How do location and tenant mix impact mall performance in Mumbai?

December 11, 2015 / By  

Lack of recreation space in Mumbai makes a visit to malls an obvious choice for leisure. It is during such visits that one wonders why some malls perform much better than others. While many factors determine mall success, here I focus on the degree to which location and anchor tenant mix influence performance in Mumbai, measured by the average vacancy rate as at 3Q15.

My study covers over 40 retail properties with a minimum gross leasable area of 100,000 sq ft. Location characteristics considered are strength of primary catchment[1] and location at arterial road[2] and corner plots[3]. Tenant mix characteristics considered are the presence of the following anchor tenants: multiplex, department store, hypermarket, and food and beverage (F&B).

Comparison of vacancy rate based on locational characteristics
Source: REIS

A dense primary catchment makes the most significant difference to performance – properties with strong primary catchments have half the vacancy rate of properties with weak catchments. Corner plot location is the second most important determinant due to visibility and ease of entry/exit. Arterial road location ensures easy access and strong visibility, resulting in lower vacancy rates. All successful malls in Mumbai are located along arterial roads that are north-south orientated, historically the growth pattern of Mumbai.

Comparison of vacancy rates based on anchor tenant characteristics
Source: REIS

F&B product mix makes the biggest difference to performance. Hypermarkets and department store anchors play an equally significant role, followed by multiplexes. The footfall generating benefits of F&B and hypermarket anchors are reflected in attractive lease terms. Food court tenants pay 60-70% lower rents compared to the mall average after considering access to the shared food court area which they enjoy.

As the retail trade faces increasing competition from e-commerce, shopping centres in Mumbai can significantly boost their performance by improving tenant mix, a factor within the control of centre owners.

[1] Qualitative assessment based on population and supply of retail space in the vicinity.
[2] Western Express Highway, Eastern Express Highway, New Link-Linking Road, SV Road, LBS Road.
[3] Plot having public access roads abutting two adjacent sides.

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