The race for retail space in Bangalore is turning chaotic. With rising income levels attracting both local and international retail brands, the city’s overall vacancy rate dropped to a historic low level of 0.3% between April and June, 2007, according to a Jones Lang LaSalle (JLL) report.

In contrast, the National Capital Region (NCR), the leader in mall stock, recorded double-digit vacancy rate in the second quarter, averaging at 16.3%. In Mumbai and Chennai the vacancy rate stood at 8.6% and 5% respectively during this period. Hyderabad’s vacancy rate dropped to 0.8%, a record low for the city.

The competition for quality retail space in Bangalore, the country’s second fastest growing city, is getting tougher owing to limited supply. Bangalore’s existing retail space is estimated over 2 million sq ft, a significantly low base compared to peer cities.

And fueling this demand are supermarket chains such as Reliance Fresh, Subhiksha, Food World, Fab Mall among others, who are chalking out aggressive expansion plans in a bid to cater to the high consumer demand, the report said.

This demand-supply mismatch has also led to an increase in rents, which have gone up by 7.1% during the three month period, over the Q1FY07 levels. The average rental values in prime malls stood at Rs 150 per sq ft per month, according to the report.

“Rentals in Bangalore are expected to increase anywhere between 10-15% over the next two quarters. Rental values will continue to witness a northward trend owning to limited availability of professionally managed retails space,” Jones Lang LaSalle Meghraj local director (corporate solutions) Karun Varma said.

In the pipeline is about 5.5-7 million sq ft of mall space under construction across the city, spread over 15 projects. This supply is expected to be completed by end 2008. This apart, the city’s landmark retail project - the UB City Mall located in the central business district (CBD) will add 120,000 sq ft to the city’s retail stock by the fourth quarter of 4Q07.

In this context it must be mentioned that retail rents in Bangalore are much lower when compared to the NCR and Mumbai. Rental values for prime locations in Delhi were at Rs 350 per sq ft per month. In the suburbs of Gurgaon and Noida rents stood at Rs 275 per sq ft per month, while those in Ghaziabad were Rs 210 per sq ft per month.

Similarly rents across Mumbai’s prime city malls and high streets stood at Rs 350 per sq ft per month, with the high street of Bandra Linking Road attracting the highest retail rent at Rs 450 per sq ft per month.
Source: Economic Times, 15 Sep, 2007

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