market intelligence 38 . imagesretail. OCtOBer 2011 market intelligence OCtOBer 2011 . imagesretail. 39 OtBtT c20 IditidtitiootoiDfiCitTiJones Lang LaSalle’s city tiering system is based on the combined current levels oreal estate activity (supply and demand) in three key sectors – oces, retail and hospitality. • Tier I cities currently comprise oDelhi, Mumbai and Bangalore; • Tier II cities comprise oChennai, Hyderabad, Pune and Kolkata; • Tier III cities comprise the balance othe cities in our analysis. Cities can move between tiers as market circumstances change. Kolkata, or example, moved rom a Tier III to Tier II city in 2007 to refect increasing levels oreal estate activity. Similarly in Chennai, real estate activity is growing so rapidly that the city may be reclassied as a Tier I city in the near uture. InDIa’s CITy TIers is there lie beyond the metros or indian retailers ? actually there is. here is a look at the most promising emerging retail destinat ions oindia, rom indore and jaipur to goa and raipur. excerpts rom a jones lang lasalle meghraj report. TIER I TIER II TIER III De lh i Ch en nai Lu dh iana Mumbai Hyderabad Mohali Ba ng alor e P une Ja ipur – K ol ka ta Ud ai pur – – Indore – – Ujjain – – Bhopal – – Jabalpur – – Nagpur – – Bhilai – – Raipur – – Vadodara – – Surat – – Nanded – – Goa – – Vijayawada – – Coimbatore – – Kochi – – Thiruvana- nthapuram – – Guwahati While India is one of the rst nations to emerge from the global nancial crisis of 2007, its property market is not emerging without scars. Across all property asset classes, none has felt the pain more than retail. Hardly a week went by in 2008 and early 2009 without some announcement of retailers scaling back operations, mall projects being cancelled or shelved, and investors pulling out of projects. Mid-2009 was a turning point for the Indian economy. As the retail sector returned to stability, the condence level of retailers and investors was renewed. Mall developers and operators also took a wiser approach to new projects in terms of design, management and location. Offering quality, well- managed retail space to under-served markets was a recipe for success that the wise capitalized on early. As a new decade begins, India’s retail sector moves beyond infancy, where organized retail was just beginning to get a foothold in major metros, to adolescence where organized retail has penetrated deeper into Indian markets. In order to understand the opportunities in the retail property market as the Indian retail sector progresses in its path of maturity, one needs to go off the path so often taken by developers, investors and retailers, both domestic and foreign. An exploration of markets off the beaten track will reveal where the new geography of opportunity lies in the Indian retail property market. For the purposes of our analysis, we have looked beyond India’s top 7 metros to focus on a selection of20 markets that are in various stages of retail maturity. We examine the changing plot of the Indian retail story and assess the lessons learned and
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The nexT Three CaTegOrIesO reTaIl ClassIICaTIOn– hIgh grOwTh, emergInganD nasCenT – Is whereThe aCTIOn wIll Be asreTaIlers anD DevelOpersenDeavOur TO Deepen TheIrunDersTanDIng O ThesemarkeTs anD CapITalIzeOn The OppOrTunITIes ThaTThey presenT.
strategies in the wake of the global
economic downturn, we felt a fresh
look at our analysis was appropriate.
While the methodology employed and
factors considered for classicationremained the same in our most recent
analysis, we expanded the set of cities
that we considered.
Our results reveal that the set
of cities in our top two categories,
Mature and Transitional, have not
changed from our original analysis.
Retail in these top eight markets
is fairly well understood and
documented, and these cities no
longer represent the frontier of retail
in India.
Conversely, the next three categoriesof retail classication – High Growth,
Emerging and Nascent – is where
the action will be as retailers and
developers endeavour to deepen their
understanding of these markets and
capitalize on the opportunities that
they present. While a large number of
Tier III cities in India can be placed
in one of these three categories, we
have limited our discussion to 20
markets which we feel best illustratethe characteristics of the category
based upon consumer proles, market
characteristics and developer activity.
hIgh-grOwTh CITIes
InDOre
Indore, the commercial capital of
Madhya Pradesh, is the centre of
business and trading activities in
Central India. While the city is also
known for its textile industry, Indore
is undergoing fast-paced infrastructuredevelopment to match the future
demand from other industrial sectors.
The state and local government
are undertaking several initiatives
to promote Indore as a premier
destination for investment.
Being a historic city, Indore has a
distinct core (old city) with newer
developments spread spatially
around in a concentric manner.
Residential, retail and institutional
areas dominate the city core in which
wholesale markets are prevalent andtraditional high streets dominate the
well as the upcoming locations suchas Vijay Nagar, MR 10 and Indore
Bypass.
A high number of afuent
entrepreneurs who reside in Indore are
driving the demand for local brands
along with national and international
retailers. Older, unorganized high
street markets are slowly giving way
to organized retail with the arrival of
new malls and shopping centres in
the city.
Approximately 1.7 mn sq.ft. of retail
space currently exists in Indore withanother 2.5 mn sq.ft. expected in the
next few years as 3-4 mall projects
have been announced. With several
prominent retailers considering
venture in the city, organized retail
has a bright future in Indore.
JaIpur
Jaipur, the capital of Rajasthan, is
a major international and domestic
tourist destination as part of India’s
Golden Triangle tourism circuit.Proximity to Delhi and Gurgaon is
helping to fuel both tourism and retail
activity in Jaipur. Economic growth,
rising disposable incomes and a
changing socio-economic environment
have led to the expansion of urban
spaces around the city with suburban
and peripheral locations becoming
the focus of development. Arterial
roads, such as M.I. Road and
Sansar Chander Road have becomefully commercialized for retail and
wholesale trade.
Jaipur is the rst city in Rajasthan
to have experienced modern
shopping plazas and multiplexes.
Approximately 10 shopping mall-
cum-multiplexes, totalling 800,000
sq.ft, are operational at various
locations in the city, with another 15
in the developing or planning stages.
Upcoming integrated townships
within Jaipur’s suburbs and along its
growth corridors also have a retailcomponent as a part of their product
mix. Major malls currently operational
in the city include Crystal Court, Mile
Stone, Mall 21, Silver Square, Crystal
Palm, City Flex, MGF Metropolitan
and Silver Square.
Retail spaces have a high rate of
absorption in Jaipur with major
brands and anchors such as Shoppers
Stop, Blackberry, McDonald’s and Big
Bazaar taking up space. There may
be a temporary oversupply condition,
but it is likely to get absorbed by
organized retail spaces offering
JaIpur Is The IrsT CITy InraJasThan TO experIenCemODern shOppIng plazasanD mulTIplexes. arOunD10 shOppIng malls-Cum-mulTIplexes areOperaTIOnal aT varIOuslOCaTIOns
vaDODara’s emergIngCOmmerCIal anD reTaIlDIsTrICTs are prInCIpallylOCaTeD On The wesTernsIDe O The CITy. rC DuTTrOaD, raCe COurse rOaDanD OlD paDra rOaDhave emergeD as amOusCOmmerCIal DesTInaTIOnswIThIn The CITy.
(Nyay Mandir Gate to Mandavi
Gate), Raopura Road, Rajmahal Road,
Mangal Bazaar and Dandiya Bazaar.
Vadodara’s emerging commercial
and retail districts are principallylocated on the western side of the
city’s railway line. R.C. Dutt Road,
Race Course Road and Old Padra
Road have emerged as the prime
retail and commercial destinations
within the city. A majority of national
and international brands operating
in Vadodara are primarily located
along these roads. The predominant
typology of retail developments found
here are commercial complexes with
retail space on the lower ground and
upper ground oors with ofce spaceabove. Approximately 4.6 mn sq.ft. of
retail space is operational in Vadodara
with another 1 mn sq.ft. of new retail
space expected to enter the market
in the next few years as additional
projects are in various stages of
planning and development.
COImBaTOre
Coimbatore, a key industrial city
in South India, is regarded as the
preferred IT destination in Tamil Nadu
after Chennai. Several private sector
initiatives in the city have contributed
to an increase in real estate activity
in the region. Since commercial
establishments already have theirpresence in the CBD of the city, located
at the high density areas of RS Puram
and Race Course Road, new commercial
locations have been encouraged to set
up along major corridors towards the
outskirts of the city.
Coimbatore has its traditional retail
markets on Oppankara Street and
Cross Cut Road where both wholesale
and retail businesses are conducted.
Other retail markets can be found in
and around the residential locations of
Avinashi Road, Race Course Road and
100 Feet Road.
High streets such as BharathiyarRoad, Avinashi Road, Mettupalayam
Road and Cross Cut Road are currently
the main retail hubs of the city.
Brands including Ford, Nokia, Philips,
Hyundai, Sony, Bajaj,and Hero Honda
presently have their showrooms
scattered across these markets while
the likes of Zodiac, Lee, Nike, Reebok
and United Colors of Benetton are
found in RS Puram.
gOa
The state of Goa, located along India’sWestern coast, is the nation’s foremost
OrganIzeD reTaIl IswIDespreaD ThrOughOuTuDaIpur wITh Durganursery rOaD, shakTInagar anD suDkhaDIaCIrCle havIng The largesTCOnCenTraTIOn O newenTranTs. a seleCTIOn OTOp BranDs Is presenT InThe CITy
recent years whereas Sharda Chowk
and Jaistambh Chowk are noteworthy
markets in the city centre.
A few small, unorganized shopping
centres have been completed over thepast few years with Raipur getting
its rst shopping mall, City Mall 36,
followed by two or three more in
recent years.
TrIvanDrum
Trivandrum, the capital of Kerala, is
the second largest city in the state and
home to a large population of urban
professionals. Technopark, a 340 acre
IT park located in Trivandrum, is one
of the largest IT parks in India with
150 marquee IT rms and over 20,000employees.
Large-scale employment
opportunities such as this are a major
part of the reason that Trivandrum
witnessed a 42 percent increase in
population during 1991-2001 and
why it is ranked second in the state
of Kerala in terms of market potential
and afuence.
Trivandrum’s central business
district is also the heart of the city’s
traditional retail district with Palayam,
Chala and East Fort being the 3
most prominent markets. M.G. Road
and the area between Pattom and
Kesavadasapuram are the growth
corridors of retail in the city. Kedaram,
Karimpanal Arcade and Attukal
Shopping Complex are some of the
noteworthy shopping destinations
within the city.
The suburbs, which are residential
in nature, currently only haveneighbourhood format retail stores.
While retailers have land banks
in the suburban areas (in close
proximity to Technopark), no major
development has taken place yet to
explore the potential of this area. Only
58,000 sq.ft. of retail space exists in
Trivandrum.
uDaIpur
The lake city of Udaipur is a
popular tourist destination in India.
Historically, retail markets in Udaipur
have been an integral part of the city.
As Udaipur grew beyond the banks
of its lakes, major transportation
arteries developed into retail corridors.
Retail high streets continue to be
xture along Bapu Bazaar, Chetak
Circle, Suraj Pole, Ashwini Bazaar,
Nehru Bazaar, Bada Bazaar, ShastriCircle, Delhi Gate, Sindhi Bazaar,
Town Hall and Chand Pole. These are
complimented by specialized high
streets at Ghantaghar Market Udaipur
(jewellery), Malda Estate (apparel)
and Hathi Pole (antiques).
Organized retail is widespread
throughout Udaipur with Durga
Nursery Road, Shakti Nagar and
Sudkhadia Circle having the largestconcentration of new entrants.
Bhilai, the second largest city in thestate of Chattisgarh, is known as the
steel capital of India. Home to India’s
largest steel plant, SAIL, Bhilai is one
of the most industrialized sectors of
the state.
The inux of professionals working
at SAIL has added a cosmopolitan
avour to the local culture of the city
and spurred demand for organized
retail. Bhilai is ranked as the top
city of Chhattisgarh state in terms of
market potential and afuency.
NH-6 is the central retail corridorin Bhilai with major developments
located around the main junctions of
the highway. Among the city’s sectoral
markets, the City Centre and Sector-6
markets are the most popular.
The format of retail developments in
Bhilai is mostly high street in nature
with some mixed-use retail-and-ofce
complexes found in projects such as
Chauhan Estate and Dhillon Complex.
A few brands such as Raymond,
Reebok, Titan, Koutons , Gini & Jony
and Peter England can be found in
markets along NH-6 such as Supela
Chowk and Akash Ganga.Retail projects in the upcoming
areas of Bhilai typically do not have
an independent existence but can be
located in the ground and rst oors
of residential apartments. These are
mostly full service departmental
stores. Although there are no
multiplexes in Bhilai, some traditional
cinema halls including Venkatesh,
Maurya and Chandra have upgradedthemselves to cater to the city’s
present needs.
Presently, the city of Bhilai does
not have any shopping mall although
a 690,000 sq.ft. project is being
developed by Entertainment World
Developers.
BhOpal
A few malls are under construction
or planned in prominent areas of
the capital city of Madhya Pradesh.
Various mixed-use commercialcomplexes in the city currently
showcase a few brands. Organized
retail exists to a limited extent in
scattered areas of Bhopal in the form
of some supermarket chains.
The area around Hoshangabad
Road is also fast developing into a
commercial sector. Approximately
240,000 sq.ft. of retail space exists in
Bhopal.
whIle The sIze O nOn-meTrOs Is relaTIvelysmaller, They shOulDnOT Be wrITTen O ByreTaIlers. nOr shOulD allemergIng CITIes Be paInTeDwITh The same Brushas There exIsTs a greaTDeal O varIaTIOn In ThepurChasIng pOwer anDaluenCe levels O ThesemarkeTs.
The petroleum and tea industriesdominate the Guwahati economy
which is the centre of culture,
politics, and commerce for the entire
region. An inux of migrants over
the past decade has caused the city’s
population to swell by more than 40
percent and provided a boost to the
development of the region.
Retail markets were traditionally
conned to the city centre in
Guwahati with areas such as Pan
Bazaar, Paltan Bazaar and Fancy
Bazaar being the most popularmarkets. Arterial thoroughfares
eventually developed into retail
corridors, with the G.S. Road
becoming the most prominent.
Departmental stores, supermarkets
and large format stand-alone stores
are the most popular retail formats
in Guwahati. With the development
of the shopping malls and plazas,national and international brands
have started to migrate from high
streets into malls.
Big Bazaar (stand-alone), The Hub,
Cube Mall, Dona Planet and Sohum
are some of the existing brands and
organized shopping areas in the city
of Guwahati.
An additional 600,000 sq.ft. of
retail property development has
been proposed for development in
Guwahati, most of it along G.S. Road.
JaBalpur
Jabalpur, with 1.2 million residents,
is one of the wealthier cities in the
state of Madhya Pradesh. It is the
headquarter of many important
Central and State departments which
employ thousands of government
workers. Jabalpur serves as a
distribution centre for a wide variety
of products and natural resources
from all over. Its relative prosperity
has caused it to be ranked third in the
state in terms of market potential andafuence.
Residents of Jabalpur, who have
relatively higher disposable incomes,
are limited to shopping at the
traditional markets of Soni Bazaar,
Madhital and Sadar Market. Treasure
Island (Jabalpur), a 680,000 sq.
ft. retail project, has added a new
dynamic to the local retail landscape.
nanDeD
Nanded, a religious hub to India’s
Sikh community, has one of most
prominent Gurudwaras in the country.
DeparTmenTal sTOres,supermarkeTs anDlarge OrmaT sTanD-alOne sTOres are mOsTpOpular reTaIl OrmaTsIn guwahaTI. wITh TheDevelOpmenT O shOppIngmalls anD plazas, BranDshave sTarTeD TO mIgraTerOm hIgh sTreeTs InTOmalls.
sae ChOICe. prOperTyDevelOpers musT lOOkBeyOnD InDIa’s 7 largemeTrOs anD IDenTIylOCaTIOns wITh The rIghTmIx O markeT maTurITy,reTaIl mOmenTum anDspaCe aOrDaBle OrBranDs. unlIke The rIghTmarkeT, The rIghT prOJeCTIs maDe, nOT DIsCOvereD.
OuTlOOk
While the performance of economies around the world
will certainly have an impact on India’s retail sector, the
stable footing it is on as a result of strong underlyingfundamentals in demographics, urbanization and a growing
middle class should provide reason for optimism.
Success is far from guaranteed for retail property
developers, however. For them it is critical to take the
lessons learned from the recent downturn and go forward
with a cunning eye for the right market and the right
project.
The right market may not be the
obvious or safe choice. Property
developers must look beyond India’s
7 large metros and identify locations
with the right mix of market maturity,retail momentum and space affordable
for brands. Finding markets with
sufcient retail potential (purchasing
power) where a rst mover advantage
may yet be realized is a recipe that
has worked well for developers such
as Entertainment World Developers
and may be imitated by others going
forward.
Unlike the right market, the right
project is made, not discovered.
Operators of organized retail need to
be vigilant in containing costs in non-
metro cities by employing innovative
techniques to maximize FSI throughmixed-use projects and keeping a lid