FALLING rentals help retailers expand
on March 14th, 2009 at 1:29 pmFALLING rentals are proving to be a boon for a cross-section of businesses which, for a while, had to defer their expansion plans in various cities on acount of high rentals.
Cafe Coffee Day (CCD), ethnic apparel wear Biba and Samsonite, are some of the players looking to expand in Tier-I cities. High rentals were a stumbling block in most locations. That has changed now. “On an average, we have managed to bring down rents by about 15-20%. There have been instances where the reduction has been as much as 50%,” says Samsonite director (global) Ramesh Tainwala.
The correction in some locations in Delhi has been as much as 80%. Though, Samsonite opened only three new stores in 2008, it plans to add 35 stores by 2009 end. Biba is also using the slowdown as an opportunity to expand. “We have renegotiated our rentals for 10 properties in the last one week alone,” says Biba Apparel director Sanjay Bindra.
In one of the existing stores in Navi Mumbai, it managed to negotiate its rental and brought it down by 50%. Lower rentals are now helping it expand to prime areas in New Delhi, where it has just one store. Today, Biba has 64-standalone stores across the country and plans are on to add 30 more over the next year. A property broker, on the condition of anonymity, cites the case of a Hyderabad mall where the rent was at Rs 300 per square foot, a year ago. That is now down to just over Rs 100 per square foot. Likewise, rates in a prominent mall in south Mumbai have reduced from Rs 600 per square foot to a third at Rs 200 per square foot. Like a host of other players, CCD, too, plans to use the fall in rentals to expand in Tier-I locations.
“Rentals in malls would have fallen by 20-30%, while on high streets it would have fallen by 15-30%. Falling rentals are definitely helping our expansion plans and helping us enter locations where we were not present earlier,” says CCD director Alok Gupta. He adds that it takes less time to negotiate with developers. The plan is to establish a stronger presence in south Mumbai and Delhi where developers were unwilling to negotiate on rents. CCD, which currently has 800 outlets, plans to ramp it up to 1,000 in the next financial year. A large part of it is scheduled to come up in the 115 cities where it already has a presence.
BUILDING BLOCKS
Correction in some locations in Delhi has been as much as 80% Samsonite plans to add 35 stores by 2009 end Biba, too, plans to add 30 stores over the next year Biba has managed to negotiate its rentals and bring it down by 50% CCD, which currently has 800 outlets, plans to ramp it up to 1,000 in the next fiscal.
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