Shopping malls have brought in a new culture to the Indian cities, especially to the Tier 2 and Tier 3 cities. While road side vendors are fighting a losing battle with these malls and their occupants who are willing to sell their products at lesser price, all malls are not profitable.
The vacancy rates between successful and unsuccessful malls stand at 10% across major Indian cities. A total of 3.5 – 4.5 million sq. ft. of space will lay vacant across the country – reports say. The success of a mall is calculated basis vacancy level, rental value, appreciation and tenants profile. Quite a few are average performing malls and very few are successful. The reason for failure is identified as poor management.
An intelligent management will look at a right mix of tenants, space optimization and zoning. Studying shopper behavior and taking feedback from shoppers is important. Various brand categories, need to be managed intelligently to monetize areas that will prove beneficial.
Another reason for poor performance was the inability to define mall type, lack of research and selection of wrong partners. Not all developers were experts at mall management, and hence very few malls are today operating near full capacities. The unsuccessful ones get converted to Grade B malls or make way for new asset classes, paving way for the successful ones to improve. Going forward profitable malls may charge a premium for their sustainable value.