JLL Report says, PE investments touch Rs 5,500 crore in retail real estate since 2015

According to property consultant JLL India, the private equity investments have touched around Rs 5,500 crore in retail real estate segment since 2015. This is because the interest for superior quality shopping malls has been growing with time.

The report added that the increased investments would uplift the supply of retail spaces. Besides, it is also predicted that by 2022 about 90 shopping malls would come into the market of major cities in the country.

The report said, “The Indian retail sector has attracted a cumulative of Rs 5,500 crore between 2015 and Q1 2018. Close to Rs 3,000 crore in 2016 and Rs 700 crore last calendar year.”

Till now, JLL has reported two major deals in this segment this year. These include – 1) Blackstone bought 85 per cent stake in Nitesh’s Pune mall for Rs 300 crore, and 2) Phoenix, CPPIB bought L&T land for Rs 650 crore in Bangalore

Owing to the growing interest of private equity investment companies, developers of retail malls are motivated to re-evaluate their dossier. Besides, they have started including three determining factors for success of any mall. These factors – product, catchment and customer experience.

Showing confidence in the future trends of retail real estate sector of India, private equity investors have started to make large value as well as long-term commitments towards the sector.

The report stated, “It is estimated that the future pipeline of 5 years (2018-22) will be 90 malls spread over 34 million square feet. Of the expected new malls, 62 per cent will be in the category of superior malls while only 10 per cent will remain in the poor category. About 28 per cent malls in the next five years will be considered average.”

Ramesh Nair, CEO and Country Head of JLL India said that using the past experiences, the developers are learning to create superior quality malls.

Nair further added, “Some of the key factors determining the success of malls will be design, varied tenant mix, strength of catchment, infrastructure and amenities. But an increasingly influencing factor will be the mall’s ability to counter shoppers’ expectation for ‘experience’.”

He also said that from the upcoming supply, the superior quality malls would do well. This is because they possess the right fundamentals.

“We will continue to see stock consolidation as some of the weak properties will divert to non-retail uses like small offices, hospitals, educational, healthcare and survive,” he added.

The report further estimated that vacancy would depend on the quality of the upcoming supply of malls.

Where superior grade malls are estimated to witness low vacancy of around 8 per cent, average malls are likely to see the vacancy levels of 17 per cent. On the other hand, vacancies of poor grade malls will touch 40 per cent. In future, this will make poor grade malls less business-friendly for brands.