April 25, 2023
Robust retail sales are expected to boost mall operators' revenue this fiscal year, with an occupancy rate of 95%
Operators are expected to receive contractual rent escalations of 4-5%
Mall operators are expected to reach 125% of pre-pandemic or fiscal 2020 revenue
Cost efficiency measures taken during the pandemic are expected to enhance profitability for malls
Indian mall operators are anticipated to achieve revenue growth of 7-9% in FY24, despite the high-base effect of the previous year, owing to high occupancy and leasing rates, according to a report from rating agency CRISIL.
Experts mentioned that robust retail sales are expected to boost mall operators’ revenue this fiscal year, with an occupancy rate of 95% resulting in better rental rates for new leases. Additionally, as 10-15% of mall operators’ revenue is linked to retail sales through revenue share, this percentage is anticipated to increase in the current fiscal year. Moreover, operators are expected to receive contractual rent escalations of 4-5%.
It is anticipated that mall operators will reach 125% of pre-pandemic or fiscal 2020 revenue. Following the removal of mobility restrictions in 2023, businesses are expected to return to normalcy, resulting in a substantial growth in footfalls and a 60% revenue increase to 116% of the pre-pandemic level.
The experts also highlighted that cost-efficiency measures taken during the pandemic are expected to enhance profitability. The operating margin is anticipated to reach 70% this fiscal year compared to the pre-pandemic level of 65-68%. Additionally, the infusion of equity is expected to improve leverage, thereby keeping credit risk profiles stable. Furthermore, continued investor interest in the sector through platforms such as real estate investment trusts (REITs) is a positive development.
The report analyzed 28 malls across the country and revealed that the pandemic has forced mall operators to optimize their overheads and reduce costs through manpower planning.
Source: Economic Times