Setting benchmarks for shopping centres

“It will be important to benchmark terms in retail and shopping centre developments in India as per the global standards and best practices if India wishes to invite foreign participation to accelerate its retail growth,” stated Charles Grossman, Chairman, International Council of Shopping Centres Inc. (ICSC) at the 2nd annual ICSC - India Shopping Centres and Retail Conference in Mumbai recently.

Charles Grossman who is also the Managing Director of ING Clarion Partners, a member of ING Real Estate responsible for $64 billion in real estate assets, said that statements like ‘300 upcoming malls in India’ from some of the leading consulting organisations and media send confusing signals to investors and retail fraternity in general worldwide. Sharing his views on investing successfully in retail real estate, he remarked that in the US, normally a development with over half a million sq. ft. dedicated for retail, entertainment & food with adequate parking and public services will be termed as a mall and then there are of course shopping centres of smaller sizes & formats but then there are not termed as malls whereas in India a landlord of a building with 15 shops also calls himself a mall owner.

Talking about investments and returns from real estate across the globe he said that retail malls held most value than other property types and large sum of money was being invested. “Malls are most wealth generating property medium, so why sell it? Keep the ownership and have control over tenancy,” advised the chairman.

Anchoring chairman’s address, Mr V Vaidyanathan, country head-retail banking of ICICI deliberated on his Indian experience on the subject. Confusing laws, regulations and unclear dealings always deter professional & retail investors, he said. Booking by investors is a serious issue to worry about, a good option would be to have an integrated management, he remarked.

Focusing on the theme ‘The Art and Science of Successful Shopping Centres’, the conference addressed key issues of retail and shopping centres’ growth in the context of recent and the proposed developments in India and saw almost cent per cent attendance of key developers from across the country. “Shopping center development activity in India continues in a most haphazard manner, seemingly without a care what so ever! Traffic, infrastructure and ecological issues come to the fore only after the situation becomes intolerable and unmanageable,” said Taneja. Wondering, what kind of future can our industry expect if developers and retailers fail to be more conscientious of the boundaries beyond their shopping centers or stores! And further having realized the concerns and limitations of the public authorities and local corporations, planning a shopping center requires a much more comprehensive view of development, said Taneja. The subject was aggressively debated at the ICSC session ‘The Future is Now’ with Neel Raheja, MD, K Raheja Group and Shrirang Sarda, MD, City Center, Nashik as panelists.

The key to a successful shopping center development ultimately depends on attracting people to visit and spend. While the developer with careful site selection, good design and effective marketing can do much ensure this outcome, the real determining factor to success is recruiting the right tenants and working in concert with them. The developer will fail if he views the stores in his project solely as rent-paying tenants. The stores must be viewed as partners whose input should be sought well-before ground is broken and whose input should be sought and heeded continuously. Creating this ‘partnership for profit’ requires constant consultation and tremendous trust. Yogesh Samat, CEO, Inorbit Mall anchored the session ‘Partners in Profit’ with global experts. Having heard the problems between the developers and tenants, Ian Watt, Director pf South Africa based Ol Mutual Properties, observed that the occupancy cost was a concern area for retail. Besides the stores have to come up with some unique concepts to pull crowds to the mall, remarked Timothy Hardy, Director of International Franchising, Build-A-Bear Workshop. Citing examples of his chain that has opened about 200 stores in US, he explained how an involving concept can appeal to the kids. “The visitors here enjoy the experience, buy goods from the shop as well as get to take home something,” he remarked.

Winnie Nazareth, vice president, marketing and entertainment, businesses, Ayala Land Inc. from Philippines spoke on ‘Succeeding in a Competitive Marketplace: Winning Formulas for Positioning, Tenant Mix, Marketing & Management’. Anchoring the session Anshuman Magazine, MD, CB Richard Ellis-South Asia explained how the aggressive expansion of the modern retail real estate market in India had created confusion in the minds of brands & retailers as they were not able to decide where they should take up space as most malls looked the same and had similar offering. To succeed in a situation like this it was vital to spell out a clear differentiation in positioning, tenant mix and have an excellent marketing & management strategy in place.

According to Winnie, foreign concepts should serve as an inspiration and should not be copied. Retail is still a local business. “What is celebrated as a marketing success in one country can be a flop in another. Most of the Asia Pacific countries like Philippines, Singapore and Malaysia have made malls, committed mistakes and are now rectifying but as India started late they better get it right the first time itself. It is important to know what your competitor is coming up with to take the necessary steps for your mall,” she said. The conference also deliberated on the subject of the role played by International Property Consultants (IPCs), other advisors and local agents in the context of retail real estate development, marketing and management in India. Leading the session on ‘The Art of Marketing Retail Mall Space’ Pranay Sinha, CEO of Select Infrastructure, who earlier headed the retail consulting for JLL, said that the marketing of space began right from the conceptualizing of the concept and much of the success and failure of the developments in India depend upon the advise given by the consultants.

Indian developers seem to have an inexhaustible supply of words to describe their projects. Creating a common language and identity for the Indian shopping centre industry is must. A panel discussion on the subject was anchored none other than by Mr Michael Baker, the director of research for ICSC, also national retail advisor, Urbis JHD, Melbourne, Australia - who has been responsible for compiling and developing glossary of terms for shopping centre businesses for the ICSC book and experts like Mr Rahul Saraf, director, Sunsam Properties, Mr Kishore Biyani, MD, Pantaloon Retail, Mr Dharmesh Jain, chairman & MD, Nirmal group, Mr Suresh Singaravelu, chief executive, Prestige Estates Projects (Forum Bangalore). Transparency in deals and clear communication is vital to gain confidence of all stakeholders - consumers or equity holders, commented Mr Biyani, MD of Pantaloon Retail, India’s largest retailer, who is now also getting into property and fund management for retail. The second ICSC event ended with closing comments from Scott Harris - vice president of ICSC, “A good conference is the one that raises more questions than it answers.”

The shopping center scene in India

Industry experts say that while in most markets around the world, retail formats have evolved over centuries from traditional market places to stand-alone stores, to organized high streets, and most recently to modern day shopping centers in India, the development of shopping centers has been more of a revolution than an evolution. The shopping center boom in India started nearly a decade after the first signs of its evolution in the early 1990s. Today, India is expecting over 50 million square feet of quality retail spaceby year 2006-07. While previously it was the large organised retailers, with their glitzy shops and direct consumer interface, who had been a key factor driving the growth of organised retail in the country, now it is the shopping center developers who are usurping the role. Shopping center development has attracted many real-estate developers and corporate houses across all large- and mid-sized cities. As a consequence, from just three in 2000, India is all set to have over 300 shopping centers by 2005! ICSC, the global trade association serving 56,000 property developers, investors and retailers around the world, opened its India office in New Delhi on January 1, 2004 with the appointment of Amitabh Taneja as director, ICSC-India.