Malls operators may offer relief to tenants due to impact of coronavirus on business

New Delhi: Mall operators in the National Capital Region have started reviewing the impact of the Covid-19 outbreak and might offer some relief to their tenants.

They are discussing possible scenarios since the relationship with the retailers is long term and with their business taking a big hit, paying rent will be a difficult task for them, mall operators ET spoke to said. Similar discussions are happening in other cities as well, they said.

Authorities in the NCR have ordered closure of cinema halls including multiplexes, a major draw for customers at malls, till March 31. With residents not coming out to crowded places also because of the coronavirus scare, most of the malls are witnessing a sharp decline in footfalls.

Some tenants have revenue-sharing deals and in such cases a fall in their sales would reduce the payment to the mall owner as well. The operators are considering possible relief measures for the other set of retailers from whom they take a rent or a minimum guaranteed amount.

“The situation is fast emerging and evolving. We are in constant touch with our tenant partners and other mall developers. Being responsible and credible developers, we shall take steps in the best interest of all the stakeholders,” DLF Rental Business managing director Sriram Khattar said.

“The safety of our shoppers, employees of our tenants in retail and offices and our own employees is of utmost concern to us. Meanwhile, numerous proactive steps have been taken to ensure proper hygiene and the highest safety of the shoppers. The retailers have been quite responsive and together we are continuously enhancing the hygiene and housekeeping filters,” he added.

According to another operator, footfall is down by 30% and is expected to fall further.

“This is like the post-demonetisation era where shoppers avoided malls for at least 10 days after the announcement. But situation is expected to worsen as lots of people are in isolation. Though, we are not legally bound to give any relief to the tenant, as a credible mall operator and for the sake of long-term relationship, we are in talk to give some relief to share the burden of loss,” said an operator, who did not wish to be named.

According to property consultant Anarock, the top eight cities of India have 126 malls sprawling over more than 61 million sq ft, and more than 100 malls have multiplexes attached. Even short-term closures will have significant financial implications for them.

“The threat of Covid-19 has impacted everyone across the globe, and as per the government’s proactive mandate to exercise caution, people have been apprehensive and refraining from leisurely activities. Footfalls are down and resultingly have affected sales,” Ambience Group director Arjun Gehlot said. “In such a scenario, retailers have to reinvent themselves to tide over the challenge. The malls will extend whatever best is possible to their partners, but there is limited room for support due to financial obligations. Cost of operations and other financial costs are extremely high. Having said that, we will discuss all probable options with our retail fraternity and like always overcome this problem together.”

However, demand for daily essentials have gone up and so the retailers selling these have experienced a boom in their sales.

On the other hand, retail sales of other products especially luxury brands and high involvement purchase items have fallen substantially. “However, most of the retailers are on revenue-share model and since the revenues have gone down, this should automatically bring down the rentals, which should be of some relief to the retailers,” said Samir Jasuja, the founder and managing director of real estate research firm PropEquity.

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