In today's Finshots, we trace the lifecycle of a mall and see why some of them are dying.

The Story

It's happening.

Malls are dying.

And the ones that are on life support will also likely soon go under. That’s according to a real estate consultant firm Knight Frank.

But before we discuss such depressing matters like “dying malls”, let’s instead look at what a successful mall looks like. A good example is the Select Citywalk Mall in Delhi. It’s owned and operated by Select Infrastructure Private Limited and is located in Saket, South Delhi, one of India’s wealthiest residential areas. The mall opened to the public in 2007 and boasts a near 100% occupancy rate with a healthy mix of international (17%) and domestic brands properly zoned and housed across 500,000 sq. ft. of prime leasable area.

It also hosts three anchor stores (stores that pull in people by the masses)—H&M, Zara and Decathlon, alongside a 6-screen multiplex, a food court, dedicated zones for fashion and lifestyle, groceries, home and electric brands and adequate parking space. And considering that the mall is just a shoe’s throw away from the metro, it’s no wonder that this urban consumption centre has generated the highest sales per square foot and the highest footfall in the country among any Indian mall of comparable size.

This is what success looks like.

But there is also another kind of mall. One that’s barely occupied. There are no anchor stores, no movie screens, no food courts, no people. Maybe a few spas, a liquor store and the occasional pigeons flocking to the chandelier. It feels eerie, with parts of the mall so decrepit you could mistake it for a haunted house.

So the real question is — How does a mall go from being a bustling centre of human activity and commerce to a ghostly shell?

Well, you would think that ghost malls emerge when there’s a general decline of human activity in the area surrounding the mall. Maybe you believe the mall loses its sheen when people lose interest. However, that’s only partly true. A good chunk of malls go bust because of bad management.

Take for instance the case of Grand Venice Mall. As an article in the Print notes — It once featured “Roman statues, domes, Venetian-styled architecture, and louvred windows… two canals running under its arches, with gondola rides on offer so that visitors can get a Venice-like experience in Uttar Pradesh. However, the mall and its reputation began to deteriorate after the Economic Offences Wing (EOW) of the Delhi police arrested the mall’s owner Satinder Singh Bhasin in 2020 for his alleged role in the ₹4,000 crore Bike Bot scam.”

Sidebar: The Bike Bot scam was a scheme that promised customers large returns on their investment in motorcycles that were supposed to be used as two-wheeler taxis

Anyway, once the mall owner is implicated, management and upkeep take a back seat. Soon enough, the anchor stores walk away. This takes away a good chunk of the crowd and the reduced footfall in turn affects everyone that’s left. If you don’t have enough retail stores, that affects footfall again. And it’s a vicious, never-ending cycle. Infact, in its report on Ghost malls, Knight Frank writes that vacancy rates in Grade C stock (small, bad malls) have gone up even when Grade A shopping centres’ operational metrics continue to improve.

That’s the point. Not all malls are dying. But the ones that are doing poorly are most likely doomed.

And it doesn’t always happen because the mall owner goes bankrupt or is implicated in a "Bike Bot scam". Sometimes it could happen because of short-term incentives. As a mall developer, you want to make sure that you break even on your investment as quickly as possible. And in a rush to lease out spaces, many smaller developers will refuse to strategically allocate retail units. You’ll see a random mix of tenants. A food outlet next to a designer apparel store. There are no zones. No clear demarcations.

And sometimes they will also divide retail spaces into smaller units just to push a sale. In the short term this makes money, easing the pressure on an already stressed balance sheet. Yes, real estate developers are constantly short of funds. But in the long term this is a terrible strategy, especially if you are looking to attract premium/quality tenants.

And you know what’s worse?

Some mall owners don’t even care about this. Once they break even on a project, they move on to the next best thing. The only funds dedicated to maintenance and upkeep will come from the common area maintenance charge. A fee that every tenant is expected to pay. And if this money doesn't cover the costs, or even worse there’s little provision to ramp up this charge, then the mall is doomed once again. The developer walks away. Larger stores (that can cut their losses soon) will also head for the exit leaving behind a half empty mall with small business owners that may not have the leverage or the money to switch.

This is how most malls die in India. And it’s a terrible sight.

So what happens then?

Well sometimes, a mall owner may really want to breathe new life into the mall. In which case, they’ll have to undo some of the damage and also invest some money. Re-zone, reprioritise and plan to attract bigger, better brands — especially in the wake of e-commerce players vying for the same customers. In other cases, the best option is to let it go. Repurpose the mall into an office space or tear it down and build something else in its place.

And finally maybe, just maybe, this is the natural order of things. Eventually the ride has to end. A mall has to die. Slow decay until your favourite spot becomes a ghost mall. The only thing that will remain are the memories — of a place that once used to be truly special.

Okay, that was probably a bit cheesy. But you get it, don’t you?

Until then…

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