></li></ul><li>Past Vs Future Supply<br />Past<br /><ul><li> There has been a mismatch in the anticipated and actual supply
  81. 81. Reasons for these delays – lack of funds, poor planning and designing, infrastructure issues, economic slowdown etc</li></ul>Future<br /><ul><li>Mumbai is set to witness 11.26 mn.sq.ft. of fresh retail space between 2010 and 2012
  82. 82. Central suburbs would experience maximum influx of retail space (around 62% of the total upcoming retail space).</li></li></ul><li>Rental Profile<br /><ul><li> Retail rents in Mumbai is known to be amongst the most expensive in the world
  83. 83. The anchor tenants get higher discount rates when compared to the vanilla tenants
  84. 84. The rental structure varies across the 4 regions
  85. 85. Rental values in malls have appreciated around 9% during March 2009 – February 2010.
  86. 86. The rent across the country was cut down, however, in Mumbai the rents went up.</li></li></ul><li>Product Category Distribution<br />
  87. 87. Outlook<br /><ul><li> ATD is an important measurement of how successful a retailer is. It is the revenue generated per square foot of the store.
  88. 88. Since Central suburbs is expected to experience the highest upcoming supply, it is likely to see a large amount of oversupply.
  89. 89. Western suburbs is likely to see a lot of residential growth followed by organized retail activities. The challenge would be to keep a balance between organized consumer market and upcoming space supply of organized retail.
  90. 90. During the period 2009-12, the ORM is expected to grow from Rs. 74 billion to Rs. 203 billion RERP would increase from Rs. 79 billion to Rs. 216 billion.
  91. 91. The oversupply is expected to fall over the coming years. This is expected to stabilize the retail rental space</li></li></ul><li>BENGALURU<br /> “City of Gardens”<br />
  92. 92. Market Overview <br /><ul><li>16 operational malls estimated to be 30 by 2012
  93. 93. Increased penetration of foreign brands-apparel, F&B
  94. 94. Muted Response to Mixed formats
  95. 95. Pending projects due to recession
  96. 96. Young demographic of the state with high aspiration</li></li></ul><li>Upcoming Supply Analysis<br />
  97. 97. Rental Profiles <br />
  98. 98. Outlook<br /><ul><li>Expected growth post recession and stabilization
  99. 99. Major consumers from IT/ITES thus high demand for retail.
  100. 100. Convenience Shopping with exception to West Zone
  101. 101. over supply and high vacancy rate.
  102. 102. Metro Project.</li></li></ul><li>CHENNAI<br /> “City of Filter Coffee”<br />
  103. 103. Market Overview <br /><ul><li>4th Largest City of India
  104. 104. High Rate of Urbanization
  105. 105. Slower pace of organized retail
  106. 106. Presence of mere three malls in the city
  107. 107. Value driven market and conservative
  108. 108. Largest existence of high market</li></li></ul><li>Upcoming Supply Analysis<br />
  109. 109. Rental Profiles <br />
  110. 110. Outlook<br /><ul><li>7.4 mn sq ft retail space expected
  111. 111. IT corridors and MRT stations a prospect
  112. 112. Foreseeable Decline in rentals
  113. 113. Possible threat of over supply.
  114. 114. 8%-43% oversupply from 2010-12</li></li></ul><li>
  115. 115. Thank You<br />