By Asmita Dey & Rishi Ranjan Kala
Even as the retail sector is steadily choosing up aided by pent-up demand and festival presents, retailers nonetheless anticipate recovery to stretch across 2021. Many in the sector worry the situation could compel mall tenants to ask for more rental waivers from developers and landlords post-March 2021.
However, mall owners, several of whom have extended slab-sensible discounts till March, say that rents are currently down by as a lot as 25% in some areas and rentals as nicely as footfalls would now be determined only following government rolls out the immunisation programme to verify the pandemic.
The uncertainty on rental negotiations in FY22 is due to Covid altering buying choices as job and earnings uncertainty and movement restrictions are feared to additional influence customer and household spending.
BCG, in a December report on how India shops, spends and saves in the new reality, stated, “In apparel, purchase decision was primarily triggered by social/celebratory occasions (accounting for 42% of triggers).
However, due to social distancing norms and an overall reduction in physical interactions, the social/celebratory occasions no longer hold much sway in purchase decisions. Instead, the single largest trigger is now functional — clothes for home workouts, an additional pair of jeans due to daily washing, worn-out innerwear replacement, etc.”
For instance, even though Biba has struck revised rental agreements till March, the retailer fears that businesses may possibly will need an extension as Covid-induced disruptions are nonetheless a concern.
“We are already having discussions now to discuss and plan for next financial year. The situation in metros is definitely quite bad as compared to small towns when it comes to mood and sentiment,” stated Biba MD, Siddharth Bindra.
Going ahead, the firm also does not rule out a rental correction — about 15-20% decrease than what it was pre-Covid.
“Our ask would be to continue with the current arrangement as the pandemic is very much around,” Bindra added.
Olive group of restaurants founder AD Singh, as well, expressed comparable issues. He stated the way forward on rentals would rely on prevalence of the virus and comfort of persons in stepping out “which is quite unpredictable”. Support on rentals really should be provided as extended as it is needed. Consumption across India on an typical has barely touched about 50%, he added.
Mall operators as well are waiting for more clarity. Omaxe president (retail), Benu Sehgal stated Covid has had a painful influence on all rental properties and in some situations, rental earnings has dropped by as higher as 25%.
“While some retailers shut stores, others operated with renegotiated rentals. Increased consumer spending witnessed in last few months coupled with the news of vaccine has reignited hopes of a bounce back in rentals with expectations of shoppers returning to malls. The immunisation efforts of the government will determine footfalls and rental scenarios going forward,” she added.
Raheja Developers COO Achal Raina stated the festive season led to an upsurge in sales. “Even though retailers are expecting some rental discounts, it is not something which has established as a practice,” he added.
“So demand is likely to spill over to coming quarters of next year with new collections. Rather expansion plans by retailers which were either put on hold or postponed are coming back to the market with expansion plans. Things are promising and may stabilise sales as well as footfall to retail outlets. There may be a little tweak here and there but one should look at a promising next quarter,” he noted.
Pacific Group executive director, Abhishek Bansal is more optimistic. He stated, “We have been closely monitoring brands and category sales every month, and are anticipating to reach last year’s numbers by March. Majority of discount-related negotiations were closed during July-August including group brands, individual brands, etc. We are not getting any demand for a further discount on rentals from retailers, as we already have extended slab-wise discount till March 2021, but some are on 100% rentals as per sales performance”.