Realty demand to stay sluggish in H1 2014

 Brigade Road, Bangalore's traditional high street market, witnessed an increase in rental values in the second half (H2) of 2013 when compared to H1 of the year, though many of the shopping hubs in South Bangalore saw rentals declining, according to CBRE’s latest India Retail Market View.

However, the retail market in Bangalore is expected to remain sluggish during the first half of 2014, owing to lack of major mall launches foreseen during the period.
With respect to project completions, certain projects from 2013 are expected to spill over and come on stream during the first half of 2014, the report said.

Supply constraints from the perspective of organized retail are expected to continue to fuel the demand for retail space across prominent high street locations, which would result in upward pressure on rentals at such locations. Emerging locations in and around Bangalore are expected to continue to witness occupier interest from varied retail formats, the report said.

Across the country, retail space supply in shopping malls grew by 78 per cent during 2013 to 4.7 million sq ft in seven major cities, with global players expanding their presence in the country, property consultant CBRE said.

"Despite ongoing uncertainty, retail real estate witnessed good activity during 2013 with a number of international brands entering and expanding across key cities," CBRE South Asia Chairman and Managing Director Anshuman Magazine said.

Although domestic retailers have been performing steadily, they face competition from global retail groups, especially in the apparel and F&B segments, Magazine said.

The total organized retail supply for the year 2013 in the country stood at approximately 4.7 million sq ft, witnessing a strong year-on-year growth of about 78 per cent, against total mall supply of 2.5 million sq ft in 2012.

Much of the supply in 2013 was concentrated across Tier II cities; however, 2014 is likely to witness supply addition in the key hubs of NCR and Mumbai.

Prominent global players such as Starbucks, Krispy Kreme, Dunkin Donuts, Forever 21, Zara and Superdry expanded their presence across the country’s leading cities during H2 2013.

Retailers in the luxury and bridge-to-luxury segments were particularly active, with brands such as Brooks Brothers, Missoni, Michael Kors and Emilo Pucci making inroads into the country’s market places.

The demand from global retailers in the Delhi NCR and Mumbai markets remained buoyant as more retail groups sought space in prime shopping centers, as opposed to standalone high street outlets, the consultant observed.

"Most of the supply in 2013 was concentrated across Tier II cities; however 2014 is likely to witness supply addition in the key hubs of NCR and Mumbai," CBRE said.
Going forward, limited availability of quality retail space in core locations is likely to pose a greater barrier to new retailer entry in a number of key markets including Delhi NCR, Mumbai and Bangalore as opposed to prohibitive rentals.

 On account of such constraints in quality supply, select developments are likely to witness higher than average increments in rentals because of retailer preferences for such spaces.