High-Street rentals come down to 4-year lows

Rentals for prime high street locations from Khan Market in Delhi and Brigade Road in Bengaluru to Linking Road in Mumbai have fallen to their 2017 levels or lower after several retailers broke lease agreements or sought substantial cuts due to financial distress.“We have asked the landlords to be flexible and not to let tenants go,” said Sanjeev Mehra, president of the Khan Market Traders’ Association. “Rentals have gone down by 10-25% as landlords are willing to adjust and are even offering to pay in instalments.” Khan Market is the costliest retail space in the country.According to the latest report by CIRIL Network, a real estate consultancy firm, rent in Khan Market in 2020 was Rs 1,275 per square foot per month, compared with Rs 1,350 in 2017 while Linking Road was at Rs 350-800 and is now at 2018 levels, a decline of 20-30% since 2019. Even in the case of Brigade Road in Bengaluru, the rental is down to Rs 150-350, 15% lower than 2017As a result, several retailers have started aggressively expanding to take advantage of the lower rates. “Since last year, we have seen lower rentals in marquee high street locations and obviously capitalised on it by either opening newer stores, upsizing stores in existing high-traffic locations or relocating existing ones to better locations on the same street,” said Sanjeev Mohanty, managing director, South Asia, Middle East and North Africa, Levi Strauss & Co. “Also, due to Covid, high streets tend to be less impacted by restrictions compared to malls.”82024227As consumers increasingly shift online for their purchases, the hope is that physical retail will bounce back to pre-Covid sales level in the next few months. For several retailers, their brick-and-mortar outlets are becoming fulfilment points for ecommerce orders.Last month, Tata Starbucks announced it entered seven cities with 40 new stores last fiscal, its fastest annual expansion in the country. Chai Point opened about 11 new stores last year, all in high street locations.“High street as a category is a resilient one and it fits well with our omni-channel approach—delivery friendly, walk-in and takeaways,” said Amuleek Singh Bijral, cofounder of Chai Point. “We have seen the rental in some of the prominent high street addresses come down by 25-30% and we have gone ahead and done long-term leasing at some of the high streets in our major cities like Bangalore and Delhi.”High real estate costs in India make it important for retailers to generate higher average price realisation per square foot of space to maintain profitability. When the lockdown was enforced, most retailers either shut stores or sought rent waivers from malls and high street property owners. However, with the prolonged closure of shops, both sides agreed to discounted rates until March this year. “Rental at the high street has gone down but leasing is also happening,” said Vibhor Jain, head of consultancy Cushman & Wakefield for north India. “We have done some leasing in Khan Market, Greater Kailash and Safdarjung (all in the capital). Interestingly, in some cases, the same set of tenants, who had left immediately after lockdown, are returning at a lower rental.”Experts said the differential between metros and secondary towns and cities has narrowed. “High streets across the metros and tier 2, 3 cities have been in demand,” said Mannu Bhazin, COO, IQI India. “Although at some places, rentals have gone down to 2017 levels as landlords have become flexible and don’t want the property to be vacant.”

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