Recent data indicate mall rentals across key cities on average declined 14% qoq in 1Q09, while main street rentals declined 12% qoq. Hyderabad and Noida witnessed the sharpest decline in mall rentals of 27% and 17%, respectively, while the fall in main street rentals was the highest in Mumbai (19%) and Delhi (15%).
With developers delaying mall projects, Mumbai, Bangalore, Chennai and Hyderabad did not have any new mall completions in 1Q09. Further delays in planned supply of retail space are likely.
Given high vacancy levels (15% in Mumbai and 20% in NCR) and subdued demand, rentals are likely to remain weak in the near-term. Developers are increasingly shifting to a
minimum guarantee + revenue sharing arrangement to attract/retain tenants.
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