19 June 2023, Mumbai
Retail mall operators are expected to experience a significant rental growth momentum this fiscal year, with an estimated incremental growth of around 10%, according to a recent report.
Optimism for Fiscal Year Growth
The report highlights the robust rental income and footfalls witnessed in the previous fiscal, surpassing pre-pandemic levels by nearly 27%.
Continual Footfall Improvement and Increased Retail Sales Boost Net Operating Income
The positive outlook stems from the continual improvement in footfalls and the subsequent rise in retail sales, leading to a healthy net operating income, states the report released by Icra Ratings.
There was a strong year-on-year expansion of rental income in FY23, which grew by a substantial 78%, surpassing pre-pandemic levels by 25-27%. This growth was primarily driven by higher revenue shares supported by increased retail trading and occupancy levels.
Enhanced Revenue
Reddy predicts that the current trend will likely persist throughout this fiscal year, resulting in improved revenue for operators.
Icra Ratings expects a further 8-10% increase in rental income for retail mall operators in FY24, backed by an anticipated 4-5% improvement in trading value across various sectors, including jewelry, electronics, and apparel, as well as increased spending on food, beverages, and entertainment.
Stable Outlook for the Sector, Despite Vacancy Challenges
The report maintains a 'stable' outlook for the retail mall sector. Despite healthy leasing activities, vacancy levels are expected to hover around 18-19% this fiscal year, mainly due to the substantial new supply of 9-10 million square feet.
The top six metros, particularly Delhi-NCR and Chennai, will account for a significant portion of this year's new supply, while approximately 17% of the upcoming supply in FY24 has already been pre-leased.
