Retail space rentals drop up to 30% as Covid-19 second wave worsens

The trends of the previous two quarters revealed that the retail segment was gradually inching towards pre-pandemic level business

With Covid-19 disrupting normal economic activities, the demand for office and commercial space has come down resulting in a significant drop of up to 30 per cent in monthly rentals across the key high street markets in top cities.

The country's iconic retail hub in Delhi's Khan Market has witnessed a reduction in rentals by as much as 8-17 per cent during the first quarter of 2021 compared to the same period a year ago. Likewise, high street markets of Kala Ghoda, Bandra Linking Road, and Fort in Mumbai, Brigade Road and Commercial Street in Bengaluru have seen a decline anywhere between 5 per cent to 17 per cent, according to data available with property consultant Anarock Research.

At Indiranagar in Bengaluru, the rentals range between Rs 225-250 per sq feet.

The retail sector has been one of the worst affected due to the pandemic since early 2020. With almost zero sales amidst lockdown and thereafter as well for few months, we saw retailers closing their stores or even curtailing their future expansion plans. As a result, the average monthly rentals across the major high street retail markets mostly saw corrections across cities," said Pankaj Renjhen, COO & Joint MD, Anarock Retail.

The trends of the previous two quarters revealed that the retail segment seemed to be on the verge of recovery and was gradually inching towards the pre-pandemic level business. However, the second wave has once again crimped this growth, he said.

Almost zero sales seriously impacted the retail sector during the first lockdown. Soon thereafter, many retailers closed down their stores permanently or curtailed their expansion plans. Given this sombre scenario, the average monthly rentals across major high street retail markets began correcting by anywhere between 2 per cent and 30 per cent, Anarock Research data reveals.

The country's most expensive retail hub - Khan Market in New Delhi saw a drop of between 8 per cent and 17 per cent in average monthly rentals in Q1, 2021, as against Q1, 2020. The average monthly rentals hovered between Rs 1,000 per sq feet to Rs 1,100 per sq feet. Rentals dipped 8-17 per cent in Bengaluru's retail hubs of Brigade Road with current monthly rentals between Rs 250 and Rs 275 per month, while in Indiranagar, the rentals range between Rs 225 and Rs 250 per sq feet.

Mumbai also saw about a 5-10 per cent decline in rentals in key markets as of Q1, 2021 as against the previous year. The current average monthly rentals at both Kala Ghoda and Fort areas are around Rs 450-500 per sq. feet each, while at Bandra Linking Road it stands at Rs 750-900 per sq feet.

Kolkata also saw a decline in its high street rental rates, Gariyhaat Rash Bihari Avenue being the worst affected in the city with rental rates dropping to Rs 160-220 per sq feet in Q1 2021 from Rs 250-260 per sq feet in Q1 2020.

In contrast to all major cities, Hyderabad saw an increase in average high street rental rates in areas like Gachibowli, Banjara Hills, and Jubilee Hills as much as 7-15 per cent during this period. The average monthly retail rentals in Gachibowli are now at Rs 115-125 per sq feet Last year, they were Rs 100-120 per sq feet. In Banjara Hills 12, the average monthly rentals increased from Rs 120-130 per sq feet in Q1 2020 to anywhere between Rs 135-140 per sq feet.