a quarterly report by - Technopak

Rightsizing of the Mall
Becoming Crucial
perspective
a quar terly repor t by
Volume 02 / 2009
04
Mall developers in India joined their peers across the globe in developing large malls and launched many
ambitious projects with size greater than 1 Mn sq.ft. Size gradually became important for Indian mall
developers. Many developers got in the race to build the biggest mall in a city/town more as an ego fulfilment
exercise overlooking the importance of catchment needs, demand-supply scenario and sustainability
aspects. This trend was not restricted to just mega malls in metropolitan cities and was soon seen in
other cities like Ahmedabad, Nagpur etc. too. In some cases, the sheer size of these projects along with
the supply of other upcoming retail real-estate developments didn’t fit very well with the catchment’s retail
appetite resulting in an oversupply scenario. Also, with the change in economic scenario, low consumer
sentiment and lack of footfalls, many retailers became cautious about their expansion plans. Retailers are
either walking out of malls or rightsizing their portfolios to overcome their challenges.
In face of the oversupply of retail space and resulting difficulties in getting tenants on board even during the
construction phase of such large projects, the developers are now making necessary changes by tweaking
the size of the mall to suit the demand-supply scenario. Mall developers now are becoming increasingly
aware of the importance of getting the size of the mall right. The perception of what the right size of a retail
real-estate development should be, is undergoing a significant shift.
There have been different views on mall sizes. A large mall would bring all the required components under
one roof however, it would be difficult to lease a very large mall and get multiple anchor tenants. On the
other hand, a small mall may not be able to have the right retail anchors and entertainment mix. We feel the
right strategy is to base the size of the mall on the size of its catchment area, its purchasing capacity, need
gaps and existing and potential supply of retail space in the catchment.
Right sizing would start from the planning stage involving a thorough study of the needs of the catchment,
existing supply and potential competition. This would also benefit the developers with regards to completion
on time, lower spend on attracting retailers and lower capital requirement. In addition to right sizing the
mall, developers also need to differentiate their malls through elements like entertainment, handicrafts
etc.
| Volume 02
Retail Real-estate Trends | 14