Why Mall Owners Are Turning Towards Food And Entertainment

Entertainment and food and beverage (F&B) outlets are increasingly gaining ground at the expense of large apparel or departmental stores in malls across the country. As F&B and entertainment sections see an increase in footfalls, so does the area mall owners are allocating to them, at least three mall owners told BloombergQuint.

Traditionally, the area dedicated to F&B and entertainment outlets is much less compared to apparel stores. Currently, the F&B and entertainment sections constitute about 20-25 percent of the floor area but with changing consumer behaviour, the allocation is moving up to 35-40 percent, all three of them said.

Consumers are spending heavily on F&B and entertainment, even as retail spending is on the backburner, pointed out Aditya Sachdeva, director of retail at Knight Frank India.

Nirmal Lifestyle, which shut its mall in Mulund in Mumbai, plans to open another mall in the same area. Managing Director Dharmesh Jain said, this time, the mall will allocate nearly 40 percent of the its floor space to food and entertainment while the remaining will be dedicated to apparel stores.

Phoenix Marketcity in Pune is looking to increase the area dedicated to these sections by another 30,000-40,000 square feet by Diwali, according to Director Rajiv Malla. Currently, the mall allocates about 100,000 square feet to the food and entertainment sections.

Oberoi Mall, right from its inception, saw robust demand for food, beverages and entertainment and has allocated approximately 30 percent of its floor area for the same.

Ishanya Mall in Pune is increasing its allocation to 35 percent from 10 percent over the last two years, according to chief executive officer Mahesh M. The mall will eventually take the floor space dedicated to F&B and entertainment to 40 percent, he added.

Renegotiating Rentals

What’s also driving the shift away from departmental and apparel stores is that retailers have begun negotiating for a reduction in rentals – to the tune of 20-25 percent – hit by several quarters of waning retail demand, said Arvind Singhal, chairman of consulting firm Technopak Advisors. This phenomenon is growing not only in the metros but also in Tier-I and Tier-II cities, he added.

“The retailers which are not achieving the expected targets are approaching the mall owners to either bring down rentals or give them short-term benefits of reduced rentals,” according to Aditya Sachdeva, director of retail at Knight Frank India.

Besides, retailers pay malls owners a variable component – a percentage of their store sales – along with a fixed rent. Due to lower footfalls, this variable component has also taken a hit, again leaving mall owners with lower rentals.

Retailers are especially renegotiating with non-premium malls to reduce the rental, as it is a drag on precious resources of retailers, Kumar Rajagopalan, chief executive officer of Retailers Association of India added.