‘Ghost’ malls on the rise in India: Knight Frank

The number of ‘ghost malls’ – shopping centers with vacancy rates of more than 40% – rose to 64 in 2023, up from 57 in 2022, according to the latest report from global real estate consultancy Knight Frank. It analyzes that the disparity between ‘high-performing shopping centres’ and ‘high vacancy shopping centres’, consisting of Class C and ghost shops, has emerged even ‘more starkly’ in 2023. The number of ghost malls is increasing in key cities like Delhi-NCR, Mumbai and Bengaluru.

“This stock (ghost malls) is not attracting widespread interest from retailers due to several constraints such as poor location, outdated design, sold out strata schemes besides dilapidation and unattractiveness of structures,” said the report titled ‘Think India Think Retail – 2024’. say.

Knight Frank’s primary research shows that with the arrival of a number of new malls in India, retailer preference for Class A assets is at an all-time high. As the new malls opened, many retailers prepared to expand their presence. This led to high double-digit vacancies in Grade C structures as the performance and operating metrics of better-performing shopping centers improved, the data showed.

“The high vacancy rate of such properties has consistently impacted the vacancy rate in India for the Tier 1 cities and presents a distorted picture despite an 87 bps decline in mall vacancy rates from 16.6% to 15.7% .”

If these centers are destocked, the overall health of malls in India will improve dramatically, the report said. It adds that the differential vacancy resulting from such exclusions better reflects the performance of shopping centers in the top markets.

“The pan-India vacancy rate in the top 8 markets drops from 15.7% to 7.4% after this analysis, and all cities covered represent a healthier picture.”

In contrast, while Class A shopping center operating metrics continue to improve, asset-level vacancy rates are lower than ever before. Likewise, the reverse is also true. “Previously struggling malls continue to face perennial problems as retailers leave and new assets compound their problems, sharply increasing their already high vacancy rates by double digits,” the report said.

The number of malls cutting back on “ghost mall” inventory has increased, the report said, adding that the health of malls in the top 8 markets has improved significantly as vacancy rates decline. The report notes that it is only a matter of time before such structures pave the way for newer, more luxurious and more relevant shopping havens for buyers.

“Given that nearly USD 798 million (INR 67 billion) is tied up in the gross leasable space of these non-performing malls, consolidation of retail portfolios by institutional investors and proactive steps by mall developers to either repurpose or demolish these structures will create new opportunities . opportunities for interested players to monetize land. “

Of the 82% of stores in the top 8 cities, NCR with 23%, Bengaluru with 18% and Hyderabad with 15% constitute the top 3 cities with the maximum number of stores. Mumbai had a 13% share of the total number of stores in the top 8 cities.

Overall, the North region has the “largest gross lettable area” of a total of 4.3 million m², followed by the South and West regions with 3.5 million m² and 3.2 million m². The East region, on the other hand, has the smallest footprint at 0.7 million square meters.

Within Tier 2 cities, Lucknow emerged as a “key player”, with an impressive 18.4% “gross leasable area” share among its counterparts.