M A R K E T B E AT CHENNAI Retail Q3 2020 Muted leasing activity in malls and main streets; vacancies rising in main streets Leasing activity was muted across malls and main streets during Q3 as lockdown restrictions continued until August. Transactions of just around 50,000 sf were recorded during the quarter as retailers are still assessing the impact on cashflows and business volatility after a prolonged lockdown. 8.07% MALL VACANCY (Q3 2020) Highstreets in the north west and peripheral south west submarkets accounted for 57% of the overall transactions in the quarter. On an annual basis, the city’s retail leasing was down by around 76%. Space reductions and exits (in some cases) were also witnessed from smaller stand-alone establishments in the F&B, apparel, health & wellness categories across major high streets. Locations such as Anna Nagar 2nd avenue, KNK road, OMR and Pondy Bazaar witnessed a rise in vacancies primarily with brands like Pepe Jeans, VIP Bags, Lee Cooper, Cold Stone Creamery, Orange Wok, Poorvika SHARE OF APPAREL, FOOTWEAR & 51% Mobiles, etc vacating due to lower sales and high overheads. Mall vacancies increased by 67 bps in Q3 as compared to the previous quarter and are LIFESTYLE IN GROSS LEASING (Q3 2020) expected to rise further over the next few months as retailers look at store count rationalization in a bid to keep the business afloat as well as explore alternative sales channels (e-commerce route). 0.44 msf UPCOMING MALL SUPPLY Higher vacancies lead to rental concessions; deferral of upcoming mall supply Mall rentals in the CBD and Southern submarkets have dropped by 4% and 3% respectively on an q-o-q basis and a few mall developers such as Prestige (Forum) and Express Avenue Mall have provided rental waivers to their tenants for the short-term as a support measure. Express Avenue Mall has also agreed to pure revenue sharing with retailers until end of the year. While Velachery highstreet rental saw a q-o-q dip of 5%, other highstreets such as Khader Nawaz Khan Road, Cathedral Road - RK Salai and Adyar Main Road have witnessed reduction in rentals up to 3% on a q-o-q basis. In highstreets such as Pondy Bazaar, landlords have reduced rents by about 5% for the short-term to cover pandemic protection measures. Upcoming mall ECONOMIC INDICATORS Q3 2020 supply of 0.44 msf scheduled for completion early in 2021 has been deferred by about 6 months. 2021 2019 2020 Forecast Malls and retailers pursue digital channels to drive footfalls and purchases Footfalls have fallen by more than 65% after the pandemic and local retailers especially in the apparel, consumer electronics and hypermarkets are GDP Growth 4.2% -5.8% 6.5% actively pursing omnichannel models to remain relevant. Mall developers in the city have come up with different initiatives to provide a well-managed and hassle-free shopping experience to their visitors. For instance, Phoenix Marketcity and Palladium have come up with an app called Nhance by Phoenix and made it mandatory to provide details via the app while visiting the mall. Most malls have also taken measures such as pre-booking store visits, pre- CPI Growth 3.4% 4.5% 4.2% ordering food, increasing surveillance of common areas and restricting usage of certain common amenities to facilitate a safe shopping experience. Consumer 5.0% -5.2% 6.3% Spending MALL SUPPLY / VACANCY RATE AVAILABILITY BY PRODUCT TYPE Govt. Final 1,400 10.00% 3,500 20.00% Expenditure 13.2% 12.8% 11.5% 1,200 3,000 Growth 8.00% 1,000 2,500 15.00% 800 6.00% Source: Oxford Economics, RBI 600 2,000 4.00% 10.00% 400 1,500 200 2.00% - 0.00% 1,000 5.00% 500 - 0.00% Superior Malls Good Malls Average Malls MALL SUPPLY ('000 sf) VACANCY (%) MALL INVENTORY ('000 sf) VACANCY (%) M A R K E T B E AT CHENNAI Retail Q3 2020 MARKET STATISTICS Q-O-Q Y-O-Y PRIME RETAIL RENTS – MAIN INR SF/MTH EURO SF/YR US$ SF/YR STREETS CHANGE CHANGE Nungambakkam High Road 130 18 21 0.0% -3.7% Khadar Nawaz Khan Road 140 19 23 -3.4% -3.4% Cathedral Road – R.K. Salai 115 16 19 -2.5% 0.0% Usman Road - South 100 14 16 0.0% 5.3% Usman Road - North 110 15 18 0.0% 4.8% Adyar Main Road 140 19 23 -3.4% 0.0% Anna Nagar 2nd Avenue 150 21 24 0.0% -3.2% Purasawalkam High Road 115 16 19 0.0% 4.5% Pondy Bazaar 150 21 24 0.0% 0.0% Velachery 100 14 16 -4.8% -9.1% Ambattur (MTH Road) 95 13 16 0.0% -5.0% Q-O-Q Y-O-Y PRIME RETAIL RENTS – MALLS INR SF/MTH EURO SF/YR US$ SF/YR CHANGE CHANGE Chennai - CBD 215 30 35 -4.4% -4.4% Chennai - Western 180 25 29 -5.3% -2.7% Chennai - South 185 26 30 -2.6% -2.6% Note: Asking rent (INR/sf/month) on carpet area of ground floor Vanilla stores is quoted US$ = 73.5 INR AND € = 86.3 INR SIGNIFICANT LEASING TRANSACTIONS Q3 2020 Rohan Sharma PROPERTY LOCATION TENANT SF Director, Research Services +91 124 4695555 /[email protected] Independent Building GST Road Brand Factory 13,000 Kapil Kanala Senior Associate Director, Research Services Pudur Road Reliance Smart 6,000 Independent Building +91 40 40405555 /[email protected] Independent Building Karthikeyan Salai Easy Buy 6,000 cushmanwakefield.com A CUSHMAN & WAKEFIELD RESEARCH PUBLICATION SIGNIFICANT PROJECTS UNDER CONSTRUCTION Cushman & Wakefield (NYSE: CWK) is a leading global real estate services firm that delivers exceptional value for real estate occupiers and owners. Cushman & Wakefield is among the largest real estate services firms with approximately 53,000 employees in 400 offices and 60 PROPERTY LOCATION SF COMPLETION DATE countries. In 2019, the firm had revenue of $8.8 billion across core services of property, facilities and project management, leasing, capital markets, valuation and other services. To learn more, visit www.cushmanwakefield.com or follow @CushWake on Twitter. Chennai Airport MLCP Meenambakkam 238,101 Q2 2021 ©2020 Cushman & Wakefield. All rights reserved. The information contained within this report Esthell Mall Velachery 200,000 Q4 2021 is gathered from multiple sources believed to be reliable. The information may contain errors or omissions and is presented without any warranty or representations as to its accuracy..