Retailigence

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Pantaloon Says India Malls Waiving Rents as Supply Slows Demand

Posted by retailigence on October 2, 2008

By Saikat Chatterjee

Pantaloon Retail India Ltd., the nation’s biggest publicly traded retailer, said malls are waiving rents and offering to pay for interior decoration as excess supply and slowing economic growth erodes demand.

Developers are ready to “pay us for coming into the malls,” Kishore Biyani, founder and managing director of Pantaloon, said in a telephone interview from Mumbai, where the company is based. “They need anchor clients like us to bring in other clients.”

India’s shopping centers are facing excess supply and slowing demand after mall rents almost doubled in two years. Malls in India’s top eight cities have about 20 percent of their total 40 million square feet (3.7 million square meters) of space vacant, according to real estate broker Cushman & Wakefield Inc.

Malls are offering rent moratoriums for six months and free interior fixtures, Biyani said. The company, which soon plans to sign such agreements with mall developers, is also scrutinizing its own spending and costs more carefully.

“Every proposal and capital expenditure is being carefully examined and we are not getting into anything that may be marginal,” Biyani said.

Retail rents rose sharply in the past two years as Reliance Industries Ltd., the nation’s most valuable company, and Bharti Group, which runs India’s biggest mobile-phone operator, started running stores.

India’s $1.2 trillion economy, Asia’s third-largest, expanded 7.9 percent in the three months ended June, the weakest pace since the last quarter of 2004.

It’s “premature” to say whether and how much India will be affected by the credit crisis as “there’s no clarity” on how that will affect consumer behavior in India, Biyani said.

Consumer spending and same-store sales will continue to grow and Pantaloon will stick to its target of adding as much as 16 million square feet of store space in the 12 months ending June next year, he said.

Pantaloon Retail said same-store sales in August rose 13 percent to 5.24 billion rupees from a year earlier. Total sales in August rose 53 percent to 7.17 billion rupees, according to the company.

Source: Bloomberg

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