Grim outlook for retail real estate : CRISIL

Grim outlook for retail real estate; leaserentals to tumble by another 6 per cent
The views expressed in this article are based on the findings of CRISIL Research’s study, titled ‘City Real(i)ty’,which covers the real estate scenario in 10 Indian cities .This article explains CRISIL Research’s view on the retail market across 10 cities and 48 micro-markets withinthese cities.Post the crash of late 2008, the Indian retail real estate market continued on its downward trajectory duringthe second half of 2009. During this period, retailers revaluated expansion plans and renegotiated withdevelopers to try and bring down their lease rentals in malls.Going forward, CRISIL Research expects retailers to remain cautious about their expansion plans, even as the retail industry shows signs of revival. Despite rentals reducing to realistic levels in malls, retailers aretweaking the size of stores to ensure viability. Retailers are now eyeing the prime high-streets and mallspaces for expansion plans, considering rentals in these areas have corrected notably following reduceddemand. In 2010, we expect retail lease rentals to fall further on an average by 6 per cent in light of the largenumber of upcoming malls.NCR lease rentals slide the mostAmong the 10 cities that CRISIL Research tracks, the National Capital Region (NCR), specifically Noida andGreater Noida, witnessed the sharpest fall in retail lease rentals. The concentration of malls in several areasof NCR gave rise to a skewed demand-supply scenario, leading to relatively high vacancy levels duringMarch-November 2009.1 City Real(i)ty is an assessment of the real estate market scenario in Ahmedabad, Bengaluru, Chandigarh, Chennai, Hyderabad,Kochi, Kolkata, Mumbai, NCR and Pune. The report provides a lucid and comprehensive analysis of the residential, commercialoffice space and retail real estate market across cities and micro-markets within a city.

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