Leasing activity in malls gains momentum

• Chennai’s retail market registered a net absorption of 30,000 sq ft after a lull in the past two quarters. The retail segment in Chennai began to witness a gradual recovery as restrictions were eased and the festive season in the quarter also aided the acceleration of footfall in malls. This helped support the improvement in business sentiment and confidence among retailers.
• High streets sustained their growth momentum witnessed in 3Q21. Many brands which had leased spaces in average malls are now evaluating high streets as an option as part of business and store optimisation measures.

No completions recorded in the quarter

• No new malls became operational in 4Q21.
• Supply pipeline looks weak until 2022 with most proposed malls yet to break ground and many planned malls being shelved or put on hold.

Rents and capital values remain largely stable

• Rents remained largely stable across all malls. However, due to the increasing vacancy levels in the past few quarters, mall developers remain flexible and continue to offer some sort of discounts on a case-by-case basis.
• Rents in high streets also remained largely stable.

Outlook: Demand for mall space set to improve at a gradual pace

• The onset of the Omicron variant and rising cases has resulted in restrictions being imposed by the state government. This is likely to impact retailers and, thus, affect leasing activity. We do, however, expect this to be temporary.
• Retailers and consumers alike have now learnt to mitigate the risks imposed by the pandemic. Hence, demand for mall spaces is set to improve gradually once the impact of the virus is absorbed.