Many small shopping centres in India are transforming into desolate complexes as consumers switch to online purchases and bigger shopping centres for a better shopping experience, according to a report by Knight Frank India. One of the key parameters to determine a shopping centre's health is its vacancy rate. Malls with a vacancy rate exceeding 40 per cent are defined as ‘ghost malls’. The report shows that the count of ghost malls increased to 64 in 2023 from 57 in 2022 despite having a 238 per cent year-on-year surge in the gross leasable area (GLA) of all shopping centres in top Indian markets.
The top eight cities in India, including Delhi, Mumbai, and Bengaluru, saw a downward growth in the overall count of shopping centres to 263 in 2023. During the year, eight new retail centres were inaugurated while 16 were shut down.
As per the report, this trend shows a low consumer demand ringing alarms for the health of shopping complexes. The trend also prompts potential job cuts and economic disruption for small-scale retailers and service providers.
Small retailers see a downward spiral
Private consumption, totalling 60 per cent of the country’s GDP, has seen slanted growth. It rose 3.5% year-on-year in the last quarter of last year while the economy grew 8.4 per cent.
Realty developers on the other hand accumulated a loss of Rs 67,000 crore in revenue last year due to an upsurge in underperforming retail assets totalling 13.3 million square feet of unoccupied shopping area.
Many small mall retailers have found themselves in a maze of downward financial spirals while struggling to compete with the convenience and variety offered by mega-shopping complexes.
Ghost malls on the rise
Retail assets have seen a sharp rise in under performance with 13.3 million square feet of shopping area remaining vacant. This has resulted in the loss of Rs. 67,000 crore ($802.5 million) of revenue for retail developers in 2023.
Around 132 small shopping complexes, with an average leasing area of 100,000 square feet, face the threat of turning into ghost malls – with the vacancy rate climbing to 36.2 per cent in 2023 from 33.5 per cent in 2023.
Subsequently, these centres continue to bear the brunt as retailers exit and the new assets further add to their woes. This further contributes to their already high double-digit vacancy. “It is only a matter of time before such structures pave the way for newer, fancier, and relevant shopping havens for buyers in the long-term,” the report states.
However, the vacancy rate in larger shopping centres with an average leasing area of 500,000 square feet remained at 5 per cent, and 15.5 per cent in mid-level shopping malls.
"Grade A malls have notably excelled, maintaining robust occupancy, foot traffic, and conversion rates, thereby delivering value to their customers," comments Shishir Baijal, Chairman & Managing Director of Knight Frank India. Baijal says that Grade C assets and ghost shopping centres are under performing, pushing landlords to take action to rejuvenate or divest such properties.
