Guest Column
REITs to Boost Retail Asset Investments Beyond the Metros


Pankaj Renjhen, Managing Director – Retail Services, JLL India
With retail assets becoming more lucrative thanks to the impending launch of real estate investment trusts (REITs) in India, the ticket sizes of investments into retail real estate (hitherto largely limited to the metros) has picked up pace in Tier 2 and Tier 3 cities. In fact, the period between 2015 and Q3 2017 saw an astonishing 54% of investments in retail real estate happen in Tier 2 and Tier 3 cities, well exceeding those into the metros.
Of the over US$1.57 billion of investment registered in retail real estate sector between 2015 and Q3 2017, more than half went into non-metro cities. This includes entity-level deals, platform deals and acquisition of stakes in malls. Some of the global private equity funds have been investing in the retail real estate sector to diversify their investment portfolios in India.
Retail real estate investments beyond the top 7 cities (2015-Q3 2017)
imap://palash%40realtynmore%2Ecom@delta.websitewelcome.com:993/fetch%3EUID%3E.INBOX%3E52454?part=1.2&filename=image001.png
Source: JLL Research
These are Tier 2 and Tier 3 cities which have investment-grade retail assets with the potential of generating good returns for investors after they are refurbished or upgraded into superior quality malls. Apart from Mumbai, investment largely took place in cities such as Pune, Bangalore, Amritsar, Indore, Ahmedabad and Chandigarh.
In some cases, investors intend to improve properties through various value-adding initiatives. This can be done by altering the tenant mix, adding hot retail categories and upgrading the food and beverage (F&B) offerings. It is now recognised that improving a mall’s F&B, entertainment and leisure component induces ‘placemaking’, generates more footfalls and increase dwell time – thereby helping retailers to boost their sales.
In cognizance of this, retail space investors are undertaking the necessary upgradation steps after acquiring the right retail assets. Interestingly, such investors are opting for both new mall projects as well as operational ones. The proportion of investment has been quite high in case of latter; however, in the last 12-15 months, private equity funds have been committing to acquiring and developing greenfield retail real estate assets too.
Location of the project
Rental Income prospects
Developer’s rating and background
Lease revenue model
Overall tenant mix
Competition in the long run
Lease churning opportunity
Malls with the potential for upgradation through re-leasing or other practical approaches
Associated risks and market conditions
Investment by PE funds in retail real estate assets will also bring a structured approach to leasing, leading to a more regular performance evaluation of brands within malls. Importantly, investing is as much about exits as it is about returns. As retail assets can become a part of the REIT portfolio, options for exits open up, which enhances the liquidity of such retail assets.
-
News1 week ago
April Shower: Real Estate Gets Booster Shot as RBI Cuts Repo Rate by 25 BPS
-
News3 days ago
Gaur City Mall Buzzes as Superstar Sunny Deol Promotes Latest Film ‘Jaat’
-
News1 week ago
RBI’s Second Consecutive Repo Rate Cut to 6% Spurs Optimism Across Real Estate Sector
-
News6 days ago
Vegas Mall Hosts Grand Event on April 13 to Celebrate the Spirit of Baisakhi
-
News4 days ago
Superstar Sunny Deol Visits VVIP Style Mall, Ghaziabad
-
Guest Column1 week ago
Look East: How Noida, Greater Noida are Poised to Ride India’s Retail Leasing Surge
-
News1 week ago
ANAROCK Appoints Vik Lulla to Lead US Commercial Leasing and Advisory Operations
-
News1 week ago
Cyclothon 2.0 Receives Warm Welcome at World Street by Omaxe