Ghost malls haunt Indian retail, but not all is grim (2024)

BENGALURU - Life for the shopkeepers of Dreams Mall has been more like a nightmare ever since the three-storey building in Bhandup, a Mumbai suburb, was partly damaged by two fires in a short space of time.

They are still on the hook for property and municipal taxes, even though the 1,000-shop mall has been closed since the fires in 2021 and 2022.

It has fallen into such disrepair now that, as Google reviewer Gopakumar puts it, “a horror movie could be shot here”.

A study by real estate consultancy Knight Frank India of 340 shopping centres in 29 cities found 64 to be “ghost malls”, with vacancies of over 40 per cent.

This is up from the 57 ghost malls in 2022, based on the Think India Think Retail 2024 report.

Almost one in five shopping centres in the study wears an abandoned look – a near-empty building with shuttered stores and eerie, darkened hallways.

“Many of the small shopping malls are on the verge of closure,” said Mr Gulam Zia, director of Knight Frank India.

Most underperformers are older suburban malls that cannot compete with glitzier developments in more central locations that have organised zoning and brand-name anchor tenants, as well as attractions such as cineplexes, large foodcourts and family entertainment zones.

About 13.3 million sq ft of shopping space is vacant, resulting in a loss of 67 billion rupees (S$1.08 billion) in revenue for developers in 2023, the report found.

Coming in with the highest number of ghost malls is the National Capital Region, which includes Delhi and its neighbouring suburbs. It has 21 such malls, followed by “India’s Silicon Valley” Bengaluru with 12, and financial hub Mumbai with 10.

The National Capital Region and Mumbai, especially, have a growingnumber of strugglingmalls.

They include the Raheja Mall in Gurugram city that was attacked by a mob offended by a movie in January 2018; the Grand Venice Mall in Greater Noida city whose Roman statues and gondola rides lost their popularity after the mall owner was charged in a financial scam; and the Angel Mega Mall in Ghaziabad city that is known for only one snack eatery, Haldiram’s.

The ghost malls have some factors in common, the Knight Frank report found. These includeinvestors in disputes,a dated appearance,faulty layouts with dark alleys andpoor customer flow, low occupanciesand lack of anchor tenants.

The report says that even as vacancy rates in small, dilapidated malls have gone up, Grade A shopping centres – bigger, well-located malls – continue to enjoy robust occupancy and foot traffic.

When people want tovisit a physical store, theychoosebigger malls in convenientlocationsthat have more to offer, are well maintained and make for an enjoyable visit.

“In markets with many malls, the inability to stand out is particularly damaging. To revive these malls, we need better management and fresh, customer-focused strategies,” said Mr Kumar Rajagopalan, chief executive of the Retailers Association of India.

Mr Amrit Hemdev, founder of real estate advisory and investor Avenuez, said: “The world over, malls are changing from retail centres to places to hang out, so the layout and design have to be excellent. No one goes to a mall any more for convenience shopping, only for luxury shopping and store-only sales.”

Noting that the food and beverage sections of malls have grown larger in the past few years, he added:“Unless you have good food anchors – highly rated restaurants or bars – malls don’t get visitors these days.”

Some analysts say poor management is the key reason why some malls fail.

Mr Anuj Kejriwal, managing director of retail consultancy Anarock, said: “There are many reasons for a mall to die, but bad management is the worst of them.”

Many underperforming malls tend to be built by one developer but run by an association of investors who have bought different units that they rent out to stores, he said.

In such a “strata-sale model”, tenant stores pay fixed maintenance costs, but when there are not enough of them to cover the costs, some investors might refuse to foot the bill.

“During the period of low occupancy, the air-conditioning and lights are switched off... even the toilets are not maintained. That discourages even more tenants and even more shoppers. That’s how the story starts, and then it keeps going downhill,” Mr Kejriwal said.

Selling or repurposing a mall and addressing the specific reasons for its decline will first need unanimous assent from all investors, he added.

Mr Chandershekhar Kaul, managing director of mall advisory company Beyond Squarefeet, said that asmorepeople prefer to shop and watch movies online, they are increasinglyabandoning small neighbourhood malls for sprawling oneswith “experiential”features.

These features are, for example, large foodcourts seating at least 200 people,gaming areas for family entertainment, hypermarkets,high-demand fashion brands and multiplexes with at least three screens to show big-budget releases.

“To accommodatethese critical elements, you require at least 100,000 sq ft. A smaller mall that doesn’t offer all this stands a high chance of going bust,” said Mr Kaul.

Multiple investors co-owning a space in a strata-sale model often compromise on the overall mall experience as they focus on selling individual units, he noted.

They do not understand that “what they think are add-ons actually draw customers, who then spend money at the shops”.

Experienced developers would enter into revenue-share models with shops, so that all stakeholders benefit from a well-run mall with high footfall.

“If the mall is owned by multiple investors, then developers can do nothing at all till warring owners agree, which rarely happens,” said Mr Kaul. “The chances of repositioning a ghost mall are higher if it is owned by a single developer.”

For a ghost mall to be revived, it may need to be overhauled.

This was what Beyond Squarefeet did for the 15-year-old Oberon Mall in Kochi city. The mall lost customers primarily to the fancier Lulu International Shopping Mall that came up in 2013. Not only is Lulu four times larger than Oberon, but it also boasts its own metro station and Kerala state’s first McDonald’s outlet.

Oberon made some smart changes, including converting a whole floor into a flea market with home-grown fashion and handicraft brands, and is now buzzing with shoppers again.

“Boutique brands that can’t afford rent in the rest of Kochi now have pop-ups in Oberon,” Mr Kaul said.

In other cases, ghost malls may need to be sold to a developer for a shot at revival.

For example, Abu Dhabi Investment Authority-backedLake Shore Retail acquiredthe crumbling Koregaon Park Plaza inPune city’s most affluent residential neighbourhood in 2019, after three other developers gave up on it. The plaza has since been turned into a premium mall called Kopa.

The earlier mall was indistinguishable from other Pune malls, and “even though it was in a premium location, it didn’t have premium feel”, said Mr Kejriwal.

Kopa is now rezoned with a separate office space, and the shopping area has only luxury brands.

“The first malls in India were built two decades ago, and they need to be reimagined” with new strategies to appeal to a whole new generation of Indians, Mr Kejriwal added.