DLF, Parsvnath and other real estate developers have lagged behind by 54% in their target to open retail space even as retailers’ vacancy climbed to 16% last year. Cash-strapped real estate developers failed to deliver eleven million square feet of retail space in 2008, according to a study released by Cushman & Wakefield. Out of the proposed 74 malls in key eight cities at the beginning of 2008, only 34 were delivered through the year. Developers in NCR lagged the most with a supply of 4.7 million square feet compared with the earlier target of 7.1 million square feet. Developers may continue to restrict their supply, or go slow on retail space by a similar amount in 2009 across key major cities.
“For any developer, the vacancy level should not cross over 5%. The vacancy level of 16% suggests that most of the malls across India are finding it difficult to manage their operational cost,” said Rajneesh Mahajan, director of retail services at Cushman & Wakefield. The reason for the shortfall was the mismatch between the potential and actual occupancy. The Indian organised retail sector grew at 25% in 2007. Anticipating the growth of retail sector at above 35% in the coming years, developers had announced big retail projects. However, owing to economic slowdown, the growth of the retail sector has come down to 15% in 2008, resulting in developers deferring their projects for 1-2 years. “From the projected supply of 20.8 million square feet space in the first quarter of 2008, we will see a spill over of about ten million square feet development in 2009-10. Lack of funds leading to construction delays and cautious expansion by retailers have resulted in slow absorption of retail space in malls,” said Mahajan.
The post Developers Unable to meet Retail Space Target appeared first on India Investment Property.
