High prices of luxury space rentals, lack of suitable retail real estate making it tough for luxury brands to expand business in India. Indian cities ranks among the lowest in a recent study on luxury retail penetration in top Asia Pacific cities.
Delhi, Mumbai and Bangalore rank at 25, 25 and 27, respectively, according to real estate company JLL‘s recent report whichtracked the presence and expansion patterns of 100 top international luxury and mid-tier retailers in 30 major Asia Pacific cities.
Steep rentals and lack of quality retail real estate at strategic locations near high-income neighbourhoods are making it hard for luxury brands to expand their business in the country in a viable manner, forcing many players to tweak their business plans and go slow.
As of now, a total of 70.7 million sq ft of retail space is ready and operational in top seven cities of the country. Out of this 25 million sq ft is grade A and it is completely taken up with zero vacancy, while the vacancy level for total retail real estate space is 12%. Although no sharp reduction in rentals is expected, the price gap between prime and affordable assets may reduce as 3.9 million square feet of retail space is getting added by the end of 2014 and 8.4 million sq ft by 2015 end
Established retailers like Reliance Brands, which operates a large number of stores for several internatioanal luxury brands such as Zegna and Brooks Brothers, find it challenging to justify investments. “Irrespective of the financial strength of a company, profitability is the focus. And rentals in India affect profits,” Darshan Mehta, CEO at Reliance Brands, told The Economic Times.
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