Hit by overcapacity, malls in Mumbai, Gurgaon shop for corporates

Many of India''s malls seem to be in trouble as few retail buyers and unaffordable rentals are pushing developers to change them into office complexes reports CNBC-TV18.

Crossroads, Mumbai''s first mall, which was once a glittering retail complex, today is being marketed as an office property. UBS has taken 80,000 square feet here for Rs410 a square foot, on par with retail rentals in nearby malls such as Phoenix and Atria.

But Crossroads is not the only one to go looking for corporates. In Gurgoan, Centrum Plaza on Golf Course Road and projects like Vipul Agora, Orchid Plaza and Time Towers on MG Road are looking out for corporate tenants. That''s because there are just too many malls in the same area.

"In given catchments if there are three malls, between them all the retailers will occupy the space but what happens to the fourth, fifth and sixth mall in the area? If you cannot create an attractive buyers'' basket in the mall, it will be unsuccessful" says Govind Shrikhande, CEO, Shoppers Stop.

Over the past six months, certain locations in Mumbai, Delhi and Gurgaon have seen office properties command rentals at par with retail rents that are otherwise higher. That''s hope for builders. That''s why K Raheja Universal''s proposed mall in Malad in suburban Mumbai too is being positioned as an office complex.

"Even though we thought retail rentals did look attractive at Rs150 - Rs200 a sq foot, we questioned the sustainability and benchmarked it against office space. Now we also find Bandra-Kurla Complex and Andheri in Mumbai out pricing themselves, so we found we could match the retail prices even by doing an office complex there" adds Ashish Raheja, managing director, K Raheja Universal.

While developers in the metros may have found a way out by cashing in on the increasing demand for office space the fate of such malls in Tier 2 and 3 cities remains to be seen. And with 260 malls coming up in metros alone, many more malls might find themselves following Crossroads.