PE investments in retail real estate touch Rs 5,500 crore since 2015: JLL

New Delhi: Private equity investments in retail real estate segment have touched around Rs 5,500 crore since 2015 on increased interest for superior quality shopping malls, according to property consultant JLL India.

Increased investments would boost supply of retail space and it is estimated that about 90 shopping malls would come into the market by 2022 at major cities, it added.

"The Indian retail sector has attracted a cumulative of Rs 5,500 crore between 2015 and Q1 2018. Close to Rs 1,000 crore has been invested in the sector in Q1 2018 making it one of the best quarters for the sector in recent times," JLL said in the report – Indian Retail: Stepping up the Game.

Private equity investments in retail properties stood at Rs 800 crore in 2015, Rs 3,000 crore in 2016 and Rs 700 crore last calendar year, the report said. In 2018 so far, JLL reported two major deals in this segment -- Phoenix, CPPIB bought L&T land for Rs 650 crore in Bangalore, while Blackstone bought 85 per cent stake in Nitesh's Pune mall for Rs 300 crore.

The steady increase in interest from private equity investment companies, has propelled developers of retail malls to re-evaluate their portfolio and include three determining factors – product, catchment and customer experience - for success of any mall.

Private equity investors have shown confidence in the future trends of Indian retail real estate and have started to make large value as well as long-term commitments towards the sector.

"It is estimated that the future pipeline of 5 years (2018–22) will be 90 malls spread over 34 million square feet. Of the expected new malls, 62 per cent will be in the category of superior malls while only 10 per cent will remain in the poor category. About 28 per cent malls in the next five years will be considered average," the report said.

JLL India CEO and Country Head Ramesh Nair said the developers are making use of past experiences and learning to create and superior quality malls.

"Some of the key factors determining the success of malls will be design, varied tenant mix, strength of catchment, infrastructure and amenities.

But an increasingly influencing factor will be the mall's ability to counter shoppers' expectation for ‘experience'," he added.

Out of the upcoming supply, the malls under the superior category would do well as they have the right fundamentals, Nair said.

"We will continue to see stock consolidation as some of the weak properties will divert to non-retail uses like small offices, hospitals, educational, healthcare and survive," he added.

The report further estimates that vacancy would be inversely proportionate to the grade/quality of the upcoming supply. While superior grade malls are expected to see low vacancy of approximately 8 per cent, average can expect to see vacancy levels of 17 per cent.

Poor grade malls will have vacancies touching 40 per cent, making them less business-friendly for brands in the future.