In India, 21% or total 57 malls are in a dilapidated state(Ghost Malls) and have resulted in a loss of over $524 million, according to Knight Frank India’s latest report ‘Think India, Think Retail 2022’.
On a mall by mall level, the term ‘ghost mall’ is defined as having less than 40% occupancy. Delhi NCR has the highest number of ghost malls followed by Hyderabad and Pune.
Ghost malls lack the due diligence, design issues, faulty layouts, short of lightening, and anchor tenants that other successful malls have. Because of this, these malls are no longer a success and now just exist as dreary versions of themselves.
“Attempts to breathe life into these assets and attract a good mix of retailers have been unsuccessful, so the revenue generation potential of such malls is far below the expected threshold.” The report said.
Some large format stores in malls have been closed by authorities who claim that the businesses haven’t paid taxes they owe to their malls. Dealing with bankruptcy, demolition of shops and auctioning of the mall property are also underway, said a Knight Frank report.
Knight Frank suggest how to utilise ghost malls on the rise
“There is a huge amount of space in ghost malls that can be used for different purposes,” said Shishir Baijal, Chairman and Managing Director of Knight Frank India during the second annual Global Report on Ghost Malls. “Some retail spaces will be filled by neighborhood grocery stores, food banks and clothing outlets while health care and childcare services will be able to open up too.”
Demolition of the existing buildings and sale of the land can help reduce losses while still drawing in business to let out offices that cannot afford high rents in prime office business parks or popular business districts.
Malls witnessing growth despite rise of e-commerce
The report concludes that, excluding the ghost malls, the number of malls in India has significantly increased. As for 2018, there were only 255 total malls; now the situation is much more promising with 271 total malls and over 15 million square feet.
Despite the increase in e-commerce, quantity in terms of physical retail remains at 95%. The retail industry is expected to grow 10% by 2022 and make up 10% of the GDP. Organized retail sales grew at a CAGR of 24% between 2017-2022.
Despite the pushback in the retail sector due to the pandemic, the operational metrics are recovering, with consumption increasing by 20-25% from the same period in FY2020.
Demand for commercial space in India has been building up for 2 years, and this increase has shaken traditional development patterns. Inorbit Mall’s CEO stated that malls are ready to build by 8-9 million square feet in the next year or so at tier 1 and tier 2 or 3 locations.
The rating agency Knight Frank estimates that between FY22 and FY28, the amount of money spent on organised retail sales can grow by 17%, with the city of New Delhi leading due to its many malls. Hyderabad has the most spaces filled in top-quality malls.
India has a total mall area spread across 92.9 million square feet in 271 operational malls in the top eight markets, which include Ahmedabad, Bengaluru, Chennai, Hyderabad, Kolkata, Mumbai, and National Capital Region (NCR).