While the number of Grade A malls has increased across the country, there has also been a 59% year-on-year increase in low-performing shopping malls, with approximately 13.3 million square feet of retail space classified as “ghost shopping centers.” Here’s a look at why Indian shoppers are leaving Grade C malls and how some of these assets are used to monetize land parcels.
As of 2023, Grade A shopping center stock with enviable occupancy, strong tenant mix, good positioning, and active mall management accounted for 47% of total shopping center space, totaling 58.2 million square feet across the country.
Grade B shopping center stock, with a decent occupancy and tenant mix, contributed 31% with 39.7 million square feet. Grade C stock, on the other hand, with high vacancy rates, inferior tenant mix, and poor mall management, contributed the least (22%), as these assets contain 27.2 million square feet of leasable space, according to a new Knight Frank India survey.
What are ghost malls?
Ghost shopping malls are underperforming malls with a vacancy rate of more than 40%. The number of such malls increased to 64% last year, up from 57% in 2022, across eight major cities. There was a significant in low-performing retail assets in eight major Tier 1 cities.
In 2023, 64 shopping malls with approximately 13.3 million square feet of gross leasable area will be classified as ‘Ghost Shopping Centers’. This has grown by nearly 59% from 8.4 million square feet in 2022.
According to the Knight Frank Survey, underperforming malls were either demolished for residential or commercial projects (including co-working spaces), closed permanently, or auctioned off.
Why do Indian shoppers prefer Grade A over Grade C malls?
The rise of online shopping has been the primary cause of this shift in consumer behavior.
Poor design, unappealing brands, ineffective management, a lack of maintenance, uninviting exteriors, insufficient infrastructure surrounding the mall, and fierce competition from Grade A malls all contribute to a drop in consumer foot traffic.
Grade C shopping centers in NCR, Mumbai, and Pune were demolished to make way for the construction of housing inventory.
According to Knight Frank India report titled ‘Think India Think Retail 2024: Shopping Centre and High Street Dynamics Across 29 cities,’ in 2023, some Grade C shopping center assets in Tier 1 cities such as the NCR, Mumbai, and Pune were demolished to make way for the construction of residential inventory to monetize the land parcels, as demand for residential units has been strong since the pandemic.
Many of these ghost malls nationwide have been prime targets for brownfield activity, which involves repurposing them for new uses. “Such ghost malls are repurposed primarily due to shifting consumer preferences, changes in retail dynamics, and economic factors that render their original purpose unsustainable,” Vivek Rathi, National Director of Research at Knight Frank India, told HT Digital.
The cities with the most ghost malls are
According to the Knight Frank survey, 64 abandoned malls in eight cities account for 75% of the total 125.1 million square feet of gross leasable area. According to the study, Delhi-NCR has the highest concentration with 21 ghost shopping centers (5.3 million sq ft), followed by Bengaluru with 12 (2 million sq ft), Mumbai with 10 (2.1 million sq ft), Kolkata with 6 (1.1 million sq ft), Hyderabad with 5 (0.9 million sq ft), Ahmedabad with 4 (1.1 million sq ft), and Chennai and Pune with 3 (0.4 million sq ft).
Repurposing ghost malls is challenging due to zoning restrictions and strata ownership.
Challenging repurposing into alternative types is frequently caused by regulatory barriers such as zoning restrictions and permit conversions, or, more specifically, strata ownership with multiple owners, which makes it difficult to reach a common ground for repurposing or selling out, explains Rathi.
Furthermore, structural issues may arise, necessitating extensive renovations to convert spaces originally designed for retail into residential, office, or educational uses.
Financial constraints can also be an issue, as repurposing projects often require large investments. He explained that once a decision is made to proceed, market demand for specific alternative uses is carefully evaluated to ensure viability and maximize returns.