By Mr. Shubhranshu Pani, JLL India
Site location, scale and size are the primary factors defining the development of every shopping center. The site for shopping malls should be selected on the basis of parameters such as:
· Accessibility and transport connectivity by car, public transport and service vehicles, the lack of which affects not only customer footfalls but also the efficient delivery of goods and services to the stores located in the mall. Traffic before and after the mall also should be considered
· Visibility from approaching roadways, and proximity to a good road network that also connects the physical catchment with its potential residential population
· Size and configuration of the site, since an optimal size is necessary to achieve critical a mass catering to the catchment area. In the case of mixed-use developments, the various segments should complement each other and work together. Also, attention must be paid in some cases to the ability of the site to offer future expansion if required in the long run. In the case of mixed use developments, appropriate circulation of all asset classes is important
| Shubhranshu Pani, JLL India |
· Topography and shape of the site, with supporting infrastructure (a regular shape providing maximum space utilization is a preferred parameter while selecting a mall site)
· Current and future competition and its impact, the current and anticipated supply of retail space and the performance of these spaces should also be evaluated
· The study of the catchment, its demographics and consumption patterns are vital, as it is sales and consumption that will bring in the rentals. Most other costs such as construction and land are controllable and in most cases fixed.
In short, a site is ideal for a mall if it has the right mix in terms of the following parameters: location, accessibility, visibility, market potential, right size and topography.
Site selection also depends on macro as well as micro location parameters which vary according to the market dynamics prevailing in a particular city.
The price of land and the financial feasibility of the project play an important role in site selection. Retail performance and retailers’ ability to pay rent is predictable regardless of city and location, so the final potential of a site (and the revenue generation of a mall) can be guesstimated.
The format requirements for malls tend to differ when we compare Tier I to Tier II and Tier III cities. Since the retail markets of Tier II and Tier III cities tend to be less mature, retailers’ sales performance is lower (as is the number of interested retailers) and the size of stores is smaller.
This results in smaller potential for mall developments in tier II and tier III. Malls in most Tier II and Tier III cities need to be close to the city center or dense catchments, as local travel is usually a deterrent for customers.
Challenges in Site Selection & Acquisition
Regardless of which city one speaks of, there tend to be challenges for mall developers when it comes to finding sites in suitable locations at a reasonable price. In the first place, land costs in India are quite high - especially in Tier I cities.
Residential prices over the last five years have grown significantly, making retail real estate a suboptimal asset class. This affects the financial viability of and returns for retail projects. Added to the viability issue, retail also needs higher access to drive footfalls, and therefore close to dense catchments.
Shopping malls also need to be limited to a lower number of floors. This requires higher floor plates, and there are constraints of use of FSI for developers. It is difficult to find larger land parcels within city limits and then effectively utilizing the potential of the land.
In some cases, traffic management and accessibility of the site is a big problem for mall developers even if the land is available. In other cases, the support infrastructure may not suffice to support heavy footfalls. Also, the approvals and environmental clearances required for retail developments can pose a challenge for mall developers.
Making The Best Of A Location..
While location is a fundamental consideration in a selecting site for a shopping center, a major challenge can be addressed if the size and tenant mix are formulated according to the location. In most cases, the more perplexing changes can be overcome by adopting a structured and planned approach for development, execution and management of the mall.
If access to a particular site is not convenient, the mall developer can attract shoppers by adopting practices such as providing shuttle service, reward programs and attractive marketing promotions.
Facilities provided by a shopping mall - such as parking, conveniences and other comforts - also play a major role in attracting shoppers. The proportion of quality mall supply in India is still low, so a mall developed as per international standards (with good design and tenant mix) will invariably meet with success. Here, it must be noted that successful shopping centres do not need to be large; an appropriately designed smaller project in the right catchment which is tenanted adequately for the catchment can also be successful.
Also, a mall can be converted into a destination shopping centre by incorporating critical mass and retail categories that are ideal for the catchment population and the trade area. To achieve this, it is important to identify the characteristics of the potential shoppers in terms of age, income and preferences. This is helpful in catering to the existing gaps in terms of retail and leisure offerings within the catchment.
The Importance Of Market Research
A structured and planned research study is invaluable when it comes to creating a shopping centre with the right size and right tenant mix. After reviewing the location, the optimal size of the shopping centre can be established so as to arrive at the retail size that a particular site can sustain.
A macro-level demand and supply analysis of retail according to the catchment, demographics and the availability of supporting infrastructure helps in assessing the size of the development which can be supported by demand.
It is acceptable to make a shopping center mix aspirational for the location, anticipating changes that the catchment will undergo over the medium term of 5-10 years. This is the period wherein the shopping center will become operational and stabilize. However, completely ignoring the current requirements of the neighbourhood and the catchment is dangerous.
Turning A Non-Performing Location Around..
If the right positioning and trade / tenant mix are arrived at, a shopping centre can work even in a non-prime location. If the location for a mall is not very favourable, the trade and tenant mix can be accordingly optimized to increase the overall viability of the centre.
In other words, a location with challenges can be turned around if the mall to be developed there takes into consideration the existing micro-level market dynamics, and if it provides the retail categories which are missing in the targeted catchment.
If a proposed shopping centre is able to fulfil the demand of all the customer groups and can provide a differentiated retail offering, it can become successful in spite of the location challenges. If parameters such as size, positioning and tenant mix are conceptualized optimally, and if it takes into account the competing retail developments, a shopping centre will be successful in the long run. Also, strategically conceived, regular promotional activities can ensure a steady footfall.
When a mall identifies a unique selling point or differentiating factor, there can be a significant revival in its fortunes. For example, Ambience Mall Gurgaon offered critical mass to shoppers and provided them with categories that other retail developments did not give them.
Ambience Mall Gurgaon positioned itself as a destination mall, pulling crowds not only from Gurgaon also from Delhi. A wide-ranging tenant mix right from fashion to home furnishing and appliances to entertainment and leisure attracts large numbers of shoppers. Ambience also provides shuttle services to its customers, thus overcoming the challenge of accessibility for shoppers who need to come from distant locations.
A note of caution on the design and circulation is appropriate. Retrospectively compensating for design and circulation errors is an expensive proposition, as modifications to the layout and vertical circulation entails significant costs. However, if the intention is to revive a shopping center, it is often worthwhile to go the extra mile to correct such errors since such changes can significantly increase the performance of the center.
About the author..
Mr. Shubhranshu Pani is Regional Director (Retail Service) at JLL India
For media Contact
Arun Chitnis
Head – Corporate Communications & Media Relations
JLL India
Level 6, Amar Avinash Corporate Plaza
Bund Garden Road,
Pune 411001.
Tel: (020) 30930441 Fax: (020) 40196101
Mob: +91 9657129999
Bund Garden Road,
Pune 411001.
Tel: (020) 30930441 Fax: (020) 40196101
Mob: +91 9657129999
Twitter: JLLIndia_Realty
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