Retail malls to add 30-35 mn sq ft, to invest around Rs 20,000 crore in 3-4 years: Report

Retail mall operators are on course to add 30-35 million sq ft of space in the next 3-4 years at a cost of Rs 20,000 crore, spurred by the strong recovery in retail sales last fiscal, according to a report.

The expected addition is one-third of the existing space available with retail mall operators.

The recovery is expected to sustain, as broad-based consumption across geographies as well as sectors fortifies demand resilience, Crisil Ratings said in a report on Wednesday.

The findings of the report are based on the numbers provided by 28 malls.

These malls have leasable space of around 18 million sq ft across 17 cities, with a total debt of over Rs 8,000 crore.

The revenue of mall owners is estimated at 125 per cent of the pre-pandemic level this fiscal, it said.

Area addition will be supported by continued investor interest in malls, as evident from investments in new assets, the report said.

This, along with comfortable balance sheets, will keep credit risk profile of mall owners stable despite the sizeable capex plans, it said.

According to Anand Kulkarni, a director with the agency, malls are expected to attract investment of over Rs 20,000 crore over the next 3-4 years.

The large upcoming supply has two characteristics, as per the report.

First, it is geographically well diversified, with tier-2 cities likely to account for a quarter of the upcoming mall area. This underscores the increasing depth of consumption beyond the metros and tier 1 cities, which traditionally saw the maximum interest from mall owners.

Second, thriving investor interest will help fund area expansion, stated the report, which estimates that 15-20 per cent of investments towards new supplies will be funded by investors such as private equity, global pension funds, and sovereign wealth funds.

The launch of the country's first retail assets-led Real Estate Investment Trust (REIT) this fiscal also shows rising investor interest, says the report.

According to Saina Kathawala, an associate director at the agency, mall owners are likely to report a second consecutive year of high performance this fiscal, with revenue growth of 7-9 per cent, following the robust 60 per cent growth last fiscal.

This strong performance has helped malls sustain healthy occupancy of 95 per cent, it said.Sectors such as jewellery, restaurants, sports and electronics have recovered well above their pre-pandemic levels and maintained double-digit growth this fiscal.

Some sectors such as apparel and footwear, have also seen strong recovery, albeit with some tapering this fiscal.Multiplexes, which are typically strong footfall drivers for malls, are also seeing healthy performance with improved content availability.