Mall Management: Operating In Indian Retail Space 1259004996, 9781259004995

Table of contents :
Title
Foreword
Preface
Acknowledgements
1. INTRODUCTION TO RETAILING AND SHOPPING MALLS
Introduction
Emergence of Organized Retail in India
Organized vs Unorganized Retail
Evolution of Shopping Malls
Malls Move Out of Indian Metros
Mall Management
Factors Stimulating Growth of Shopping Malls in India
Challenges of Mall Development in India
High Rental Charges
Summary
Review Ques tions
Practice Exercises
Suggested Readings
Case: India's first modern mall
2. CONCEPT OF SHOPPING MALL
Introduction
Definition of Shopping Mall-Different Perspectives
Shopping Centre Vs Mall: The Paradox
Comparison of Indian and Western Shopping Malls
Significance of Shopping Malls
Types of Shopping Malls
Emerging Trends
Summary
Review Questions
Practice Exercises
Suggested Readings
Case: The mall and the community
3. MALL DEVELOPMENT PROCESS
Introduction
Planning and Design Decisions
Site for the Shopping Mall
Mall Design Process
Summary 57· Review Questions
Practice Exercises
Suggested Readings
Case 1: What makes a mall successful?
Case 2: Square peg in a round hole
4. FINANCING AND REVENUE MODEL FOR SHOPPING MALLS
Introduction
Capital Sources for Malls
Sources of Revenue
Strategic Decisions in Mall Financing
Summary
Review Questions
Practice Exercises
Suggested Readings
Case: Multiple owner can't manage malls
5. TENANT MIX
Introduction
Zoning
Concept of Tenant Mix
Important Terms Related to the Tenant-mix
Five Attributes of the Tenant-mix
Benfits of Tenant-mix
Types of Retail Tenants
Tenant Categorization on the Basis of Lease Contract
Tenant-mix Decisions
Tenant Mix Modification to Flow with Times
Modes of Tenant-mix Improvement
Anchor Tenants
Temporary Tenants
Ancillary Uses of Mall Space
Future Direction of Tenant Mix Management
Summary
Review Questions
Practice Exercises
Suggested Readings
Case: Retailer developer partnership: A way forward
6. LEASING ADMINISTRATION
Introduction
Important Terms Related to Leasing
Types of Lease
Major Provisions of A Lease Agreement
Significant Clauses and Exigencies Concerning Lease Agreement
Rent Changes in Leasing Agreement
Leasing Process
Documentation Used for Interaction with Prospective Tenants
Best Leasing Practices
Lease Preparation
Leasing Administration
Expiry and Termination of Lease
Summary
Review Questions
Practice Exercises
Suggested Readings
Case: Retailer's down shutters
7. MARKETING AND PROMOTION ACTIVITIES FOR SHOPPING MALLS
Introduction
Classification of Marketing Activities in Shopping Malls
Marketing and Promotion during Planning and Construction Phase
Targeting Retail Tenants
Targeting Customers
Marketing and Promotion during Launch and Operations Phase
Mall Promotion Calendar
From Marketing to Relationship
Summary
Review Questions
Practice Exercises
Suggested Readings
Case: Summer carnival at Oberoi mall, Mumbai
8. FACILITIES MANAGEMENT IN MALL OPERATIONS
Introduction
Facilities Offered in a Mall
Summary
Review Questions
Practice Exercises
Suggested Readings
Case: Accidental deaths in shopping malls
9. REGULATORY FRAMEWORK FOR SHOPPING MALLS
Introduction
Shops and Establishments Act
Environmental Regulations for Shopping Malls
Insurance for Shopping Malls
Labour Laws Concerning Shopping Malls
Summary
Review Qtlestions
Practice Exercises
Suggested Readings
Case 1: Disputes over right to inspect the mall
Case 2: Demolition of mall built on enchroaclzed land
10. HANDLING ANCHOR TENANTS
Introduction
Definition of Anchor Store
Popular Anchor Tenants in the Indian Malls
Summary
Review Questions 221. Practice Exercises
Suggested Readings
Case: Food court emerging as anchors
11. FUTURE OF SHOPPING MALLS
Introduction
Comparison of Mall Development in the US and India
Challenges before Indian Shopping Malls
Life Cycle Stages of Shopping Malls
Summary
Review Questions
Practice Exercises
Suggested Readings
Case: Has the decline set in for the Indian malls?
GLOSSARY
INDEX

Citation preview

Mall Management

About the Authors

Dr. Harvinder Singh is an Associate Professor in the area of

Dr. Srini R. Srinivasan

Cases in Retail Management and Strategic Retail Management. He has

Mall Management Harvinder Singh Associate Professor—Marketing IMT, Ghaziabad

Srini R. Srinivasan Chairperson, Vivekanand Education Society's Institute of Management Studies and Research, Mumbai

Tata McGraw Hill Education Private Limited NEW DELHI

New Delhi New York St Louis San Francisco Auckland Bogotá Caracas Kuala Lumpur Lisbon London Madrid Mexico City Milan Montreal San Juan Santiago Singapore Sydney Tokyo Toronto

Tata McGraw-Hill Published by the Tata McGraw Hill Education Private Limited, 7 West Patel Nagar, New Delhi 110 008. Mall Management Copyright © 2012 by Tata McGraw Hill Education Private Limited. No part of this publication may be reproduced or distributed in any form or by any means, electronic, mechanical, photocopying, recording, or otherwise or stored in a database or retrieval system without the prior written permission of the publishers. The program listings (if any) may be entered, stored and executed in a computer system, but they may not be reproduced for publication. This edition can be exported from India only by the publishers, Tata McGraw Hill Education Private Limited. ISBN (13 digit): 978-1-25-900499-5 ISBN (10 digit): 1-25-900499-6 Vice President and Managing Director: Ajay Shukla Head—Higher Education Publishing and Marketing: Vibha Mahajan Publishing Manager—B&E/HSSL: Tapas K Maji Deputy Manager—Sponsoring: Amit Kumar Associate Development Editor: Amrita Marik Senior Production Manager: Manohar Lal Senior Production Executive: Atul Gupta Marketing Manager—Higher Education: Vijay Sarathi Graphic Designer (Cover Design): Meenu Raghav Assistant Product Manager: Daisy Sachdeva General Manager—Production: Rajender P Ghansela Manager—Production: Reji Kumar Information contained in this work has been obtained by Tata McGraw-Hill, from sources believed to be reliable. However, neither Tata McGraw-Hill nor its authors guarantee the accuracy or completeness of any information published herein, and neither Tata McGraw-Hill nor its authors shall be responsible for any errors, omissions, or damages arising out of use of this information. This work is published with the understanding that Tata McGraw-Hill and its authors are supplying information but are not attempting to render engineering or other professional services. If such services are required, the assistance of an appropriate professional should be sought. Typeset by Sanjay Chawla and printed at Sai Printo Pack, A-102/4, Okhla Industrial Area, Phase-II, New Delhi 110 020 Cover Printer: Sai Printo Pack RZZCRRXHRBRLC

Dedicated to

My wife, Sumeet, and my son, Ramneek. —Dr. Harvinder Singh Dedicated to

My wife, Srividhya, son, Adithya, and daughter, Anusha. —Dr. Srini R. Srinivasan

Foreword

The Business Monitor International (BMI) India Retail Report predicts that total retail sales in India will increase from INR 18.85 trillion (USD 392.6 billion) in 2011 (33 to 35% of India’s of why the wider world is beginning to take such an interest in the Indian Retail sector. Mall Management: Operating in Indian Retail Space structured contribution to this topic which is important not just for retail practitioners and students based in the sub-continent, but to a wider global audience. This book elucidates the factors that are essential to ensuring that retail, with particular regard to shopping malls, is a key engine of economic growth.

but ensures that they too begin to see Mall Management in a whole new light. Economic

and assessment tasks it demonstrates a keen understanding of pedagogical and andragogical

Mall Management: Operating in Indian Retail Space

***************

viii

Foreword

retail space on high streets, the demand for additional space to spur the growth of the Indian retail industry is being met by the Shopping Mall. But do we know enough of how to locate, design, build, lease, market, promote and manage a Shopping Mall?

Bengaluru ***************

interesting topic.

sure that it will also be a handy reference for the practitioners within the business of mall management.

Mumbai

Preface

two decades in India. People’s understanding of the concept and its utility is undergoing

changes as time progresses. But would shopping malls be in a position to accommodate those

induced us to write this book.

management means facilities management; there is a standard formula for success applicable across all shopping malls; and the biggest myth of all: people desperately need shopping

engineering and construction terms) as user of the book is more likely to be a person with

the operating life of the mall.

x

Preface

students of retail management. It is because shopping malls are the popular and potent platform to carry out retail business and a thorough understanding of mall management

them in picking up threads for initiating and conducting research on issues that raise curiosity in their minds. forward to your support as well as comments.

Acknowledgements

contribution of all those people.

energy. Though compilation of chapters took place during my stint with IMT, major part of content was gathered while I was working with Birla Institute of Management Technology

for three long years, the place where I learned more than I taught.

of content and arguments that are part of this book came out of discussions that I had with my students, both inside as well as outside the classroom. I thank all my students for their contribution in this book.

Editor of Journal of Business and Retail Management Research (JBRMR), for bringing in an

xii

Acknowledgements

a great catalyst in making this dreams a reality.

without their contribution. that rightfully belonged to my family, but they let it happen without making any complaint. I must thank my wife, Sumeet, who has been a great support throughout this process and my

keep doing this in future as well.

No one walks alone and when one is walking on the journey of life, one just doesn’t know where you start to thank those who joined you, walked beside you, and helped you along support of highly talented group of academicians and corporate professionals.

Mukherjee, Director-VESIMSR

their knowledge, ideas, and numerous tips, all of which culminated in the completion of this

Acknowledgements xiii

inspired me and subconsciously contributed a tremendous support to this book. ideas and helping me clarify my thinking in innumerable ways. Mumbai

CHAPTER

1

Introduction to Retailing and Shopping Malls

LEARNING OBJECTIVES This chapter will enable the readers to • Understand the important forces and events a ec ng retail in the perspec ve of its evolu on • Learn about the growth and development of the organized retail worldwide and in India • Know the prospects and challenges faced by the Indian retail business

SHOULD THERE BE FDI IN INDIAN RETAIL? The policy framework for the retail sector in India is being hotly debated for quite some me now. At one extreme of the debate are the people who oppose the entry of big business houses in retail (even the Indian ones). Their argument is that retail is a major employment generator (second only a er agriculture) and the entry of big players would decimate small retailers/intermediaries leading to a huge loss of employment. The other extreme comprises people who advocate entry of interna onal players like Wal-Mart. They cite frequent bouts of food infla on experienced by the country and suggest that the world-class supply chain infrastructure and prac ces used by these companies would revolu onize the Indian agriculture, reduce wastages and stabilize food prices. Genera on of employment, remunera ve prices to farmers, lower prices to consumers and higher revenues (by way of tax collec on) for the government are other reasons cited in favour of foreign direct investment (FDI) in retail. In between the two extremes of the retail debate is a sec on of Indian retailers who advocate the organized retail but are apprehensive of the deep pockets and aggressive strategies of interna onal retailers. They support delay in the FDI induc on in retail and seek imposi on of condi ons on

2

Mall Management

the entry of foreign retailers. However, some Indian retailers see the entry of foreign retailers as a good opportunity to collaborate with them. Though the debate is on, the Government of India on its part has taken some decisions favouring FDI in the retail sector. It has permi ed 100% FDI in cash and carry (1997) and 51% FDI in single-brand retailing (2006). But the fate of FDI in mul -brand retail s ll hangs in balance.

INTRODUCTION It is o en said that ‘change is the only constant’ as it is sure to come, but it is variable in the sense that it does not arrive at a constant pace. With the advances in transportation, communication and information technology, things are changing at a faster pace. Development of the retail sector in India is a live testimony to this. Retail is one of the oldest professions in India that came into existence when people started generating surplus that could be exchanged or traded. It started within the village through barter system but over the years expanded in terms of scope, coverage and complexity. Its outlook metamorphosed due to emergence of currency, marketplaces and regulations. The earliest evidence of retailing is seen in the Indus Valley Civilization (Harappa and Mohenjo-Daro), which was a predominantly urban civilization. This civilization exchanged merchandise with the Babylonian Civilization and also sold it through marketplaces. Over the ages, other platforms came into existence for carrying out retailing activities. These include haats (rural as well as tribal), on-foot hawkers, pushcart vendors, traditional vendors (e.g. maniharins), mobile traders and a variety of shops. Retailing was an integral part of life in ancient and medieval India as is evident from the book Arthshastra, which clearly demarcates locations for retailing of specific products and services within a city. The old city of Delhi (Shahjehanabad) had well-planned locations and layout for marketplaces. All these changes since the days of the Indus Valley Civilization were more of an evolution than a sudden metamorphosis. However, during the last two decades or so, the pace of change has been remarkable.

EMERGENCE

OF

ORGANIZED RETAIL

IN

INDIA

People generally associate the evolution of the organized retail in India with either the entry of private players or the developments that took a er 1991. However, the truth is far from this. Till date, India’s largest network of retail stores (if we may call them so!) is governed by the Government of India and the state governments. Here we are referring to ‘Fair Price Shops’ (ration shops) that are operated under the Public Distribution System (PDS). Similarly, private initiatives in creating and managing organized chains date back to the pre-liberalization era. Who can forget the icon brand ‘Bata’ and its panIndia presence well before the onset of liberalization!

Fair Price Shops The Public Distribution System (PDS) is a rationing mechanism that ensures availability of specific quantities of select essential commodities at subsidized prices to a target group

Introduction to Retailing and Shopping Malls

3

of people, and Fair Price Shops (FPS) are the instruments or platforms to implement this system. At present, India has nearly 5,00,000 FPS, which provide essential commodities to a sizeable population of India. These shops are run by private persons under the authorization and monitoring of respective state governments. The private person provides the retail space and handles operational issues at the front-end (including workforce), whereas the state government handles the supply chain. The government also frames rules and norms to be followed by the shop. In this sense, it is very similar to the franchising mode that operates in the modern retail business. The Public Distribution System was started as a war-time measure in 1939 (British India). Its evolution can be divided into four phases. Phase one was from its origin to the 1960s when it was meant to distribute imported food grains. The second phase lasted from the 1960s to 1978 and it involved development of an administrative machinery to handle and distribute domestically produced food grains a er the Green Revolution. The third phase lasted till 1991 and saw tremendous expansion of the network. It was during the second and third phases that FPS started distributing a variety of products beyond food grains. Phase four commenced in 1991 and resulted in the shi of the PDS from universal coverage to targeted coverage.

Private Initiatives in Pre-liberalization India Private initiatives in se ing up retail store chains were taken by companies like Raymond’s, Bata, DCM and Bombay Dyeing. Some of these companies have been doing business in India for over 70 years now. As a step towards forward integration, these companies started chains of stores (company owned as well as franchisee owned) in Indian cities. These stores were larger in size, had be er ambience and carried deeper assortment. However, these were located in or around the existing marketplaces.

High-street Markets in India During a large part of the twentieth century, urban retailing was carried out through shops of varied sizes in well-demarcated marketplaces. The typical size of a shop ranged from 50 square feet to 500 square feet. Each city had one ‘sadar bazaar’ ( a term used for wholesale market), which used to be a lane or road having shops on both the sides. Shops followed a unique pa ern of clustering in which competing or complementary shops were clustered together. In some cases, it evolved into a market that was entirely dedicated to a single product category, for example, Jauhari Bazaar in Jaipur. There were marketplaces like Connaught Place in Delhi, MG Road in Bangalore, Mount Road in Chennai and Linking Road in Mumbai. Proximity to customers, relationship orientation and trust were hallmarks of this type of retailing. This framework worked well till the 1970s or 1980s. A big change came with the advent of liberalization. The Indian market was opened for international companies and brands. International companies desperately needed suitable platforms to showcase their brands and products. They picked up the best retail spaces available (e.g. Connaught Place). However, such spaces were very few, whereas brands came in abundance. It provided an opportunity for new retail platforms to emerge.

4

Mall Management

Forces Shaping Demand for Improved Retail Formats Another simultaneous change took place in the customer’s shopping list and shopping preferences. The services sector started contributing a higher proportion to India’s GDP. Gradually, the private sector became a larger and more sought-a er employer than the public sector (the government). People’s income skyrocketed and so did the aspirations. The emergence of sectors like banking, finance, insurance IT and ITES changed the economic profile of the urban population. These changes brought commensurate improvements in people’s shopping behaviour and pa ern. People had more money and less time and shopping experience and comfort became an important part of people’s life. The above changes in market and consumers resulted in the emergence of the organized retail formats. Department stores like Shoppers Stop, Ebony and Pantaloon were first to come, but later on India witnessed the emergence and acceptance of myriad retail formats. As very few existing marketplaces could provide the kind of space and ambience required to accommodate the tenants eager to serve the ‘new Indian consumer’, the situation was ripe for the emergence of shopping malls in India. Shopping malls are considered superior to stand-alone retail stores or high-street locations as they can insulate shoppers from unfavourable ambient factors and distractions by o ering a controlled and superior ambience. The concept of ‘all solutions under one roof’ became a big hit with the time-starved urban shoppers and thus shopping malls took o in India.

ORGANIZED

VS

UNORGANIZED RETAIL

The organized retail occupies nearly 75–80 per cent of the total retail sales in the developed countries, whereas the unorganized sector dominates the retail business in the developing countries (ICRIER, 2007). In the developing world, the share of the organized retail varies widely from just 1 per cent in Pakistan and 5 per cent in India to 36 per cent in Brazil and 55 per cent in Malaysia (BRIC Report 2007). Modern retail formats, such as hypermarkets, superstores, supermarkets, discount and convenience stores, are widely present in the developed world. However, these retail formats have just begun to spread to the developing countries where the retail business continues to be dominated by family run neighbourhood shops and open markets. As a consequence, the wholesalers and distributors who carry products from industrial suppliers and agricultural producers to the independent family shops and open markets remain a critical part of the supply chain in these countries.

Spread of Modern Retail in Developing Countries The shopping mall construction boom in Asia has a racted a good deal of international media a ention during the past few years. Eight of the ten largest malls in the world were in Asia in early 2008, and several more mega-malls in China and the United Arab Emirates are under construction. From Shanghai to California, shopping malls are sprouting up by dozens every year. And, with the retail sector booming, more such swanky shopping plazas are waiting to be built.

Introduction to Retailing and Shopping Malls

5

The arrival of modern retail in developing countries occurred in three successive phases. In the early to mid-1990s, the first phase took place in South America (e.g. Argentina, Brazil and Chile), South East Asia and East Asia outside China (e.g. South Korea, Malaysia, Philippines, Thailand and Taiwan), North-Central Europe (e.g. Poland, Hungary and the Czech Republic) and South Africa. During the mid- to late 1990s, the second phase covered Mexico, Central America (e.g. Ecuador, Colombia and Guatemala), South East Asia (e.g. Indonesia), China and Southern-Central Europe (e.g. Bulgaria). The third phase began in the late 1990s and early 2000s in parts of Africa (e.g. Kenya), some countries in Central and South America (e.g. Nicaragua, Peru and Bolivia), South East Asia (e.g. Vietnam), India and Russia. Thus, the third-phase countries, which include India and Russia, are late comers in the di usion of modern retail. The main reason why they lagged behind was the severe restrictions on FDI in retailing in these countries though the demand side features of these countries, such as income, size of the middle class, urbanization and the share of women in workforce, have been similar to the countries covered by the second wave. In China and Russia, these restrictions were progressively relaxed in the 1990s and in India partially in the 2000s. In January 2006, India allowed foreign companies to own up to 51 per cent in single-brand retail joint ventures (JVs), but multiple-brand foreign firms are still barred in retail although they can set up wholesale operations.

EVOLUTION

OF

SHOPPING MALLS

According to some researchers, malls started in the early 20th century with a group of stores establishing o -street parking in a Baltimore neighbourhood in 1907. Another significant development took place in the 1920s in California where supermarkets would anchor and serve as a magnet for a strip of small stores. However, the entities referred to in both the cases cannot be called malls in the true sense of the concept as it is understood today. At best, these commercial units may be termed as ‘precursors’ of modern malls. Incidentally, many aspects of retailing emphasized by the ‘first malls’ have become an integral part of modern malls. In 1922, in suburban Kansas City, Missouri, J.C. Nichols built the Country Club Plaza, which was a group of stores accessible only by cars. It was constructed as the business district for a large-scale residential development. It featured unified architecture and paved and lighted parking lots. It was managed and operated as a single unit. In 1931, Hugh Prather developed Highland Park Shopping Village in Dallas, Texas. It was the first group of stores having its own parking lot with the stores facing away from the access road. Unlike Country Club Plaza, Highland Park occupied a single site that was not bisected by public streets. The first modern shopping mall, Southdale Center, was established in 1956 in Edina, Minnesota, outside Minneapolis. It was the first fully enclosed mall with a two-level design. It had central air-conditioning and heating, a comfortable common area (atrium), and two competing department stores as anchors (ICSC, 2000).

6

Mall Management

Country Club Plaza, Kansas City, Missouri—World’s first shopping mall

The concept of mall was originally conceived as a community centre where people would converge for shopping, cultural activities and social interactions. Traditional developers a racted consumers to malls through the promise of making available a wide assortment of stores and merchandise at a single location. Apart from the products and services o ered, a mall itself o ers experiences that are consumable. It has the advantage of climatic comforts and gives shoppers the freedom from noise and tra c, which characterize other shopping venues. More recently, mall interiors have evolved from comfortable-yet-mediocre spaces to architecturally rich with lavish materials and sophisticated design elements such as multilevel atrium and curved escalators. Mall managers have been organizing special events within the malls, like home improvement expos, walking clubs, art exhibits, health screening, auto shows and live music. Malls have also become important meeting places, especially for young people and senior citizens. Some bigger malls have become so famous that they have emerged as tourist destinations.

India’s Entry into Shopping Mall Era India entered the mall era in the 1990s when the first wave of mall development was observed in the form of Spencer Plaza (Chennai), Crossroads (Mumbai) and Ansal Plaza (New Delhi) creating approximately 6,50,000 sq. . of mall space in India. Despite being the forerunners of the organized retail, these malls di er a lot from modern malls.

Introduction to Retailing and Shopping Malls

7

Phase one of Spencer Plaza was inaugurated in 1990 a er rejuvenation of the firegu ed old Spencer Commercial Complex. The seven-floor mall has a mix of retail, o ce space and entertainment facilities, but it has glaring flaws. A er having sold the outlets to retailers, the mall management has no control over the retail space utilization. There is complete absence of the floor-wise retail concept or zoning as tenants and owners have set shops with all kinds of retail outlets everywhere. However, the latest phase of Spencer Plaza (phase three) is very close to a modern-day Indian mall.

Spencer Plaza, Chennai—India’s first shopping mall

Ansal Plaza was launched in 1999 as a joint venture of the Housing & Urban Development Corporation Ltd. (HUDCO), a government corporation, and the Ansal group. Located in proximity to the posh South Extension locality in New Delhi, Ansal Plaza was the first retail project of its kind in North India. This is a three-storey complex divided into three wings (A, B and C) and encloses an open-air amphitheatre. The project was conceived as a mixed-use property comprising o ces and retail. Although architecturally it looks di erent from modern shopping malls with an enclosed atrium and corridors, it scores well on other parameters such as the tenant mix and zoning. Of the three pioneers, Crossroads is closest to a modern shopping mall. Inaugurated in 1999 in the Haji Ali area of Mumbai, Crossroads was planned and developed by the Piramal Group of Industries a er renovating their old pharmaceutical buildings into a new-style mall. It is a three-storey construction dominated by retail, food and entertainment. Notably, none of the pioneer malls has a multiplex as a tenant, which is in stark contrast to the present scenario.

8

Mall Management

Ansal Plaza, Delhi, during its initial years

MALLS MOVE OUT

OF

INDIAN METROS

The growth of India’s retail sector is phenomenal. It is growing at a swi pace that is expected to be sustained in future. Barring some slowdown in the mall construction activity during 2008–09 due to economic recession, this sector has registered a fairly steady growth rate. The total shopping mall area has been doubling every year. From a meagre one million sq. . in 2002, it rose to over 52 million sq. . covered by 172 operational malls in 2009. The Indian retail growth has been fuelled by a strong economy, favourable demographics, rising wealth levels and rapidly changing lifestyles and aspirations of an ever-burgeoning middle class. The mall business is spreading fast, charting a new course in Tier II cities of India. Real estate developers are taking this phenomenon further to smaller cities, with corporate houses like ITC and the Sriram Group making a steady progress in proving its feasibility even in the rural market. There is no denying that topnotch cities like Mumbai, Delhi, Bangalore, Hyderabad, Kolkata, Chennai and Pune are leading the way. But Tier II cities like Ludhiana, Chandigarh, Nagpur and Surat are too catching the eye of mall developers. Mall developers are in such a mood that they may override the requirement in a specific city. Figure 1.1 shows distribution of mall space across major centres.

Introduction to Retailing and Shopping Malls

9

(Source: Indian Retail Report, images, Malls of India 2009) Figure 1.1: Distribution of mall space across major centres

According to an Images F7R research, there were about 172 operational malls in India in 2010. North India dominated the scene with 79 operation malls followed by West Zone with 56 operational malls, South zone with 21 malls and East zone with 16 malls. In North India, major supply of mall space came from Delhi NCR with 53 malls out of 79 coming from its constituent cities (including, Gurgaon, Ghaziabad, Noida and Faridabad). In west zone, 35 malls out of total 56 are in Mumbai. Major location in the East is Kolkata with 10 out of 16 operational malls whereas South has Bangalore and Hyderabad as prominent locations. Smaller cities like Ahmedabad, Jaipur, Nagpur, Lucknow, Indore, Ludhiana and Chandigarh are also coming up with shopping malls.. With such high projections of new format retail space, innovation, the right tenant mix, e ective mall management and provision of ample parking space are the components that will decide the future success of malls. In India, the organized retail space development has witnessed a sea change in the last decade. Over these years, there has been a spur in the availability of mall space in India. From just three malls in 1999, the country now has a total of 172 operational malls

10

Mall Management

o ering 52.2 million square feet of mall space. Though the pace of growth in mall space dampened a bit during the last few years, according to a research, the country is likely to have a total of nearly 750 operational malls providing 350 million sq. . of mall space by the year 2015 (Images F & R Research Analysis, 2007).

MALL MANAGEMENT The management procedure universally adopted for malls is that the landlord remains responsible for all aspects of managing the mall but recovers the cost of such management by way of a service charge levied on the tenants. The basis of service charge apportionments varies from case to case. The mall management and the mall owner have the same goal—of driving up the revenues achievable from the mall. Nevertheless, there is a wide di erence in the way they approach this goal. While the owner’s focus is principally on driving up the rentals, the mall manager concentrates on other ways as well for enhancing overall revenues (such as rentals, common area maintenance charges and marketing income) that will eventually boost the rents that the mall can command. In India, the concept of mall management continues to be equated with the facilities management. Several large international property consultants operate in the sphere of facilities management. While the facilities management is one of the functions of a mall manager, it cannot be a substitute for the integrated mall management. A facilities manager charges a monthly fee per unit area for managing services on-site. On the other hand, a mall manager charges a percentage of the revenue generated by the mall. Because the management demands of a mall are substantially di erent from those of an o ce building or an apartment complex, the mall management process comprises certain functions that are unique to it. Even in the case of the activities that are common to general management of a commercial or residential real estate, the orientation is entirely di erent. The functions that come under modern mall management are described below.

Positioning Positioning a mall refers to defining the category of services it will o er based on demographics, psychographics, income levels, competition in neighbouring areas and extensive market research of the catchment area. For example, if the market research indicates that the average number of households living in a particular area belongs to the upper middle class then a high-end retail mall would suit the location.

Zoning Zoning refers to the division of the mall space into zones for the placement of various retailers. A mall is dependent on the success of its tenants, which translates into the financial feasibility of tenants in the mall. Generally, there are two types of consumers visiting malls – focused buyers and impulse buyers. The time spent by the focused buyers in malls is relatively less compared to the impulse buyers who also enjoy windowshopping. There is li le that retailers can do to a ract the focused buyers, as they usually

Introduction to Retailing and Shopping Malls 11

know what they require and from where. However, the right tenant mix and optimum retailer placement a er a diligent zoning exercise can help retailers a ract both types of consumers, especially the impulse buyers. Formulating the right tenant mix based on zoning helps a ract and retain shoppers by o ering them multiple choices and satisfying their multiple needs. It also facilitates smooth movement of shoppers within the mall by preventing cluster formation and bo lenecks.

Promotions and Marketing Promotional activities and organizing events in a mall form an integral part of the mall management. Activities like food festivals, handicra exhibitions and celebrity visits increase footfalls and, in turn, sales volumes. Organizing cultural events has time and again proved vital in a racting consumers to a mall. Such activities may also act as a di erentiator for a mall.

Facilities Management The facilities management refers to the integration of people, place, process and technology in a building. It also means optimum utilization of resources to meet organizational needs. It broadly includes management of infrastructure, ambience and tra c.

Infrastructure Management It refers to the management of facilities provided to the tenants within a mall. It includes provision of adequate power supply, safety issues in case of emergency and miscellaneous issues such as signage, water supply and sanitation, etc. Ambience Management The overall shopping experience provided for consumers is an important factor for the success of any mall. The ambience management includes management of parks, fountains and the mall’s overall look. Traffic Management The tra c management includes managing foot tra c into the mall and parking facilities. The foot tra c management involves crowd management inside the operational area of a mall.

Finance Management The financial management of the mall as a true business venture is a must. The financial management involves monitoring and controlling of various issues such as cash receipts and collection of income including rentals and electricity, service and other utility charges, and payment of all invoices and expenses.

FACTORS STIMULATING GROWTH

OF

SHOPPING MALLS

IN

INDIA

Some major factors that contribute in the growth of shopping malls in India are discussed below.

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Mall Management

The Young India India has the advantage of a largely young population. Children below 14 years of age currently constitute 35 per cent of India’s population. By 2050, over 60 per cent of the country’s population is estimated to constitute the working age group (15–60). Twothirds of Indian population is under 35, with the median age of 23 years, as opposed to the world median age of 33. India is home to 20 per cent of the global population under 25 years of age (Rama P apurkar, 2008). This trend is projected to continue for the next decade. The large proportion of the working-age population translates into a lucrative consumer base vis-à-vis other economies of the world, placing India on the radar as one of the most promising retail destinations of the world.

Rapid Economic Growth The fast and furious pace of growth of the Indian economy is a driving force for the Indian consumerism, with the Indian consumers confident about their earnings and spending a large portion of their high disposable incomes. Projections by analysts suggest that India has the potential to emerge as the fastest-growing economy and outpace the developed economies by 2050. Analysts predict India to sustain an average GDP growth rate of 5 per cent till the middle of this century.

Potential Rural Market India ranks first, ahead of Russia, in terms of the emerging market potential and is deemed a “Priority 1” market for international retail. The organized retail penetration is on the rise and o ers an a ractive proposition for the entry of new players as well as scope for expansion by the existing players. India is home to a large base of consumers with annual incomes falling in the range US$ 1,000–4,700, comprising over 75 million households (ICRIER 2008). A steadily rising percentage of rich and super-rich population and impressive disposable incomes o er a spectrum of opportunities, spanning from rural retailing to luxury retailing. The impressive retail space availability and growing consumerism in the emerging cities and small towns add to the market a ractiveness.

Low Cost of Operations The most a ractive component of India’s value proposition is its cost-e ectiveness. The existing players are increasingly turning to Tier II and Tier III cities for retail establishments and for manpower sourcing. These cities o er significant cost advantage in the form of availability of low-cost skilled human resources. Well-educated small-town graduates turning to cities for employment are ideal candidates for sales and marketing executive roles in modern organized retail formats.

Share of Wallet The average annual expenditure of a household is estimated at Rs 1, 22,446 in metro cities. The maximum share is devoted to food and grocery at 36% followed by rent. Utilities too account for a significant proportion. As is evident from Fig. 1.2, the Indian consumer no longer spends typically on one type of item. Her consumption basket is ge ing

Introduction to Retailing and Shopping Malls 13

diversified day by day Significant shi s in the consumer spending will be seen in other consumption categories as well, as the values and preferences of the Indian consumer change. The shi will be in favour of ‘economically enabling’ categories that will either boost current productivity or facilitate future participation in economic activity, namely health, education, transportation and communication.

Source: Compiled from data on Private Final Consumption Expenditure provided by CMIE Figure 1.2: Consumption expenditure for an Indian family

Government Support to Modern Retail Formats Large format malls are increasingly becoming popular with developers as well as consumers. ge ing prominence with adequate retail space allocated to leisure and entertainment. To catalyze the trend, some states like Punjab even exempted multiplexes from entertainment tax in the past. This boosted the confidence of the mall developers to accommodate entertainment players like PVR, Waves, Adlab and Fun Republic in large malls.

Increase in the Sizable Disposable Income The Mckinsey Global Institute predicts dramatic changes in India’s income pyramid with the rise in the incomes of Indians (Figure 1.3). Apart from a substantial reduction in poverty, India will create a sizeable and largely urban middle class. The National Council of Applied Economic Research (NCAER) defines the middle class as comprising two economic segments: seekers with real annual household disposable incomes of 200,000– 500,000 Indian rupees ($4,380–10,940 or $23,530– 58,820 at purchasing power parity or PPP) and strivers at 500,000 –1,000,000 Indian rupees ($10,940–21,890 or $58,820– 117,650 at PPP). In 2005, the Indian middle class was still relatively small, comprising approximately 5 per cent of the population or 13 million households (50 million people). However, if India achieves the projected growth rates, its middle class will reach 41

14

Mall Management

per cent of the population or 128 million households (583 million people) by 2025. In addition, households with real annual earnings of more than 1,000,000 Indian rupees a year (classified as global—greater than $21,890 or $117,650 at PPP) will comprise approximately 2 per cent of the population, but earn almost a quarter of its income. Due to unequal distribution of income, a sizeable portion of disposable income is concentrated in the urban areas and a uent classes. However, the absolute size of rural market is so large that the total number of middle-class homes in rural India equals the number in urban India and thus have the same purchasing power Therefore, there is a significant opportunity for the organized retailers in rural areas as well. The rural market undoubtedly holds immense promise for the organized retail but companies have to devise ways to serve this market profitably. Unlike the urban market, it is less developed in terms of infrastructural facilities.

Figure 1.3: India’s income pyramid

Diversified Culture and Festivals India is a secular country, with a variety of cultures, languages and festivals. Festivals are celebrated throughout the year with great enthusiasm. Most of the festivals are celebrated all over India though under di erent names and with varying rituals. On auspicious occasions like ‘Akshaya Tritiya’, gold sales record a sudden and steep spurt

Introduction to Retailing and Shopping Malls 15

in the country, with Tamil Nadu alone contributing over 20 tonnes of gold sale. Festivals provide opportunities to retailers to convert shoppers into buyers, as Mr. Kishore Biyani (MD and Chairman of the Future group) stated once, “We have learned that if we provide people with an occasion and an excuse to shop, they will come”.

Growing Number of HNWIs India is a developing country that has the most number of the high net worth individuals (HNWIs) exist, which as a huge potential to spend. In the country, the number of HNWIs rose 22.7 % during the year 2007 to 123,000 (DSP Merryl Lynch, 2008). The growth was primarily led by market capitalization and real GDP growth. According to BRIC report (2007), India’s HNI population will equal the population of Australia in 2025.

CHALLENGES

OF

MALL DEVELOPMENT

IN

INDIA

The realization of growth projections for shopping malls in India is likely to face the following challenges:

Lack of Quality Real Estate Modern malls with adequate space for leisure and entertainment cannot come up in the absence of quality real estate. Traditional Indian cities are either totally unplanned or were planned for an entirely di erent scenario/context. In most Indian cities, plots of suitable size are not available at locations that are close to dense population areas.. Plots available in central business districts (CBD) are quite small and for utilizing these mall developers have to either go vertically up (which means reducing the footfalls at successive levels) or scale down (which means a ecting the economies of scale). Best players to operate e ectively from these small plots are the unorganized retailers who still reign supreme at prime shopping places like Connaught Place, Karol Bagh and Lajpat Nagar in New Delhi. Consequently, malls are moving to the periphery of cities.

Price of Quality Real Estate The price of quality real estate has gone up significantly in the past few years in India because of two reasons: First, there is a severe shortage of land at prime locations, so it is available at a very high premium.. Secondly, prices are going up constantly because of competition. The remarkable growth of the retail sector is in tandem with the growth of the Indian economy and the services sector. The services sector includes industries like banking, insurance, finance and investments, and outsourcing. For their expansion, these industries also require space with specifications similar to that of the retail sector. As a result, there is a huge demand from a number of eligible clients for the limited quality space available. At times, retailers who operate on wafer-thin margins are fail to clinch land deals that are snatched by these rivals with deep pockets. The problem is complicated by government policies that do not extend equal benefits to di erent sectors and industries, even if they are utilizing similar resources and contributing equally to the development of nation. A case in point is the favourable (higher) floor space index (FSI) permi ed to the IT sector as compared to the

16

Mall Management

retail sector, thus depriving mall developers of a level playing field while competing for prime space in big cities.

Spiralling Construction Cost The situation is further complicated for mall developers the rising cost of construction over the last few years due to a consistent increase in key construction inputs. For example, the price of steel, a key input, has gone up nearly 1.5 times in the last three years because of the continuously rising prices of iron ore, scrap iron, metallurgical coke and ocean and land freight. Rising steel prices is a global phenomenon. It may be noted that between December 2007 and March 2008, the price of steel in the international market has gone up from US $ 600 per ton to US $ 970 per ton—a staggering hike of US $ 370 per ton (about Rs. 15,000 per ton).

Poor Infrastructure It is impossible to plan and develop millions of square feet of mall space in the absence of adequate infrastructural support. For example, owing to lack of good transportation, easy access to malls has become an issue. Tra c jams and increased time spent in commuting to and from the mall rather than enjoying the same within the mall have truncated the catchment areas for the mall resulting in reduced profitability. Parking is another infrastructural bo leneck faced by shopping malls. Lack of good public transportation in most Indian cities compels people to use personal vehicles like motorbikes and cars. Here again, the absence of adequate public parking space adds to the woes of mall developers as they find it very di cult to accommodate the ever-rising number of personal vehicles into their dedicated parking lots. Another major area of concern is the erratic power supply. Shopping malls need to o er temperature control, lighting and modern facilities like li s and escalators for providing a good shopping experience to visitors. All these facilities require uninterrupted power supply at reasonable prices. However, power shortages are a common feature in all Indian cities. Thus power back-up arrangement coupled with recurring operational and maintenance cost escalates the capital expenditure.

Non-availability of Professional Mall Managers The emergence of organized retailing as a potent commercial activity is a new development in India. Till recently, the man behind the counter did not command respect in society. Still, the domain largely belongs to untrained, make-shi salesmen. The institutions o ering professional learning and training in retailing and mall management are too few. Hence professionally qualified and trained mall managers are practically non-existent. There is no denying the fact that shopping malls need to be managed by professional managers capable of devising ways to keep their properties alive, vibrant and youthful to retain and a ract tenants and give visitors a wonderful shopping experience. . It requires a mall manager to have a thorough understanding of promotion, marketing, branding, shopping behaviour, consumer psychology and retail financials and economics. These

Introduction to Retailing and Shopping Malls 17

diverse areas of learning are encapsulated in a professional degree/qualification that integrates learning with practice. There is no institution in India o ering a specialized programme in mall management though some retail management programs o er it as a single subject which is insu cient. As a result, this profile is mostly managed by people with background in real estate, hospitality or security.

Legal and Regulatory Framework Multiple laws regulate and guide the conduct of mall business in India. Some laws relate to the conduct of trade in general while others are specific to real estate business. Some laws are in the domain of the Central government while others are legislated and implemented by respective state governments. Most laws are outdated and provide scope for discretion to the authorities, which is o en exercised unfairly. There are also a number of laws and by-laws which a ect this business indirectly. Administrative decisions of governments also a ect the mall business adversely.

Financing Funds required for development of millions of square feet of mall space must be generated through a robust system of financing, but India’s real estate sector is driven primarily by private funds and bank loans. Private funds come from di erent sources and in di erent colours. Public money started coming in over the last 2-3 years through initial public o ers (IPOs), but since January 2008 it has taken a severe beating due to economic recession and the crashing of the Indian stock market. The Real Estate Investment Trusts (REITs) and Real Estate Mutual Funds (REMFs) are virtually non-existent. Thus the growth of malls is constrained by quantity and quality of financing options available.

HIGH RENTAL CHARGES Though market scenario seems upbeat, there are serious concerns about the high prices of real estate in India. High property prices result in higher project cost that translates into sky-high rentals. Genuine retailers su er due to high rentals as their business becomes unviable. However, the market is driven by speculators who keep investing in retail properties to make higher returns in future. This inflates the asset-price bubble, which is liable to burst any time.

18

Mall Management

SUMMARY Retailing in India has come up a long way—from pre-historic civiliza ons to the modern-day glitz and glamour of metropolitan ci es. Indian retail formats and stores remained tradi onal and unorganized for a long me but organized retailing has taken a decent start during last couple of decades. It is primarily due to favourable socio-economic condi ons that the na on experienced a er economic liberaliza on. Presence of organized retail formats is minimal at present (in single-digit figure). However, going by the experience of other na ons, it is expected to assume significant propor on in near future. A rapid growth in mall space during the last decade is a reflec on of this trend. Shopping malls need to deliver in terms of all important func ons, such as posi oning, zoning, posi oning and marke ng, facili es management and financing, in order to meet the challenges posed by the environment.

REVIEW QUESTIONS 1. Highlight the significance of the retail business in the history of mankind. 2. Discuss the emergence of the organized retail in India over a period of me. What changes in the economy and society catalysed this business? 3. What is the status of the organized retail as compared to the unorganized retail in India? How far is it likely to go in a decade’s me? 4. Trace the evolu on of shopping globally and in India. How do the two pa erns of evolu on di er? 5. How do the three pioneering malls of India (Spencer Plaza, Chennai; Crossroads, Mumbai and Ansal Plaza, New Delhi) di er from present-day malls? What could be the possible reasons behind these di erences? 6. “Smaller ci es are going to drive the mall business in the coming decade.” Comment. 7. Define mall management. Discuss important func ons that come under its domain. 8. “The mall management in India is considered synonymous with the facili es management.” Comment. 9. What are the factors that indicate that malls would increasingly become epicentres of commercial and social ac vi es? 10. What are the major challenges faced by the mall business in India? What should be done to overcome these challenges?

PRACTICE EXERCISES 1. Visit a large kirana store (unorganized store) in your neighbourhood. Make observa ons about the store, merchandise, ambience and service delivery. Also visit a supermarket (organized store) and make observa ons on similar parameters. What are the major di erences that you find between these organized and unorganized retail stores? 2. Visit a shopping mall of your choice. Note down the retail stores/brands housed in that mall. Also observe the people who visit the mall. Could you make any generaliza on about

Introduction to Retailing and Shopping Malls 19

the segment of people who visit the mall? Compare your observa ons with those of your friends who visited other malls. Are the results same? If no, try to find out the reasons for the di erence. 3. Explore old news items (six-month to one-year old) on shopping malls in a library or on the Internet. What are the issues highlighted in the news clippings? How many of these portray shopping malls in a posi ve light and how many paint them adversely? Prepare a list of all the nega ve issues and discuss the possible ways to handle/solve them.

SUGGESTED READINGS 1. Able , J.; Baijal, A.; Beinhocker, E.; Bose, A.; Farrel, D.; Gersch, U.; Greenberg, E.; Gupta, S. and Gupta, S. (2007), The Bird of Gold: The rise of India’s Consumer Market, New Delhi: McKinsey Global Ins tute 2. Annual report 2007–2008 (2008), New Delhi: Na onal Council for Applied Economic Research (NCAER) 3. Bijapurkar, R. (2007), We Are Like That Only, New Delhi: Penguin Books India 4. Feinberg, R.A. and Jennifer M. (1991), A Brief History of The Mall: Advances in Consumer Research, Vol.18, 426–427 5. h p://www.easternct.edu/depts/amerst/MallsDef.htm 6. ICSC (2000), A Brief History of Shopping Centers, New York: Interna onal Council of Shopping Centers 7. Images F & R Research (2009), India Retail Report, New Delhi: Images Mul media Pvt Ltd 8. Images F & R Research Analysis (2007), ‘Mall space in India: A demand and supply analysis’, In A. Taneja (Ed.), Malls in India: Shopping Centre Developers and Developments, pp. 150– 155, New Delhi, India: Images Mul media Pvt. Ltd 9. Joseph, M.; Soundararajan, N.; Gupta, M. and Sahu, S. (2008), Impact of Unorganized Retailing on Unorganized Sector, May, by ICRIER 10. Kuruvilla, S.J. and Ganguli, J. (2008), ‘Mall development and opera ons: An Indian perspec ve’, Journal of Retail & Leisure Property, 7(3), 204–215 11. Poddar, T. and Yi, E. (2007), “India’s rising growth poten al”, NY: Goldman Sachs Global Economics Paper 12. Roy, D. and Ni ka, M. (2007), Mall Management—A Growing Phenomenon in Indian Retail Industry, New Delhi: Jones Lang LaSelle Meghraj 13. Shankar, A. (2008), Preface. In A. Taneja (Ed.), The India Retail Report, 2009, New Delhi, India: Images Mul media Pvt. Ltd 14. Shukla, R. (2009), How India Earns, Spends and Saves: Unmasking the Real India, New Delhi: Sage Publica ons Pvt. Ltd 15. Singh, H.; Bose, S.K. and Sahay V. (2010), ‘Financing of malls in India: problems and prospects’, Journal of Retail & Leisure Property, 9(2), 55–64. 16. Taneja, A. (2009), Malls of India, New Delhi: Images Mul media Pvt Ltd

20

Mall Management

CASE

India’s first modern mall On August 28, 1999, Mumbai witnessed the launch of a concept that was new to India at that me. It was Crossroads, a world-class shopping mall and entertainment complex that was supposed to set new standards in mul -purpose high-rise shopping complexes. Though before the launch of Crossroads, Spencer Plaza had already become opera onal in Chennai, concept-wise it was nowhere near what one calls a modern shopping mall. On the other hand, the 150,000-square-foot interna onally styled Crossroads in South Mumbai, the hub of India’s business ac vity, redefined shopping in India. Crossroads is situated in the Haji Ali area in the heart of Mumbai. It is a case of a building reincarnated into a shopping mall. The loca on was owned by a pharmaceu cal company (Piramals) and had three buildings constructed on it. Seeing the immense poten al of the concept, the owner decided to convert the buildings into an enclosed shopping mall. The three buildings were covered with a glass ceiling to create an atrium in the inter-building space. The separate buildings were connected with the help of aerial bridges. The buildings were suitably altered to convert them into retail stores. Parking was a big issue. Posi oned as an upmarket en ty, Crossroads was expected to a ract the a uent car-owning shoppers. As the parking space created in the basement had nominal capacity, it was decided to install two huge car li s so that cars may be li ed from the basement to the terrace car parking. For ensuring adequate background sound for the mall, Bose Corpora on was selected for providing the sound system. Promoters (Piramals) themselves opened the anchor store (Pyramid Store) along with the choicest brands available at that me in India. Crossroads evoked an overwhelming response from the consumers, but it could o er superior experience only to a limited number of shoppers at a me. Keeping this in view, the mall management had to devise strategies to contain and filter the foo alls so that only the most appropriate consumers could get it. They decided to permit only those who carried either a mobile phone or a credit card. Those were the early days of liberaliza on and penetra on of both these products was confined to the a uent sec ons of society, and this was the target segment for Crossroads mall.

CHAPTER

2 Concept of Shopping Mall

LEARNING OBJECTIVES This chapter will enable the readers to • Understand the meaning of the term ‘shopping mall’ • Know how does a shopping mall di er from other similar en es • Get an idea of the evolu on of the shopping mall concept globally over a period of me • Know how even ul or otherwise has been the journey for shopping malls in India • Learn the problems and prospects for shopping malls in India

EVERY BIG SHOPPING PROPERTY IS NOT A MALL! Shopping malls, or malls as they are generally referred to, are fast becoming a part of an average Indian’s life. Even the people like labourers and rickshaw pullers use this word comfortably. Some of them are occasional visitors and shoppers at these malls. A couple of years ago when I inquired about shopping malls in Bhubaneswar, one of our friends proudly men oned ‘Big Bazaar’. In fact, large format stores like hypermarkets are generally referred to as malls by many. And then, there are several ‘self-styled malls’ in every Indian city. These are buildings that add the word ‘mall’ as a su x to their name, as there is no law-governing nomenclature of buildings. Most of the people are not aware of what makes a par cular building a shopping mall, whereas another one with similar dimensions fails to qualify as one.

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Mall Management

INTRODUCTION While travelling in India, it is not unusual to come across a ‘Mall Road’ in many cities, especially the ones having some colonial background. This raises a question whether there is any similarity between the word ‘mall’ in a ‘Mall Road’ and the word ‘mall’ as used in a shopping mall. The answer is yes! The word ‘mall’ shares an etymological origin with the word ‘mallet’, as in the mallets used in games such as croquet, and dates back to the Renaissance Age in Italy. The word has its genesis in the old sixteenth-century European game of pall mall (Pallamaglio in Italian meaning ball and mallet), which is a precursor to croquet. The game was played in a long alley and involved hi ing a wooden croquet through an iron hoop suspended over the ground at the other end of the alley. When Pallamaglio popped up in England, locals called it pall mall, and they dubbed the long, o en grassy, lanes used to play the game as malls. These malls shortly became popular as walking spaces and the word became synonymous with any pedestrianfriendly promenade or walkway. This is the genesis of the concept of ‘Mall Road’. Keeping in view the crowds gathering at these malls during games and for walk, some retailers started se ing up their shops along these malls. When the game fell out of fashion, some of these pall malls evolved into shopping precincts, hence the modern name of shopping centres while others evolved into grassed shady walkways, still called malls. Many European cities have long straight roads which evolved from the alleys in which the game was played. Notable examples are Pall Mall and The Mall in London.

DEFINITION

OF

SHOPPING MALL—DIFFERENT PERSPECTIVES

Di erent sources define shopping malls di erently, with each definition focusing on some characteristics rather than taking an integrated view of the entity. For defining the term comprehensively, it is important to associate the following perspectives with this apparently simple term:

Structural Perspective Definitions from a structural perspective focus on the physical or structural aspects of the building called shopping mall. As physical aspects are normally visible, people assume these definitions to be the concluding ones though it is not the case. Barron’s Marketing Dictionary defines a mall as ‘a public area containing a complex of shops with associated walkways and parking area’. It is also called shopping mall. Some malls are also covered to provide the same climatic conditions year-round. The Dictionary of Architecture and Construction, Cyril M. Harris, defines the shopping mall in architectural terms as ‘a shopping centre enclosed within a large structure, o en 2 or 3 storeys high, normally designed around a central atrium; may have numerous stores as well as entertainment facilities such as movie theatres, fast-food outlets, restaurants and public areas’. Here the focus is on physical elements like enclosure, the number of

Concept of Shopping Mall 23

storeys and atrium. The Urban Land Institute (ULI) identifies a shopping centre as the one having a distinct separation between automobile and pedestrian tra c flows and the availability of on-site parking. Anuradha Kalhan in her study described a shopping mall as having a large real estate infrastructure spread over many thousand square feet, where a number of specialty retail chains and a super market co-exist.

Management Perspective As the structural aspects may be copied, there must be something more concrete that goes into transforming a commercial real estate into a shopping mall. Giving a hint about this, the Encyclopaedia Britannica describes a shopping mall as ‘a collection of independent retail stores, services and parking areas constructed and maintained by a management firm as a unit’. Similar views are expressed by Prendergast and co-researchers when they define shopping mall as ‘a collection of shops planned and managed as a unit’. Guy (1994) also defines shopping malls as ‘planned developments that are managed and marked as a unified whole’. These definitions score over others, as these highlight parameters like planning and management of a shopping mall which are the key features when we compare malls with other retail real states. These definitions also clarify that the mall remains a single ‘unit’ though comprising a number of ‘independent’ retailers

Marketing Perspective For understanding the spirit of a mall, it is required to find out something more substantial as ‘shopping malls are not just real estate property’. Av it Ghosh and Sara McLa erty in their article titled ‘The Shopping Centre: A Restructuring of Post-War Retailing’, mention that in a shopping centre, the developer has direct control over the mix of outlets (the tenant-mix) and the centre’s image and positioning. They further highlight that the centre’s function is to facilitate ‘shopping in a self-contained environment’. J.E. Mertes in a pioneering article way back in 1947 also gave a hint about the shopping centres being uncontrolled as well as controlled. These definitions make clear the developertenant relationship in a shopping centre. The developer not only decides and controls the tenant-mix (with the help of di erent bilateral arrangements) but also controls the mall’s image and positioning in the long run. The aim is to create, communicate and sustain a favourable and strong image and positioning for the mall among the shoppers and community. Highlighting the significance of marketing in malls, Guy (1994) mentioned that malls are coherently and proactively marketed and malls typically have a strong marketing profile (Guy, 1994 quoted by Cha opadhyaya and Sengupta, 2007). Venkateswarlu and Uniyal (2005) suggest that malls are not merely points of sale for di erent retailers but also a place where several brands build their equity in unison. The last definition raises a significant issue about the tenant selection—that is, the tenant selection should be such that the presence of di erent retailers creates a synergistic e ect resulting in be er business for all. It supplements the contention of Ghosh and McLa erty (1991) who advocated developer’s direct control over the tenant-mix.

24

Mall Management

Social Perspective Shoppers would patronize a new retail format only if it o ers something which is lacking in the existing formats. Any a empt to define shopping mall would be incomplete if the social angle is ignored. The description of shopping malls as given by the Encyclopaedia Britannica describes it as a twentieth-century adaptation of the historical marketplace. In fact, malls in the west, especially in the US, evolved with the idea of developing a community centre for people, where they could converge for shopping, cultural activity and social interaction. However, slowly malls increased in such huge numbers that they replaced the street shopping centres and became shopping communities themselves. Sandes and Cook (1997) term the malls as ‘sealed envelopes’ that reveal the continuum of middle class consumers and their involvement in shopping and recreation, insulated from the unsavory streets of the city. The shopping mall is also presented as an outcome of post-War US migration from cities to suburbs and increased proliferation of automobiles, fulfilling the need for centralized shopping (Britannica Concise Encyclopedia). Malls are also referred to as ‘new quasi-public spaces’, ‘privatized public spaces’, ‘fortified cells’, or ‘theatre’ (Voyce, 2007; Davis, 1992; Kowinski, 1985; Langrehr, 1991). Such has been the significance of mall in modern-day life that it has been compared with the Greek ‘Agora’ (the medieval marketplace) that used to be the fulcrum of Greek social life. The social a ributes of a shopping mall are created, maintained and enhanced by an interplay of the physical infrastructure, management philosophy and marketing focus of the mall developer. Hence, the social perspective may be described as an orchestration of the physical, management and marketing perspectives of a shopping mall. This relationship is illustrated in Figure 2.1.

Figure 2.1: A holistic perspective of mall management

Concept of Shopping Mall 25

SHOPPING CENTRE VS MALL: THE PARADOX Definitions given by di erent sources highlight di erent features of shopping malls. There is unanimity regarding features such as having a large number of shops together, parking spaces and walkways. However, these definitions appear discordant. In the first place, di erent definitions seem to be using the term ‘shopping centre’ and ‘shopping mall’ synonymously. The term ‘shopping centre’ is used particularly in Europe and Australia, while in Asia, the term ‘shopping mall’ is used to a large extent. The terms ‘shopping precincts’ and ‘shopping arcade’ are also used in some parts of the world. Malls in Ireland, pronounced ‘maills’, are typically very small shopping centres placed in the centre of town. Are shopping malls always enclosed by climatic control, or is there an open-air version as well? Are these malls always controlled or uncontrolled? And, if controlled, what parameters are controlled and by whom? For answering these questions, there was a need for a more comprehensive classification of commercial retailing entities and for arriving at a non-overlapping definition for each format. Such an e ort has been made by the International Council for Shopping Centers (ICSC). In ICSC shopping centre definitions, 2004, it is clarified that shopping centres are a group of retail and other commercial establishments that are planned, developed and owned and managed as a single property, with on-site parking provided. As far as mall is concerned, ICSC presents it as a special design configuration. In this design configuration, n the walkway or ‘mall’ is typically enclosed, climate-controlled and lighted, flanked on one or both sides by store-fronts and entrances. On-site parking, usually provided around the periphery of the mall, may be surfaced or structured. On the basis of size and tenant assortment, ICSC categorizes malls into regional and superregional categories. It needs to be mentioned that as per ICSC categorization, open-air centres are di erent from malls which are essentially enclosed.

South China Mall—world’s largest shopping mall

26

Mall Management

COMPARISON

OF

INDIAN

AND

WESTERN SHOPPING MALLS

These are still early days of mall development in India. At present, India is making e orts to replicate successful international models and is also incorporating learning from local experiences. However, India needs a di erent or modified solution for the shopping needs of its citizens, as shopping needs and behaviour also vary with context. Though the malls that are coming up in India are not an exact replica of those in the US, they di er on several parameters. Some of the major di erences are as follows:

Location of Malls Most of the malls in the US and Europe are situated in out-of-town locations because of excellent accessibility. However, the Indian malls have unique locations due to distinct characteristics of Indian cities and suburbs. Indian suburbs are in close proximity to the metropolitan cities (e.g. Gurgaon, Noida and Faridabad on the outskirts of Delhi). The mall’s proximity to the metros is primarily because of poor infrastructure, una ordability of personal vehicles and the absence of e cient public transportation, which do not permit commuting over long distances. Over the years, the suburbs became hubs of industrial and commercial activity and a racted large populations. Consequently, these suburbs and approach ways to them became highly congested. Most of the Indian malls are either in the heart of dense population clusters or at a very short distance from these clusters. Observations made on some of the vital parameters reflect the distinction between Indian malls and their western counterparts and also highlight the extent of adaptation carried out by Indian malls to suit the local context.

Size of the Malls In the developed countries, shopping mall sizes vary from 100,000 sq. . to a few million sq. ., with the bigger ones like Mall of America and West Edmonton Mall touching 4.2 million and 5.5 million sq. . of retail space respectively. On the contrary, Indian mall sizes range from 50,000 to 500,000 sq. ., with the exception of two malls with more than a million sq. . of space (Great India Place, Noida and Ambi Mall, Gurgaon). On the basis of size, the Indian malls are separated into three categories. Small malls range from 50,000 to 200,000 sq. ., medium malls range from 200,000 to 500,000 sq. ., and big malls are larger than 500,000 sq. . The majority of the Indian malls fall in the small or medium category. The contribution of big malls in terms of numbers as well as gross leasable area (GLA) is almost negligible. There are a few upcoming projects in NCR, Mumbai, Hyderabad and Bangalore that seem to approach global standards in terms of size and grandeur, but the trend is yet to catch up.

Concept of Shopping Mall 27

Mall of America—one of the largest shopping malls in the world

Mall Expansion Being situated in out-of-town locations, the US malls are spread over massive expanses of land. Because of availability of abundant horizontal space, these malls have developed horizontally rather than vertically. Some of the bigger malls comprise more than one building, which are separated from each other. These malls utilize the external open space for landscaping, parking and outdoor activities. On the contrary, the Indian malls are established on smaller plots of land. For e cient utilization of prime land, the Indian malls are developed vertically with a higher floor area ratio (FAR). There are narrow pathways around the buildings for circulation, exhibits and landscaping. The buildings stand up to four or five floors with single/double basement. The basement is meant primarily for parking. The first two or three floors are meant for retailing, whereas top few floors are dedicated to entertainment, specifically a multiplex coupled with a food court, which is an a empt to utilize every square foot of the mall space.

Stages in Mall Life-Cycle Curve Like other products and services, the concept of product life cycle may also be applied to shopping malls. A mall’s stage in life cycle is determined by a host of factors such as the mall’s age, competitive forces, changes in shopper behaviour, and changes in the marketplace (Lowry, 1997). Because malls have been around in the United States long

28

Mall Management

enough to observe the growth, maturity and decline, it is possible to apply life-cycle concept to them (Lowry, 1997). Analysing data from 1970 to 2003, it is observed that the shopping centre annual growth rate in the United States has come down from 6 per cent to 1.4 per cent during this period (SCOPE US, 2004). Starting from 1956 (Southdale Center), the US malls have taken more than 50 years to reach this stage of the life-cycle curve. The US retail market has become thoroughly oversaturated, with an excessive amount of retail space in the light of current consumer demand (LeHew and Fairhurst, 2000). At this stage, the major challenges before the US malls are reduction in patronage and sales, retention of tenants, changing demographics, vacancy problems, and the designing of survival strategies (Ghosh and McLa erty, 1991; LeHew and Fairhurst, 2000; Lowry, 1997). On the other hand, the first Indian malls came into existence less than a decade ago, and major developments have started taking place only during the last four or five years. Competitive forces in this sector are not too intense, as there are still only a few big mall developers. A decade is not a very long time period to see major changes in marketplace or shopping behaviour. All this along with the astronomical growth rates of 70–80 per cent in the recent past, puts India clearly in the growth phase of the mall development life-cycle (KSA Technopak and ICICI Properties, 2005). The prominent challenges faced by the Indian malls are mapping the uncharted territories, matching international standards, customizing malls to specific needs of customers and positioning the malls adequately (Puri, 2007; Singhal, 2007) (see Figure 2.2). Still, it is all the more important for India to learn from the US experience regarding response to the di erent stages in the mall development life-cycle, as India is likely to consume less time in reaching the maturity stage as compared to the United States.

Source: Singh and Bose (2008) Figure 2.2: Stages in Global Mall Life Cycle

Concept of Shopping Mall 29

Choice of Anchor Tenant Traditionally, mall developers all over the world have shown a clear-cut preference for fashion retailers, thus apparel-oriented department stores have been the first choice as anchor tenants. In the United States, as discount shopping became more acceptable to high-income customers, value retailers such as Target, Wal-Mart and Kohl’s became prime candidates for the position of anchor tenant (Magazine, 2007). In India, malls are still dominated by apparel and fashion brands. Most malls have department stores such as Shopper’s Stop, Westside, Pantaloon, and Lifestyle. The next choice as co-anchors are multiplexes like PVR, DT and Fun Cinemas, whereas food and beverage brands such as McDonald’s, Pizza Hut and Haldiram’s are favourite sub-anchors. A discount-led hypermarket such as Big Bazaar, Spencer’s Hyper or Vishal Megamart as anchor tenants is a new and relatively explored phenomenon in the country though it is catching up very fast.

Entertainment Retailing As discussed earlier, shopping malls also serve as avenues for social interaction and recreation. Over the years, the US malls have started o ering ‘Shoppertainment’ by diverting a substantial part of their retail space toward entertainment. The US malls o er a diverse entertainment mix of multiplexes, mini motor speedways, natural rock climbing, ice rinks, swimming pools and water sports. In the Indian malls, the entertainment component is dominated primarily by multiplexes. In some malls, play zones for kids, bowling alleys and pool games have been added, but these represent an insignificant proportion. Malls’ excessive dependence on movies as their entertainment dimension is due to the fact that movie watching is a favourite entertainment of Indians. It has also been observed that the Indian families bond more while watching movies as compared to shopping (Singhal, 2007). Hence multiplexes create a stronger emotional connection. Moreover, because of longer duration of Indian movies (three hours as compared to one to two hours for Hollywood movies), there is a positive impact on the retailing of food and beverages in multiplexes. Besides, multiplexes help in occupying top floors of vertically expanded malls, which are otherwise not conducive to shopping.

SIGNIFICANCE

OF

SHOPPING MALLS

Why do consumers go to shopping malls? No doubt, malls provide necessary and desired products for consumers in a modem economy. However, a mall may also provide a pleasant diversion from everyday activities and chores. It is this pleasant diversion that has now become an important focus of mall management and development. Malls are now being built with large entertainment centres equipped with rides, skating rinks, amusement parks, multiplexes, museums and virtual reality centres. In view of the rising competition among malls, enhancing the entertainment value for the consumer has become a critical factor for di erentiating a mall from its competitors.

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Mall Management

Apart from serving as a place for entertainment, a shopping mall or shopping plaza is perceived as the modern adaptation of the historical marketplace. Mall means Market for ALL (MALL). The premises of the mall have a group of retailers located under one roof with the objective of providing with range of products and services to every member of the family (Srini). Shopping malls have become the latest trend in shopping for people who do not have much time to go to di erent places for fulfilling their various needs. Shopping malls have changed the old idea of shopping, when people used to sweat it out while shopping in di erent markets, shouldering the burden of several bags. Now, they just need to step in an upmarket mall, buy all their necessities leisurely under one roof, entertain themselves and come home refreshed.

TYPES

OF

SHOPPING MALLS

Over the last few decades, the concept of shopping mall has undergone numerous improvements and evolved into a multitude of mall concepts, each mall having distinct characteristics to deliver distinct benefits while catering to distinct shopping needs. Many large malls are now being integrated with o ce buildings and residential space to create huge, connected complexes covering millions of square feet. Some of the significant types of malls are described below.

Regional Malls A regional mall has 400,000 square feet to 800,000 square feet leasable area with at least two anchors. Regional malls serve a larger area than typical malls and are o en tourist a ractions. Regional malls usually have high-end stores that require large service area to be profitable. Example: Inorbit Mall, Mumbai.

Outlet Malls An outlet mall (or outlet centre) is a type of shopping mall in which manufacturers sell their products directly to the public through their own branded stores. Clothing, sports goods, electrical products, cosmetics and toys are among the types of items sold at outlet malls. Stores in outlet malls usually provide discounted or used items. Example: City Gate Outlet Mall in Hong Kong.

Seamless Malls By seamless we mean that the mall is bere of any boundaries. This helps in removing barriers in the customers’ minds and allows them the freedom to easily move from one display to another and from one section to another to compare and choose their favourite items. Examples: Central malls developed by future group at eight locations across India, including cities like Bangalore, Gurgaon, Hyderabad and Mumbai.

Concept of Shopping Mall 31

Crossroads—India’s pioneer mall remodelled as SOBO Central, Mumbai

Vertical Expansion Due to high land prices in densely populated commercial areas and the higher yield on retail property, the vertical mall is common globally. The concept of the vertical mall is a departure from the common western model of flat shopping mall. In a vertical mall, the space allocated to retail is configured over a number of stories accessible by escalators linking di erent levels of the mall. The challenge before this type of mall is to overcome the natural tendency of shoppers to move horizontally and encourage them to move upwards and downwards. Example: Times Square in Hong Kong.

Strip Malls A strip mall is a shopping centre where the stores are arranged in a row, with a sidewalk in front. Strip malls are typically developed as a unit and have large parking lots in front. They face major tra c arterials.

Specialty Malls A specialist mall focuses on a specialized product category. Since specialist malls are about specialty retailing, they are destination points where serious buyers of a particular kind of commodity come to shop in comfort. Because of their specialized nature, the economics of specialist malls are very di erent from general malls. They are o en away from the crowded main roads but are well-located on transit spines. Examples: Ishanya Mall, Pune, and Eva Mall, Bangalore.

Discount Malls Discount malls o er a great collection of branded outfits at reasonable prices. Consumers could never imagine ge ing all international brands at their original prices o ered by

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Mall Management

discount malls. Aspiring middle-class buyers have traditionally depended on those end-of-season sales for their purchase. But now among young Indians aspiring to don international brands and buying them at discounts, discount malls are a major hit.

EMERGING TRENDS Last one decade or so has been more of a learning phase for Indian mall developers as well as consumers. Developers were developing malls and managing it the way they thought would best satisfy the shoppers. Shoppers on their part had no appropriate benchmark to compare the shopping malls. Now situation is di erent with the market and consumers ge ing familiar with the concept. Environment is highly dynamic and competitive, posing a diverse set of challenges to this business. The mall developers and managers are being positive and flexible in responding to these demands as is reflected by the trends that we observe in this business. Some of these trends are discussed below.

Emergence of Large Malls During the initial phase of mall development in India, majority of Indian malls were confined to 2–5 lakh square feet only. However, these malls were not able to provide the experience and assortment expected by demanding customers. Now, newer formats have come into existence, which require large retail space. Consequently, India is seeing the emergence of ‘million plus’ malls having more than a million square feet of GLA. In this category, Mantri Square mall in Bangalore, Great India Place in Noida and Ambi Mall in Gurgaon are already operational while many others are about to start business.

Growing Popularity of Lease Model In the conventional model of mall management, developers invest money in a mall project and recover it immediately a er the project completion by selling it. Worse still, most of these investors are retail investors who do not use the premises themselves. But this model reduces the long-term interest of the developer in the mall. However, to overcome the drawbacks of the conventional model, the lease model is gaining popularity in Indian malls. Under this model, the developer leases out the space to retail brands (who actually occupy the mall space) and recovers the investment over a longer time period by way of lease rentals. This way, the developer also has a long-term interest in promoting and growing the mall.

Revenue-sharing Model Being a novel concept in India, shopping malls witnessed an overwhelming response from shoppers and tenants. It resulted in sky-high rentals being charged. High rentals a ected the bo om line of retailers who found it di cult to break-even. This problem was intensely felt during the present wave of recession. This has compelled mall developers to bring down the rentals to realistic levels. Many malls have opted for the revenue-sharing model in which the tenants are supposed to share a percentage of their sales revenue instead of paying a fixed rental per square foot. This helps the tenants as it changes their cost structure from fixed to variable.

Concept of Shopping Mall 33

Professional Face of Mall Management The process of managing malls is far more complex and elaborate as compared to that of a retail store. Acknowledging this fact, mall management is being studied and practised as a separate discipline in the United States. In fact, there are a number of US universities and business schools that o er courses in real estate and mall management. There are a number of professional companies that are managing malls on a dedicated basis. In the United States, mall management as a discipline covers all aspects of mall operations. Ninety per cent of the US malls are owned by institutional investors and are managed by professional managers. The success of a shopping centre is expressed in dollars per sq. . of GLA. Shopping malls can no longer maintain the “build it and they will come” a itude due to intense competition. This has compelled the mall managers to respond to the situation as retailers and not as landlords. The performance of these managers is judged on the basis of well- established, objective criteria such as increase in pedestrian tra c and conversions, rate of contract renewals and increase in rentals during subsequent renewals. Apart from managing the facilities, the mall managers are required to promote the mall as a ‘happening place’. Thus, the mall managers have been promoting the mall with a marketing funds method rather than through a merchant association, thereby generating a unified image of the mall. In India, most of the malls are so new that they have not come across the retention of tenants as an immediate challenge. During the mall inception phase, the Indian managers are primarily concerned with finding brands and selling retail space to investors. Once a mall is operational, the managers shi their focus to facilities management. To most of the players in this field, mall management means marketing and facilities management. There are few institutions or training institutes that teach mall management as a discipline. The situation is understandable as retail itself is a new area in India and the number of institutions o ering programs in retail management falls well short of the requirements of industry. There are few specialized organizations that o er the entire range of mall management services and solutions to mall developers who wish to outsource. A few years ago, a start was made by the Future group (Pantaloon Retail) in the form of Kshit CapitaLand Mall Management Company which started o as a 50–50 joint venture between the Future group and CapitaLand (one of Asia’s largest property groups) and is now a fully owned company of the Future group (Saha, 2006).

Virtual and 3D Shopping Malls Technology in malls can be seen as future trend in India. With paucity of time and Internet penetration, people will start shopping using their PC, laptops and mobiles. Technology advancement will also help retailers in developing websites that would give the feeling of shopping in a 3D mall.

Theme-based Malls Theme malls is the new trend adopted by promoters and developers to add a touch of exclusivity to the new malls. Serious buyers always want to shop at a place where there is variety, and for them theme-based malls will bring all brands under single roof.

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Mall Management

The concept of theme malls will not only benefit the buyers but also help the sellers get quality customers. A very wide range of similar merchandise, price range and focused consumer are the key considerations for a brand to take position in a theme-based mall. Given the higher rate of in-store conversion of footfalls (50-65% in a theme-based mall) against an average of 15-25% in general malls, there is a marked benefit for retailers to opt for specialty formats.

Destination Malls Real estate developers are coming up with destination malls on major highways to lure travelling consumers to a new way of shopping. Destination malls will be massive retail centres converging in a huge area just few minutes’ drive from the main city. The new shopping concept will o er the fun of a long-distance drive with a ractive discounts on the merchandise. Destination malls would usher in a product di erentiation that is important to sustain in the fast growing retail competition. These malls would transform the fundamental shopping format to a unique selling proposition. The factors for the success of destination malls would be prime location, ge ing premium consumers and providing quality dining services and refreshing customer experience.

SUMMARY Shopping mall is a place where people can buy a mul tude of products and services conveniently. But essence of a mall goes much beyond shopping. The concept has many perspec ves. A mall should have certain physical a ributes that are indicated by the structural perspec ve. The en re mall should be planned, developed and managed as a single unit, which is specified by the management perspec ve. A mall should brand and posi on itself according to the marke ng perspec ve. All these perspec ves transform the physical en ty called mall into a wonderful pla orm for social interac ons and bring in the social perspec ves. However, these perspec ves need to be defined in context of a par cular market. India is coming up with its own model of mall development and there are many exci ng things coming up in this sphere in near future.

Concept of Shopping Mall 35

REVIEW QUESTIONS 1. Define the term ‘shopping mall’. Discuss the integral a ributes for a commercial building to qualify as a shopping mall. 2. Trace the evolu on of the concept of mall and relate it with the refinement of consumer profile. 3. Dis nguish between a shopping mall and a shopping centre. 4. What is the significance of shopping malls in contemporary urban Indian landscape? 5. “Every product or service needs to be adapted/modified as per the local condi ons”. Jus fy this statement in case of shopping malls in India 6. Can shopping mall survive if the tenant bleeds? Comment. 7. Discuss the important types of shopping malls. Which of these are commonly observed in India? Exemplify. 8. Discuss unique a ributes of the Indian shopping malls in terms of unique a ributes of Indian ci es and people. 9. Discuss the major correc ons that have come in the mall business as a result of economic recession. 10. Comment on the prospects of mall development and management in India in the days to come.

PRACTICE EXERCISES 1. Select a mall of your choice. Visit it to verify whether it is fit to be called a shopping mall in terms of the essen al a ributes associated with the concept of mall. 2. Prepare a list of 4-5 malls in your vicinity. Visit them and record where each mall stands in terms of the parameters (structural, management, marke ng and social) for a shopping mall. Consolidate your results to iden fy the parameters according to which these malls do not live up to the ideal/desired state. 3. Compile some news items/ar cles rela ng to shopping malls in di erent media (print, broadcast and online) during the last 2-3 months. What are the di erent issues highlighted in these items? Does the issues convey any trend in mall development and management in India?

SUGGESTED READINGS 1. Bloch, P.H.; Ridgway, N.M. and Dawson S.A. (1994), ‘The shopping mall as consumer habitat’, Journal of Retailing, 70(1), pp. 23–42 2. Bloch, P.H.; Ridgway, N.M. and Nelson, J.E. (1991), ‘Leisure and the shopping mall’, Journal of Retailing, 18(1), pp. 445–453 3. Cha opadhyaya, A. and Kalyan S. (2006), ‘Percep on of mall shoppers in Kolkata: A study’, The ICFAI Journal of Consumer Behavior, 1(3), pp. 34–43

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4. Concise Encyclopedia Britannica (digital ed.), (2006), Chicago, Illinois: Encyclopedia Britannica Inc. 5. Csaba, F.F. and Askegaard, S. (1999), ‘Malls and the Orchestra on of the Shopping Experience in a Historical Perspec ve’, Advances in Consumer Research, vol. 26, 34–40 6. Davis, M. (1992), City of Quartz, New York: Vintage 7. Feinberg, R.A. and Jennifer M. (1991), ‘A brief history of the Mall’, Advances in Consumer Research, Vol.18, pp. 426–427 8. Ghosh, Avijit and Sara McLa erty (1991), ‘The shopping center: a restructuring of postwar retailing’, Journal of Retailing, 67(3), pp. 253–267 9. Gruen, V. (1973), Centers for the Urban Environment: Survival of the Ci es, New York: Van Nostrand Reinhold 10. Gruen, V. and Smith, L. (1960), Shopping Town USA: The Planning of Shopping Centers, New York: Van Nostrand Reinhold 11. Guy, C. (1994), The Retail Development Process: Loca on, Property and Planning, London: Rutledge 12. Harris, C. (2005), Dic onary of Architecture and Construc on (4th ed), NY: McGraw Hill Publishing Inc. 13. h p://www.easternct.edu/depts/amerst/MallsDef.htm 14. h p://en.wikipedia.org/wiki/Pall_mall_(game) 15. ICSC (2000), A Brief History of Shopping Centers, New York: Interna onal Council of Shopping Centers 16. ICSC (2001), ICSC Dic onary of Shopping Center Terms, New York: Interna onal Council of Shopping Centers 17. ICSC (2004), ICSC Shopping Center Defini ons, New York: Interna onal Council of Shopping Centers 18. Images F & R Research Analysis (2007), ‘Mall space in India: a demand and supply analysis’, In A. Taneja (Ed.), Malls in India: Shopping Centre Developers And Developments, pp. 150–1 55, New Delhi, India: Images Mul media Pvt. Ltd. 19. Imber, J. and To er, B. (2000), Dic onary of Marke ng Terms, NY: Barron’s Educa on Series 20. Kalhan, A. (2007), ‘Impact of malls on small shops and hawkers’, Economic and Poli cal Weekly, Vol. 42 (3), pp. 2063–2066 21. Kim, I.; Chries ensen, T.; Fienberg, R. and Choi, H. (2005), ‘Mall entertainment and shopping behaviors: A graphical modeling approach’, Advances in Consumer Research, Vol. 32, pp. 487–492 22. Kowinski, William, S. (1985), The Malling of America, New York: William Morrow & Co. 23. KSA Technopak and ICICI Proper es (2005, June), Shopping unlimited, Retail Biz, pp. 21–24 24. Langreher, F.W. (1991), ‘Retail shopping mall semio cs and hedonic consump on’, Advances in Consumer Research, Vol. 18, pp. 428–433 25. LeHew, M.L.A. and Ann E.F. (2000), ‘US shopping mall a ributes: an exploratory inves ga on of their rela onship to retail produc vity’, Interna onal Journal of Retail and Physical Distribu on, 28 (6), pp. 261–279

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26. Lowry, J.R. (1997), ‘Life cycle of shopping centers’, Business Horizons, January–February, pp. 77–86 27. Magazine, A. (2007), ‘Anchors in malls’, In A. Taneja (Ed.), Malls in India: Shopping Centers Developers and Developments, pp. 94–95, New Delhi, India: Images Mul media Pvt. Ltd. 28. Mertes, J.E. (1947), ‘The shopping center—a new trend in retailing’, The Journal of Marke ng, Vol. 7 (January), pp. 374–379 29. Prendergast, G.; Marr, N. and Jarra , B. (1998), ‘Retailer’s views of shopping centres: a comparison of tenants and non-tenants’, Interna onal Journal of Retail and Distribu on Management, 26 (4), pp. 162–171 30. Puri, A. (2007), ‘Designing India’s mall poten al’, In A. Taneja (Ed.), Malls in India: Shopping Centre Developers and Developments, pp. 72–75, New Delhi, India: Images Mul media Pvt. Ltd. 31. Saha, S. (2006, April 21), ‘Global boost to mall market’, The Telegraph , 6 32. SCOPE U.S. (2004), ‘A report by Interna onal Council of Shopping Centers’ 33. Singh, H. and Bose, S.K. (2008), ‘My American cousin: a comparison between Indian and the US shopping Malls’, Journal of Asia-Pacific Business, 9(4), pp. 358–372. 34. Singh, H.; Bose, S.K. and Sahay V. (2010), ‘Financing of malls in India: problems and prospects’, Journal of Retail and Leisure Property, 9(2), pp. 55–64 35. Singhal, A. (2007), ‘Consumer demographics and changing consump on demands innova on in upcoming mall projects’, In A. Taneja (Ed.), Malls in India: Shopping Centre Developers and Developments, pp. 54–60, New Delhi, India: Images Mul media Pvt. Ltd. 36. Taneja, A. (2007), Malls in India: Shopping Centre Developers and Developments, New Delhi: Images Mul media Pvt. Ltd. 37. Taneja, A. (2008), The India Retail Report, 2009, New Delhi, Images Mul media Pvt Ltd. 38. Urban Land Ins tute (1977), Shopping Centre Development Handbook, Washington: Urban land Ins tute 39. Venkateswarulu, A. and Uniyal, D.P. (2007), ‘Concept of a mall: measuring a tude and percep on of shoppers towards malls of Mumbai’, Indian Retail Review, 1(1), pp. 7–16 40. Voyce, M. (2007), ‘Shopping malls in India: new social dividing prac ces’, Economic and Poli cal Weekly, 42(3), pp. 2055–2061 41. Wakefield, K.L. and Baker, J. (1998), ‘Excitement at the mall: determinants and e ects on shopping response’, Journal of Retailing, 74(4), pp. 515–539

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CASE

The mall and the community The Indian shopping malls are trying to connect to the community at large in more meaningful ways, going beyond the narrow confines of shopping. Some of these ini a ves are discussed here.

Inorbit Mall, Malad As part of the company’s corporate social responsibility (CSR) ini a ve, Inorbit Malls (India) Pvt Ltd, part of K Raheja Group, adopted a community-building programme called ‘Aikya’ for its customers with an aim to establish an e ec ve social interac on medium. As part of the programme, the mall has installed a ‘Residen al Community No ce Board’, a pin-up board for the neighbourhood, where residents can post messages, classifieds and informa on. Speaking on this ini a ve, Kishore Bha ja, CEO, Inorbit Malls, said, “With Aikya, we are trying to reach out to our customers by implemen ng a lighter and more exci ng approach to impart knowledge and awareness on the issues that ma er”. “Having developed a personal connect with the customers over the years, the mall intends to further enhance their shopping experience by planning these en cing workshops, highligh ng the smaller yet noteworthy issues which are definite to make a di erence in the lives of the ci zens”, added Bha ja.

Mantri Square Mall, Bangalore To make the most of the Christmas shopping season 2010–11, Mantri Square ran several onground ac vi es under the tle of The Grand 2011 Tour. It was the mall’s first Christmas–CSR ini a ve and was managed by an in-house team. To celebrate Christmas with shoppers in a unique manner, Mantri Square had associated with Sukrupa, a registered non-profit charitable organiza on serving the underprivileged community in the area of socio-economic development. Commen ng on the exercise, Jonathan David Yach, CEO, Mantri Square, said, “our mo o is shop a li le and give a li le. We have come up with many CSR ini a ves.” Mantri square urged shoppers to buy a dona on token of Rs. 10 for the Indus Interna onal Community School, which provides free educa on to underprivileged children from the neighbourhood. For every token, Reliance Timeout made a matching contribu on, thus increasing the overall dona on to the school. Under the ‘Colour My Christmas’ ac vity, the mall invited shoppers to gi art material such as crayons, paints, colour pencils, drawing books and more to underprivileged students. Mantri Square had also made Bangalore’s Biggest stocking, wherein shoppers at the mall could drop in gi s for underprivileged children. A er Christmas, the gi s collected were given to the children of an orphanage. Sources: “Inorbit Mall focuses on CSR ac vi es”, India Retailing Bureau, June 25, 2009, retrieved from h p://www.karmayog.org/csr1to500/csr1to500_19794.htm, accessed on 9 September 2010. “Mantri Square Mall goes on-ground for their first Christmas”, Shweta Ramsay, retrieved from h p://www.even aqs.com/even aqs/wcms/en/home/news/Mantri-Square-Mall-goes-on-gro1293081470117.html, accessed on 23 November 2010.

CHAPTER

3 Mall Development Process

LEARNING OBJECTIVES This chapter will enable the readers to • Highlight the significance of planning and design in mall development • Get themselves acquainted with major ac vi es involved in the mall development process • Emphasize vital aspects of loca on decisions for a shopping mall • Understand how business poten al is assessed for a mall • Present an overview of the mall design process

CHALLENGE OF KEEPING UP WITH MODERN TIMES Galaxy Plaza is one of the pioneer malls in India. It was built more than a decade back in a posh locality of South Delhi. It was considered a landmark in terms of building architecture and it accommodated all the prominent brands available in the Indian market at that me. However, things changed rapidly during the last decade. Brands that were considered upmarket a decade ago have lost their sheen, with new brands becoming popular. New retail formats and concepts have gained popularity. For instance, at the me of development of Galaxy Plaza, mul plex was a totally new and untested concept and so it did not find a place in the mall. The same holds true for food courts. But, these two formats have gained immense popularity in the recent years. In fact, these are now a must for any upcoming mall. New shopping malls have be er ambience and a tenant-mix that goes well with the aspiring shopper of today. These malls pose serious compe on to Galaxy Plaza. For keeping the mall relevant to the shoppers, it is essen al for Galaxy to accommodate new brands and formats. The Galaxy management

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is keen to improve the tenant-mix and aesthe cs but has limited elbow room. Invi ng new tenants (such as mul plexes and food courts) may mean e ec ng major changes in Galaxy’s original structure that is simply out of tune with the modern mall design. The management team of Galaxy Plaza is in a fix as it can neither a ord to shut the mall for a long me (as required for major structural changes) nor let it die a gradual death in the face of burgeoning compe on with modern malls.

INTRODUCTION The location and design of a shopping mall are significant decisions to be taken by the developers. These decisions are taken during the planning stage itself. Organizations commit substantial time and resources during this stage in the form of field studies and research because they cannot a ord to go wrong. The following reasons explain why the decisions concerning location and design are important for a mall: (a) Cost: The location and design of a mall have a direct and strong impact on the project cost. The costs of two plots of land in the same city could di er significantly. Plots of land in the central business district are far costlier than similar plots in suburban areas. The cost of construction is another major cost head, and it varies depending on the design opted for. Design and architecture also impact the operating costs because certain design configurations require a higher level of maintenance. The final capital outlay for the mall project is calculated by adding up the costs associated with location (land price) and architecture (construction cost). In cases where limited funds are available, the developer might choose a location and design configuration that fits into his budget. (b) Nature of Decision: Decisions taken on both location and design are purely irreversible. Once constructed, it is impossible to change the location of the mall even if another location promises much higher business. In terms of design, some cosmetic changes are possible, but the basic design cannot be altered without investing time, money, damage to business and loss of reputation. All these costs are prohibitive in nature. (c) Business Potential: Location and design impact the business potential and a ractiveness of a shopping mall. The significance of location for retail business needs no emphasis, as it is quite apparent. Shoppers are more likely to visit a mall that is located at a convenient and accessible location. If two or more malls are situated at a similar or same location, then their design and architecture play the role of tiebreaker for finding favour with shoppers. However, design and architecture must be well supported by an appropriate tenant-mix and good shopping experience. (d) Shopping Experience: The location and design of a mall also influence shopping experience of a customer. From the customers’ perspective, the shopping experience starts as soon they leave their home for the mall. If the mall is located at an easily accessible location, shoppers are likely to enter the mall in a positive frame of mind. Design and architecture complement the shopping experience, as these two aspects determine the visual appeal and flexibility of the mall to accommodate suitable

Mall Development Process 41

changes over a period of time. For instance, the shape and size of atrium has a significant impact on how shoppers feel a er entering the shopping mall.

PLANNING

AND

DESIGN DECISIONS

General economic indicators and the retail potential do advocate a case for mall development, but the decision of coming up with a shopping mall at a location depends on specific information about the business potential at that location. For a large country like India, a series of decisions should be taken before a mall becomes operational. These decisions are categorized as follows: (a) (b) (c) (d)

Deciding the macro location Deciding the micro location Assessment of business potential Selecting a suitable design and architecture Decisions related to categories (a), (b) and (c) comprise the ‘planning phase’, whereas decisions concerning category (d) comprise the ‘design phase’.

Deciding the Macro Location For a vast country like India, there are many locations that may be considered suitable for developing shopping malls. Retail formats like supermarkets prefer selecting a zone or a state to begin with. It is because these formats require elaborate arrangements and infrastructure in terms of supply chain. Luxury retailers do not opt for such carpet bombing. They select the most ideal locations (cities) all over the country. The shopping malls follow the second pa ern. While doing so, the mall developers rely on macro- economic indicators of the cities. This information may be available from secondary sources: government or private. Since the capital investment is huge and secondary information could be dated or unreliable, it is safe to get it cross-checked by conducting a small study specific to the project. The study could be done in-house or could be outsourced to specialized research and consulting agencies. However, departing from the second pa ern, some developers may decide to focus on a specific zone or region. It could be because of limited availability of funds, insistence by investors, familiarity with a region and strong liaison with political, administrative and business spheres in that region.

Deciding the Micro Location It involves selecting an area or locality within a city and selecting the actual piece of land (plot) where the mall should be located. Di erent localities within the same city o er di erent potential for business, as customer profile varies significantly across localities. For instance, South Delhi and East Delhi are two di erent worlds altogether! Similar contrasts exist in almost all Indian cities. The best way to understand it is to carry out an area-specific study that looks into the following issues: (i) Absolute size and density of population

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(ii) (iii) (iv) (v) (vi)

Economic profile Monthly income Shopping trends and pa ern of consumption Existing level of market development Pricing and availability of real estate The outcome of this study should be in the form of a clear-cut ranking of areas on the basis of relevant parameters. If the locality is large enough, there could be multiple locations catering to di erent catchment areas. A catchment area is the area around a retail store or a shopping mall from where customers are more likely to come and visit it. Catchment areas are o en demarcated on the basis of radius (distance from the store) or travel time (time taken to reach a store). However, the demarcation quoted most o en is based on the proportion of business generated. On this basis, catchment areas are categorized into three types: • Primary catchment area: It is the area around the store or mall from where it gets 60–80 per cent of its business. It includes people who are at a convenient distance and visit the store or mall regularly. • Secondary catchment area: It is the area from where the store or mall gets 15–30 per cent of its business. The secondary area lies at a considerable distance from the mall, and people from this area visit the mall occasionally, only to buy select products/ services. • Tertiary catchment area: The store or mall gets only 5–10 per cent of its business from this area. It includes casual visitors who could be a part of some other store’s catchment area but happen to shop at this location due to some random reason.

Tools for Estimating Catchment Areas Theoretically speaking, catchment areas are in the form of concentric circles with radius depending on merchandise or store format. Supermarkets have the smallest catchment areas while specialty stores have the largest catchment areas. In real life, catchment areas are rarely circular because they get modified by natural, artificial or administrative barriers. For instance, an express highway can cut o a locality situated just a few hundred metres away from a store if there is no safe and convenient option to cross the expressway. Estimation of the catchment area for a shopping mall is tricky as the mall accommodates a variety of tenants—ranging from supermarkets to specialty and luxury stores. A preliminary estimate of the catchment area of a mall can be made by superimposing catchment areas of its tenant stores. The actual catchment area for a mall would be larger than this, as customers are likely to prefer a shopping mall on the basis of convenience (all solutions under one roof), experience and image. In practice, the catchment area for a mall can be estimated by field work. Some of the tools employed for this estimation include: (a) PIN codes (b) Vehicle number plates

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(c) Customer surveys (d) Contest and schemes

Assessment of Business Potential If the catchment area is small, all locations (plots) might be equally accessible resulting in a much simpler analysis. While accepting or rejecting a location, it is the business of primary trading area that is considered. (Primary trading area is the area (localities) around a mall that accounts for a significant (more than half) proportion of business for the mall. It is also referred to as the catchment area. Once a decision is made in favour of a particular location, the following information must be looked into: (i) Profile characteristics: This information consists of demographic details of customers, their income, lifestyle and preferences in the catchment area. (ii) Demand characteristics: Demand characteristics are estimated by processing/ analysing the information collected under the profile characteristics. These give an idea of what and how much is demanded by customers living in the catchment area. The demand for each product or service category is converted into an equivalent amount of retail space for each category. The aggregate of these represents the total demand for retail space in square feet. (iii) Supply characteristics: It is the information about the total supply of products and services provided by the existing sellers to the customers living in the catchment area. Just like demand, it is also measured in square feet of retail space for each category. (iv) Business potential: It is assessed a er analysing the above information.

Estimation of Demand Situation The demand estimation begins with the estimation of the total number of households in the locality. This information can be arranged through local authorities and its sources include lists of voters, electricity connections and households available with local authorities that collect house tax, electricity bill, water-sewerage bill and so on. The next step is to estimate the average income of each household and composition of their shopping baskets. One way of doing this is to get these figures for the state/city through some secondary data and explore them to the catchment area. Though this method is easier and economical, it may not yield correct results because of lack of current data and accuracy. A be er way is to carry out a sample survey in the catchment area. At the end of this stage, the research team should know, how much quantity and value of each product and service is demanded in the catchment area. The next step involves translating the estimated demand into the demand for retail space. The benchmark needed for this estimation is the average sales (in rupees or in volume terms) per square feet of retail space. This information could be available with trade associations or publications. However, it may not be available in developing countries like India where retail business is neither very transparent nor open to scrutiny. Services of professional consultants and researchers may be hired in such cases. Once

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the benchmark is available, the total retail space required to generate sales equal to the demand estimated for the catchment area may be calculated. This calculation is done for each product/service category. The sum total of all individual figures would give an idea of the total retail space required.

Estimation of Supply Situation This step requires comprehensive fieldwork and includes detailed listing and estimation of the retail space available in the catchment area. Estimation of the retail space is done separately for each product and service category. The aggregate figure gives an idea of the total supply of available retail space. For practical purposes, the aggregate supply figure should be inflated because some people living in the catchment area might be going outside the catchment area to buy some products and services. This phenomenon is called ‘out shopping’. Conversely, some people from outside the catchment area might be visiting the marketplaces in this catchment area. Their number should be estimated as floating population during the demand estimation phase. Estimation of Business Potential By comparing the estimated demand for retail space with the estimated supply of retail space, one can estimate the categories where there is a demand-supply mismatch. There would be categories where the supply of retail space is less than demand for it. These are the areas of opportunity because the mall space could be allocated to tenants in these categories (provided it jell well with the positioning of the mall). There could be some categories for which the supply of retail space is more than the demand. If it is important to have brands from these categories then the mall developers has to be very conservative and discerning while selecting the required brands and allocating retail space to them. Estimation of oversupply and undersupply is only the starting point for planning the tenant-mix. It gives an idea of which product and service categories are to be accommodated and which categories are to be preferred over the others. In a way, it helps in formulating the ideal tenant-mix for the mall (though it is not the only means of doing it). The next big decision concerns the tentative allocation (in square feet) of mall space to each category of tenants. For this allocation, the mall management needs to start from the demand-supply gap as discussed in the previous paragraph. In cases where the supply is less than the demand, the management has to decide on one of these options—fill the demand-supply gap (by allocating mall space equal to the gap), keep the market undersupplied (by allocating mall space less than the gap) or create a situation of oversupply in the market (by allocating mall space more than the gap). If the decision is in favour of oversupply, the management must be aware of the rivals at whose expense it plans to expand. Then the identification of brand categories and specific brands for oversupply would take place to give competition to the rivals. Alternatively, the mall management might feel that their tenants in each category should be able to occupy a certain percentage of market share. That tentative market share may also be converted into equivalent mall space.

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Summing up the Planning Process At the end of the planning process, the mall management should be clear about the product and service categories to be accommodated in the mall, the proportion of retail space for each product and service category, and specific brands in a category to be targeted. With the help of secondary studies and the past experience of shopping behaviour, the mall management should be in a position to find out which categories/ brands should be placed at which level inside the mall. Secondary studies are suggested for this work since the shopping behaviour does not vary significantly across localities. Since the management would be analysing detailed demographic and economic profiles of prospective shoppers, it can decide locations for categories/brands inside the mall on the basis of preferences manifested by shoppers with similar profiles elsewhere (analogous method). This decision is referred to as ‘zoning’ in a shopping mall.

SITE

FOR THE

SHOPPING MALL

Once the area is decided, the mall management should identify and shortlist plots for construction of mall. Normally, information about the availability of plots lies with the real estate brokers operating in that area. This information might also be available in newspapers or online advertisements. If the catchment area overlaps with an urban township developed by a real estate developer, it is advisable to approach that developer to know about the plot availability because commercial plots are demarcated in advance in such townships. If the desired plot belongs to the local urban authority, the mall developer needs to fulfil certain formalities and follow a specified procedure. If the plot belongs to a private party (individual or builder), negotiations should start straightaway. Details of documentation and legalities regarding plot acquisition have been dealt with in Chapter 9 on Regulatory Framework for Shopping Malls.

Checking Suitability of a Plot for Mall Development More than one plot in the area could be considered for selection, but all of them may not be equally suitable. The suitability of a plot must be checked in the light of the concept— positioning, tenant-mix and scale of the project. Certain characteristics of proposed plots should be examined to see whether they meet the requirements. These characteristics are discussed below.

Location All locations within a catchment area may not have the same appeal for the customers. Plots located at the centre of the catchment area are equidistant to the target customers and hence convenient. If the proposed plot is at one corner, residents living in localities in the opposite corner might perceive it to be distant and prefer out-shopping. A central location is particularly important if the mall plans to have tenants like supermarkets. Connectivity and Accessibility While selecting the plot, it must be ensured that the shoppers can reach the location conveniently. Relevant variables to be considered in this regard are: existence of tra c

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arteries connecting residential localities to the plot, condition of roads/lanes, and nature/ volume of tra c, especially during peak hours relevant for the shopping mall. A er reaching the location, it should be convenient for the shoppers to enter the mall. Relevant factors in this context are: the number of roads/lanes bordering the plot (as it will impact the number of exit and entry points), e ective width of these roads and direction, volume and nature of tra c during di erent hours of the day.

Visibility Visibility of the site means that the mall constructed on it should be visible from a distance. The visibility may not be a strong factor if it is supposed to be a neighbourhood mall. For such malls, almost entire footfalls come from nearby residential clusters that are well aware of its existence. But if the mall is large, it is expected to a ract footfalls from a large area, it is advisable that such malls are built on plots situated on major tra c arteries and not on the inner lanes. Visibility also depends on the nature of buildings in the neighbourhood and the pad/elevation of the proposed mall. Size of the Plot Large malls o er a superior shopping experience. Therefore the plot for development should be large enough to accommodate all the required tenants. If the mall compromises on the tenant-mix due to the small size of the plot, it would encourage out-shopping. In the worst-case scenario, it would provide a good opportunity for competitors to come and fill the gap by building a larger mall containing all the tenants. This would adversely a ect the mall, as shoppers prefer to visit a single mall that provides all solutions under one roof. Some locations are expected to a ain their full potential a er some time. In such cases, the developer might look for a plot that gives the option of adding more mall space a er a few years. It is also relevant in cases where developers wish to develop the mall in di erent phases. Zoning Classification It is important to know the classification of available plots in terms of permissible landuse as notified by the local municipal/urban development authority. It is be er if the plot is already categorized as a commercial plot, more be er if it is earmarked for mall development. If the plot is meant for residential or agricultural use, it would require change in land use (discussed in detail in Chapter 9 on Regulatory Framework for Shopping Malls), which is time-consuming, costly and risky (approval might not be accorded at all). Condition of Plot It is advisable to ensure that the plot is free from encroachments and constructions. Eviction of occupants can prove to be a big problem. The same holds true for any existing structure/building on the plot, as its demolition would consume time, money and resources. Regarding the existing building, one should ask for its civil and engineering drawings because the foundations of the building could be deep and di cult to extricate. There could be a possibility (though remote) of using the existing structure (not meant

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for a mall) as a mall. Check whether the plot is at the ground level. If it is lower than the ground level, additional expenditure needs to be incurred for levelling it. However, the lower plot could be beneficial if the mall plans to have a basement parking.

Available Infrastructure For being fully operational, a mall would require access to civic amenities like electricity, water and sewers. The plots having these amenities are preferable because arranging them afresh requires completion of tedious and time-consuming formalities apart from incurring expenses, both o cial and uno cial. Neighbouring Buildings The nature of buildings in the neighbourhood, if any, has a significant impact on the a ractiveness of the plot. In general, the presence of commercial buildings (o ces and retail) is considered beneficial, as it guarantees some footfalls. A cluster of commercial buildings or entities is also expected to have some existing facilities like common parking that can be utilized by the mall shoppers as well. However, it must be noted that the existing tra c should not act as a bo leneck for the shoppers. The plot loses its a ractiveness if an existing commercial unit happens to be a shopping mall. On the other hand, the presence of residential blocks in the neighbourhood is a positive indicator, as it adds to the population in the primary catchment area. These people assure guaranteed footfalls for many product and service categories. However, for this to happen, the profile of these people should match with the profile of the mall’s target customers. Vehicular tra c due to the neighbouring residents is also an area of concern. Another concern would be the a itude of these residents towards the tra c generated by the mall.

MALL DESIGN PROCESS The design of a shopping mall should be such that it ensures functionality, aesthetics and safety. This can be done by designing it in a collaborative manner. Designing and architecture are considered to be the sole domain of civil engineers and architects. But, for huge projects like shopping malls, designing is an orchestration of multiple functions and skill sets. Di erent functions involved in it are architecture, civil work, interior designing, acoustics, electrical work, basic amenities, lighting and marketing. Many applications relating to ambience, experience and promotions must be provided for during the design phase. Subsequent modifications, though possible, may compromise the aesthetics, functionality and/or safety of the mall.

Stages in Designing Process Designing the mall is a multi-stage process. The various stages of this process are described below.

Developing the concept and feasibility Concept development and feasibility estimation is done during the planning phase of a shopping mall. Vital inputs at this stage come from the marketplace (in terms of demand and supply for di erent product and service categories), target segment, acceptability

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and willingness of brands, competitive scenario and objectives of the developer in light of his strengths and weaknesses. The outcome is in the form of a report that establishes financial viability of the project and spells out the products, services and brands to be accommodated in the mall.

Appointing the Architect Development of architectural blueprint of a building requires highly specialized skills. Except the big mall developers who own and operate a number of shopping malls, it is not advisable for the developers to have an architect on their payrolls on a permanent basis. Selection and appointment of the architect is done from the pool of talent available in the market. The engagement is contractual in nature and is normally on a project basis. The basic criteria for preferring a particular architect over others include reputation, experience, recent projects, past relationship with the developer and expertise in handling a particular type or scale of projects. Preliminary Design It is a basic design that presents the concept of the proposed mall in the form of a drawing. It is the general site plan showing the building configuration and the site layout. It includes a summary of gross and net development area and indicative drawings of mall facade. Key parameters of the building like ceiling, floor levels, and overall height are also indicated. It also includes mall layout (tentative positions of retail stores, common areas and utilities) and circulation diagrams for the mall that include entry and exit points, vertical circulation options, vehicular flow, parking plans and servicing areas. The preliminary design is submi ed to the client (developer) and comments/suggestions are solicited. Schematic Design Suggestions made by the client are incorporated in the preliminary design to get the schematic design. It is more detailed compared to the preliminary design, as it shows detailed plan for each floor along with basements (retail and parking). Architectural details are presented on a suitable scale. It also presents design data calculations, proposed finish for exteriors and surfaces, material specifications along with finish schedules. However, development of the schematic design requires significant interaction with the client as many decisions are to be finalized by them before inclusion in the design. Issues like compliance with government norms and cost management are the constraining factors. Detailed Design This is the stage when the design for submission to regulatory bodies and for construction is finalized. Going beyond the confines of aesthetics, this design outlines requirements of civil works, municipal works, electrical fi ings, and mechanical systems and incorporates them in the design plan. This stage requires intense consultations with in-house specialists or consultants (as the case may be) in the respective areas.

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Development of construction drawings The detailed design is broken down into construction drawings for di erent components of the building. It becomes more important if the structure is modular in nature or di erent building components are assigned to di erent contractors. It is followed by actual construction work.

Elements of Mall Design and Aarchitecture It is prudent for mall developers to opt for high-quality design, as their business involves long-term ownership and management of the shopping mall, and returns accrue over a long time period. Key areas to be taken care of in a mall design are described below.

Allocation of Open Versus Covered Space How much of the total plate area is to be kept open is generally regulated by the local authority. The covered area of the plate is generally expressed as a percentage of the total plot area. Developers may decide to cover less area than they are entitled to but cannot exceed it. The percentage of the covered area along with the floor space index (FSI) determines the maximum permissible vertical expansion. The open space around the mall building can be put to di erent uses. More open space adds to aesthetics and convenience. Developers should consider appropriate uses for stores situated on added floors because conventional retailing is not a viable option at floors higher than the second or third floor. Extent of Vertical Expansion Vertical expansion refers to the number of floors that a mall can have. As discussed earlier, the vertical expansion is a ected by the permissible FSI. The FSI is a number that indicates the total built-up area and is expressed as a ratio of ‘the total built-up area on the plot’ to ‘the area of the plot’. For instance, an FSI of 2 for a 20,000-square-metre plot means that the total built-up area of the plot can be 2 × 20,000 = 40, 000 square metres. If the authorities require 50 per cent of the plot area to remain open, then the mall can have four floors (of 10,000 square metres each). However, it is too simplistic to decide the mall elevation in this manner. Mall developers have to take a call whether they want to utilize full FSI or not. The catchment area may not be able to absorb this much mall space resulting in an over-supply. Even if the developer moves ahead with it, many brands may not agree to move up to the third or fourth floor. Higher levels are suitable for retailing of products and services that have high customer involvement, engaging the customers for a long time period, for instance multiplexes, food courts, restaurants and discotheques. Developers must have ample options in this category before opting for more floors. Else they may end up diverting all or a part of the upper floors to non-retail uses (mixed use developments). Vehicular Circulation and Parking While preparing the business plan (submi ed for the purpose of arranging finances), developers give projections about expected footfalls. However, it is also desirable to

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estimate the number and composition of vehicles (two-wheelers, three-wheelers and commercial vehicles) that the mall is expected to receive. Using this estimation, the design and layout of the mall should facilitate: (i) comfortable entry, exit and movement of the expected number of vehicles in the peripheral space and (ii) matching the available parking space with the arrival pa ern of vehicles. If 5000 vehicles are expected to visit the mall per day, it does not need to provide parking space for all these vehicles because they would neither come simultaneously nor remain parked throughout the day. Some tenants a ract high-income customers (more likely to come on personal vehicles) and some retail formats engage customers for a long time (resulting in long occupation of the parking space). Destination malls and luxury malls are expected to have high incidence of personal vehicles while the converse is true for a neighbourhood mall. Suitable provisions should be made in the layout and design to ensure smooth circulation and adequate parking for these vehicles. Parking facilities are also required for commercial vehicles supplying merchandise to the retailers, and the retailers and their employees too need dedicated parking slots.

. Loading Docks A loading-unloading dock is a facility comprising a platform or a recessed bay where commercial vehicles are parked for loading or unloading goods. These docks are important for a mall as all its tenants are expected to receive replenishments at a specified frequency. There could also be cases where a large and busy tenant (generally anchor tenants like hypermarkets and supermarkets) receives massive replenishments so frequently that it demands separate and dedicated docks. Docks are generally created at locations where they do not interfere with the customer tra c and sight. These are normally situated on the periphery of the mall building though these can also be inside as a part of the basement parking. The number of docks in a shopping mall depends on its size, the number and size of its tenants, the expected footfall and turnover and regulatory requirements. Key issues for docks are: location, connectivity with the parking, storage spaces and freight li s, hours of operation, mechanical support available, safety concerns, visual appearance, light and visibility, noise, odour and ventilation. Landscaping There are di erent options for landscaping the open space around the mall building. It could be completely carpeted with stone, covered with vegetation or a mix of both. Multiple options are also available in terms of material to be used for landscaping. Each option has di erent initial cost and maintenance expenses. Natural vegetation adds to freshness and aesthetics but requires higher maintenance. Stone-paved exteriors can be put to multiple uses like games and rides for kids, kiosks, promotional displays and organizing events. Some fixtures like fountains, lampposts and statues may be added to enhance the impact of landscaping.

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External landscaping at Shipra mall, Indirapuram

Pad or Platform Development The ground level of the mall building may be kept at par with the ground level of the plot or the surroundings. The other option is to place the building at a raised pedestal or platform so that it ‘stands out’ in comparison to its surroundings. Raised platforms are generally preferred as they add to the mall’s visibility, appeal and grandeur. Besides, the height of the platform insulates the main building from the activities going on in its periphery, like surface parking, circulation of vehicles, kiosks, games and the movement of shoppers. Facade or External Appearance Facade is the face of a shopping mall and conveys the initial impression about what kind of a mall it is. The facade depends on its intended positioning and so does the material used to construct it. The material used in constructing facade also reflects what kind of mall it is or how the developer wants to position the mall in the minds of shoppers. For instance, use of glass and metal gives the mall a contemporary look whereas dominant use of plain brick or granite would give it a conservative look. Common materials used in construction of facade are: stone (sandstone, granite and marble), cement, glass, metal (aluminium, steel and brass), plastic and tiles. Di erent components of the facade are: entrance, banner and tenant displays. Typically, the facade of a shopping mall contains its name and logo, has its main entrance and carries names/ logos of major tenants. The identity of the tenants could be displayed on the facade with or without charging additional money for it. If the tenants are to be accommodated on the facade, there must be a suitable provision (panels) to do so. Some shopping malls rent out the façade space for promotional displays of brands rather than using it for their tenants.

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Chennai City Centre

Overall Theme of Architecture Most shopping malls bear a contemporary look with the use of glass and metal. There are some malls (like Ansal Plaza, Delhi, and Shipra Mall, Ghaziabad) that have adopted classical architecture as the central theme. Di erent elements like design details, materials and colours used in a shopping mall should converge into a single theme. Unfortunately, many developers do not plan it consciously resulting in development of malls that all look alike or look confusing due to lack of orchestration between di erent elements of design. Size, Shape and Number of Atriums Atrium is the open space within the mall building facing rows of retail stores. It gives a complete view of the retail stores from a distance. It adds to the comfort and convenience of shoppers, providing them a place to escape when crowd builds up. It also serves as a place for displays and promotional activities. The simplest design configuration includes an atrium surrounded by a rectangular, square, oval or circular layout of stores. In case of large malls, it becomes necessary to divide them into di erent zones. Such malls have more than one atrium. These atriums might be arranged in the form of a dumb-bell or chain of circles. Each atrium may have a di erent design theme and zoning plan. Building layout In the most basic layout, there is a single row of stores facing the atrium. The stores’ alignment may be square, rectangular, oval, circular or hexagonal. The continuity of stores is broken by entry/exit routes or utilities. Such a theme is appropriate for smalland mid-size shopping malls. In case of large shopping malls, a simple layout is not suitable because the stores situated at the farther end look too distant to visit. Such malls adopt a more complex structure with multiple atriums. Each atrium is of a manageable size and has a reasonable number of stores around it.

Layout of the first floor at The Great India Place (GIP), Noida

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HVAC, Lighting and Acoustics Provisions regarding heating, ventilation and air-conditioning (HVAC) must be considered during the design stage itself. It should be decided whether the mall is going to have a unified HVAC system or a modular one that is divided into di erent parts/ zones for the purpose of controlling the extent and intensity of air-conditioning. This decision has a direct impact on the operational cost. Suitable provisions should be made during designing and construction for laying electrical fi ings and vents.

Lighting at UB City Mall, Bangalore

Special Provisions for Anchor Tenants Though vanilla tenants are extended almost the same facilities and infrastructure as anchor tenants, the la er might require some special facilities. The same holds true for some other categories of retailers like food courts. Anchor tenants like hypermarkets and supermarkets require access to dedicated facilities and infrastructure like ramps, service li s, escalators and travelators. The ceiling of hypermarkets and supermarkets

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is considerably higher as compared to that of vanilla stores. Hypermarkets generally extend to the first basement and have a direct entry and exit option to the parking. Tenants like department stores expect at least one exclusive set of entry and exit at the mall periphery apart from ingress/egress points towards the atrium. Multiplexes require continuous space (without pillars in between) of a considerable size and also a higher ceiling. The floor for multiplexes is generally inclined (as if a ramp). They also expect space for a ticket booking window (box o ce) at the entrance or on the periphery of the mall. Food courts require kitchens with access to running water, whereas kiosks placed in the atrium or corridors require access to electricity and/or running water. Absence of these facilities would seriously handicap the working of business. All these provisions must be considered in advance and should be suitably taken care of at the design stage itself. Any change made subsequently would either be costly and time-consuming or would not be e ective.

Basic Facilities and Amenities Basic amenities and facilities to be o ered in a mall include washrooms, drinking water, li s, escalators, travelators, stairs and benches. At a very basic level, the mall design must provide for water and sewage connections at appropriate locations. Any a empt to extend these connections subsequently might a ect aesthetics and functionality. The number, size and location of washrooms is another issue that must be decided at the design stage keeping in view the expected customer circulation. The number, capacity, categorization (customer versus service) and location of li s and escalators are issues requiring special a ention. Vertical columns for li s and horizontal span for escalators must be duly provided. If the mall management is keen to place benches for the comfort of customers, suitable spaces for them must be demarcated in the design, leaving adequate space for those who are passing by. The location should be comfortable for those si ing on the benches and should o er a decent view of the mall. Safety Features Some safety and security features should be incorporated because these are mandatory as per the law. However, a mall should assess its individual requirements in terms of possible threats specific to its location, size and expected tra c, and strengthen the basic safety provisions. Most of the safety provisions are embedded in the basic mall design and require deliberate planning during the design and construction phases. The mall developer should know in which earthquake zone does the proposed project falls and must ensure using such construction techniques that eliminate all risks. The depth and nature of foundations, composition of construction material, length of beams and proportion of windows to the length of walls are decided considering the earthquake zone in which the building comes. Adequate provisions should be made for installing a sprinkler system in the building. The installation of a sprinkler system requires provision of vents, pipes and sha s at adequate locations. Staircases are rarely used in a shopping mall, but they serve as emergency exit route in case of fires. Their number and location must be decided in accordance with the law and the expected customer flow during peak hours once the business is in full bloom.

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Characteristics of a Good Mall Design The design of a shopping mall depends on a number of factors like customer personality and profile, size of the project, its location, nature of competing malls, and the profile and background of developers. However, there are some features that are common to all good mall designs. These are described below:

Aesthetically Appealing The appearance of shopping mall must be soothing and a ractive for the target customers. For this, the developers need to explore the preferences of the target customer group. A ractiveness is the interplay of di erent elements like size, elevation, facade, cladding material, lighting, ratio of open space to the total space and displays. However, the exact mix of these must be validated by the target customers.

Mural outside City Centre, Kolkata

Efficient Use of Space The price of real estate in urban centres in India is comparable with that in the cities in the developed world. Therefore, the mall design must ensure that such a costly resource is put to optimum use. Every square inch of the space must be put to satisfactory use and contribute to the return on investment (ROI). It does not mean that there should be excessive construction, as it would increase the cost of construction and repulse customers. What it means is that the space allocated to di erent components in the mall building should be su cient and not unwarranted. Apart from the ROI issue, the e cient use of space also adds to customer comfort. If the atriums, corridors and stairs are too huge, they can actually intimidate or repulse customers, especially during the mall’s early days when it is not fully occupied. Open Appearance Shopping malls are generally enclosed. When shoppers visit an operational mall, they should not feel su ocated or restricted. One way of doing this is to ensure that there is

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just optimum construction. The building can also look open by manipulating height, lighting and circulation pa erns. A good design can ensure that there is su cient open space at the entrance, and tra c gets diverted immediately a er entering the mall. Such a design can create an impression of openness by creating multiple atriums, placing di erent units at di erent elevations and strategically locating the li s and escalators.

Natural Ventilation Shopping malls are meant to accommodate and host a large number of people in an enclosed and insulated environment. But the shoppers’ experience could turn nauseating during peak hours during certain times in a year (say, peak summer in India). The situation could turn disastrous if the artificial ventilation system fails. Shopping malls should be designed in such a manner that they have adequate natural ventilation. Natural Illumination The lighting inside the mall is a big component of operational cost. Artificial light not only consumes a lot of energy but also generates heat that needs to be neutralized using high-level air conditioning. To cut down air-conditioning expenses, it is wise to opt for a design that permits maximum use of natural light during day time. It may be supplemented by choosing a suitable glass that permits maximum illumination but minimum heat radiation. The size and nature of the roofing material used for the atrium also plays a significant role in controlling illumination inside the mall.

SUMMARY It is very important to select loca on and design of a mall as decisions rela ng to these areas are capital intensive and are irreversible in nature. Therefore, it is important to assess macro as well micro issues involved in mall designing and development process. Macro issues involve es ma on of the catchment area, business poten al and likely demand for the mall. Micro issues involve checking accessibility, connec vity, visibility and other characteris cs of the site. Designing the mall is a mul -stage process involving orchestra on of various people and posi ons. All these delibera ons are done to ensure that the mall is aesthe cally appealing, uses space e ciently and is open, ven lated and illuminated.

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REVIEW QUESTIONS 1. Why is it important to apply due diligence while planning the development of a shopping mall? 2. What are the di erent decisions taken under the planning and design stages of mall development? 3. What is the significance of iden fying an appropriate macro loca on for a shopping mall? 4. How do characteris cs of the site (the plot) a ect the business poten al and performance of a shopping mall? Cite examples from real life. 5. How would you measure the business poten al for a mall at a par cular loca on? 6. What parameters should be kept in mind while selec ng a plot for mall development? 7. Discuss various stages involved in the mall designing process. 8. What are the di erent stages of mall design and architecture? 9. How do anchor tenants influence the design of a shopping mall? 10. What are the characteris cs of a good mall design?3

PRACTICE EXERCISES 1. Visit five shopping malls of your choice. Take photographs and make observa ons. Do all the malls follow the same design pa ern? If yes, prepare a list of common design features. If no, what are the points of di erence? Discuss the possible reasons for observed varia ons. 2. Imagine your locality to be a poten al land for development of a mall. What kind of mall (size, posi oning, etc.) would you suggest? Suggest the most suitable loca on and plot (out of available op ons) for developing a mall. Why do you think this site is the most suitable op on? 3. Visit five to six malls of your choice. Visit and examine the anchor tenants in these malls. Iden fy special and dedicated provisions made for the anchor tenants in the malls.

SUGGESTED READINGS 1. Beyard, M.D. and O’ Mara, W.P. (1999), Shopping Centre Development Handbook, Washington: Urban Land Ins tute 2. Darlow, C. (1972), Enclosed Shopping Centres, NY: Architectural Press (Routledge) 3. Das, A. (2009), Mall Management with Case studies, New Delhi: Taxman Publica ons Pvt. Ltd. 4. ICSC (2001), Dic onary of Shopping Center Terms, New York: Interna onal Council of Shopping Centers 5. Gregorson, J. (1988), ‘Tailoring a fashion mall to its urban se ng’, Building Design and Construc on, 29(March), p. 74

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6. Gruen, V. and Smith, L. (1960), Shopping Town USA: The planning of shopping centers, New York: Van Nostrand Reinhold 7. Guy, C. (1994), The Retail Development Process: Loca on, Property and Planning, London: Rutledge 8. Hu , D.L. (1964), ‘Defining and es ma ng a trade area’, Journal of Marke ng, 32(4), pp. 34–38 9. Hu , D.L. and Rust, R.T. (1984), ‘Measuring the congruence of a trading area’, Journal of Marke ng, 48(4), pp. 68–74 10. Levy, M.; Weitz, B. and Pandit, A. (2008), Retailing Management, 6th edi on, New Delhi: Tata McGraw Hill 11. Maitland, B. (1985), Shopping Malls: Planning and Design, NY: Nichols 12. Pani. S. (2009),’10 considera ons before building a mall’, In A. Taneja (Ed.), Mall of India, pp. 158–162, New Delhi: Images Mul media Pvt. Ltd. 13. Puri, A. (2007), ‘Designing India’s mall poten al’, In Amitabh Taneja (Ed.), Malls in India: Shopping Centre Developers and Developments, pp. 72–75, New Delhi: Images Mul media Pvt. Ltd. 14. Singh, H. and Bose, S.K. (2008), ‘My American cousin: A comparison between Indian and the US shopping malls’, Journal of Asia-Pacific Business, 9(4), pp. 358–372. 15. Underhill, P. (2004), Call of The Mall: The Geography of Shopping, NY: Simon and Schuster

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CASE 1

What makes a mall successful? A mall with a great promise reduced to a building that o ers o ce space and banquet halls for func ons—that is the story of Star City Mall. Not long ago, Star City was considered a recipe for success, thanks to its loca on in the middle-class Delhi neighbourhood of Mayur Vihar. Surrounded by a large number of upwardly mobile young families, Star City Mall had the closest compe ng supermarkets, department stores, and mul plexes a good 5 km away, across the U ar Pradesh border, in Noida. In 2009, a Metro sta on opened right next to the mall and that should have put the seal on its success. Yet, Mayur Vihar’s residents con nued to prefer to shop and eat out in Noida or in South Delhi. Retailers started fleeing the mall. Reliance Super of Reliance Retail Ltd was announced as the anchor tenant of the mall with much fanfare in 2006. But,it abandoned the mall in early 2011. “Only about a quarter of the es mated 180 malls in India are making money,” informs Santhosh Kumar, Chief Execu ve of Opera ons at real-estate advisory Jones Lang LaSalle Property Consultants (India) Pvt. Ltd. “Of the rest, 35 per cent malls are just making ends meet, and the others are losing money,” he adds further. Why do some malls succeed wildly while others fail? Retailers and experts a ribute the success of mall business to a combina on of factors. Experts name Pres ge Group’s Forum Mall in Bangalore among the best located in the country. It is on the arterial thoroughfare that links the city’s central business district to Electronics City. On either side of the mall are a uent residen al neighbourhoods such as Koramangala and BTM Layout. However, a great loca on cannot guarantee the success of a mall unless its developer addresses the needs of the primary market—the catchment area—with the right products. “For any shopping centre, the most important thing is to address the needs of the majority of the catchment around it,” says Neeraj Ghei, Director of Delhi’s Select Citywalk Mall. “You have to analyse the catchment,” he adds further. The Pres ge Group researched the market before building its first mall, Forum, in Bangalore. It hired CB Richard Ellis to study households in Koramangala and its neighbourhood besides other parts of the city to understand the ideal mixture of retailers and services the mall would need to o er. “The mall needs to be a sort of community rather than just a des na on for shoppers,” says V. Muhammad Ali, Head of Mall Opera ons at Forum. “You have to tailor a mall for the catchment rather than forcing a mall on the catchment,” he adds. That approach seems to have worked for Forum. Similarly, Delhi’s Select Citywalk in the Saket area decided it would focus on a uent women in south Delhi. “To make this a preferred des na on for the south Delhi woman we had to capture and reflect her character and her soul,” says Pranay Sinha, Managing Director of Star Shopping Centres Pvt. Ltd., which is working on malls in various ci es. (Mr Sinha earlier served as the Chief Execu ve of Select Citywalk.) A large part of the mall was dedicated to smaller stores and the developer convinced several retailers of ethnic apparel and accessories including Zardozi and Fabindia to set up stores in the mall. The idea was to replicate a typical market such as South Extension or Greater Kailash, where many women from south Delhi shopped. This was complemented by interna onal fashion brands such as French Connec on, Mango and Esprit.

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There’s a science to designing and managing malls, say experts. “There is a lot of exper se required—the way it’s designed, the displays, the shops,” says Anshuman Magazine, Managing Director of real estate consultant CB Richard Ellis South Asia Pvt. Ltd. According to Star Shopping’s Pranay Sinha, part of this design is to make it possible for visitors to see as many shops as they can from where they stand. “In a well-designed mall, this number is 15–20, encouraging visitors to walk around to see what’s on o er,” he says. The emphasis, adds Select Citywalk’s Ghei, has to be on the shops, not the mall’s architecture. And, the emphasis has to be on a significant number of shops (which brings us back to the issue of size). Noida’s Centrestage Mall, which opened for business in 2003 was ini ally much sought a er by retailers. Four years later, a much bigger mall, Great India Place, opened across the road and Centrestage saw a flight of customers. Although Centrestage has a five-screen mul plex, Trent Ltd’s Westside department store is its leading retail a rac on. Great India Place boasts a Big Bazaar hypermarket; Pantaloons, Shoppers Stop, Lifestyle and Max department stores; a sprawling Home Town do-it-yourself outlet; and several other large stores. This variety is important, say experts. Bangalore’s Forum has an 11-screen mul plex, a 30,000 sq. food court and restaurants on all floors. Developer Pres ge is now opening its first mall in Chennai, which will have two 50,000 sq. . anchor stores. It leased space for one anchor store to Lifestyle, a department store. It avoided leasing the other to another department store, signing up instead with RmKV, famous for its tradi onal silk saris and ethnic apparel. About the decline of one- me hotspot Centrestage, Kumar of Jones Lang LaSalle says the mall has now been reduced to a “convenience mall” with the number of people visi ng it dropping by 40%. “People will mostly go there for a specific purpose,” he says. According to various retailers at the Centrestage, the mall a racts around 6,000 visitors a day over weekends; Great India Place gets around 150,000. Woodland, located on the ground floor of Centrestage, closed its outlet in the beginning of 2011 as did Levi Strauss. Both brands have stores in Great India Place. Source: Adapted from ‘The Recipe for a Successful Mall’, Rasul Bailey, retrieved from http://www.livemint.com/Articles/PrintArticle.aspx?artid=C260D0CC-6F5C-11E0-B67E000B5DABF613, accessed on 16 May 2011

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CASE 2

Square peg in a round hole “This is a real deal. Move ahead and grab it,” Rajneesh ins gated Neelabh. “Do you think it is advisable to go for this skeleton? A er all, we are into developing malls and this structure has been designed and put up as an o ce complex,” argued Neelabh. Rajneesh emphasized: “Why don’t you see the clear-cut cost advantage? If you purchase a similar piece of land and come up with a comparable framework, it shall cost us a fortune. Now we are ge ng all this at 70% of the actual cost. Isn’t it a deal?” “Well, the point is: Is the structure suitable for our kind of business? If case we have to demolish the whole skeleton and come up with a fresh construc on, the cost of project shall actually go up by 30% instead of coming down!” Neelabh seemed a bit scep cal. Rajneesh then retorted: “But what is the fun of pulling it down? We shall make suitable changes, club or compartmentalize the land into chambers and o er it to tenants as per their requirement.” “The concept seems a rac ve but let us discusses the things in detail.” Neelabh now seemed interested in discussing things. He adds further: “What can we do this six-storey building with single-basement parking? There is not much open space outside.” “It is because the o ce complex was not supposed to a ract the masses. But even for a mall, we shall be using external space only for the purpose of landscaping and there is su cient space for it.” Rajneesh explained to him. But Neelabh asked: “I don’t agree with this argument. Anyway, what about atrium?” “The original structure has a narrow open space in between, again because of being an o ce complex, but we can always expand it by clubbing adjacent compartments to it.” Rajneesh suggested though ully. Neelabh then exclaimed: “An atrium with pillars in it! Wonderful!, And what about the narrow corridors?” “At the outset, it seems a real problem but we can regulate and channelize the flow of customer tra c in such a manner that people move in a single direc on.” Jus fied Rajneesh. “As they normally do in the malls. It looks reasonable.” Neelabh seemed a bit convinced. “So we need to provide extra set of stairs for reverse movement.” “Not only an extra set of stairs but also escalators and more li s,” explained Rajneesh. “Well, we need to analyse a few things again in light of this.” Clearly Neelabh was not convinced and he wanted more informa on. He asked: “So, a er building what about running business?” Rajneesh answered: “Simple! Let us approach the hypermarkets, get one as the anchor tenant that will a ract foo alls, then approach other brands and things will move on.” Neelabh then enquired: “But how do you propose to provide the enormous floor space that a hypermarket requires?”

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Rajneesh replied: “Elementary! O er them two or three floors, preferably the lower ones.” But Neelabh resisted: “Look, we cannot o er them large, con nuous halls because what we have is the framework for chambers. And they need to create their own stairs/pathways out of that floor area. And what about con nuous space required for counters?” Rajneesh responded casually: “Let them carve it out as per their own plans. Counters can be aligned as per the floor area. I don’t see any problem in this.” Neelabh had a sugges on: “Why don’t we think of a rac ng a Cineplex as an anchor tenant? This will help us in u lizing the upper floors. And let us have a food court under that.” Rajneesh solicited: “I believe a hypermarket and a Cineplex a ract customer segments that are diametrically opposite. S ll, we should consider this. By the way, why can’t we have both.” Neelabh then commented: “It is not a normal prac ce. A er all, there must be infrastructure to support both the ac vi es.” But Rajneesh had a point to make: “We have enough floor space, seven floors. It is our biggest strength.” Neelabh was s ll scep cal: “I don’t know whether it is strength or weakness. But what about remaining tenants?” Rajneesh replied: “Well, that depends, to a great on the anchor tenant. So, it shall be premature to decide that.” Neelabh came up with a sugges on: “What is your opinion about giving top floors to a hotel or commercial o ces? That shall give us revenues without taxing heavily on the infrastructure.” But Rajneesh countered: “That doesn’t get well with the conven onal image of a mall.” “The structure itself doesn’t seem conven onal. So, we need to think unconven onally to make it run profitably, if at all we decide to purchase it.” Neelabh had the final word.

Discussion Questions 1. Had you been the decision-maker, what would have been your reasons for rejec ng the building? 2. In case you are compelled to take up the building, what decisions shall you take to u lize it as a mall?

CHAPTER

4

Financing and Revenue Model for Shopping Malls

LEARNING OBJECTIVES This chapter will enable the readers to • Iden fy the major sources of funding for mall projects • Understand pros and cons of each mode of financing • Know the major sources of revenue for shopping malls • Get an overview of latest happenings in the field of mall financing

WHAT WENT WRONG? Prashant Arora does not know what to do. He never realized that the mall business will turn out to be so di erent from the real estate business he has been running for the last 17 years. A successful real estate developer dealing in residen al proper es in Delhi, Prashant decided to get into the retail opportunity that everybody was talking about—the shopping malls. He joined hands with three friends, bought a commercial plot in Noida and went ahead with a shopping mall project. However, his problems started soon. Even before the construc on could begin, one partner walked out of the project because of personal compulsions, and the project started facing funds crunch. Prashant approached commercial banks for a loan but banks were asking too many ques ons and Prashant did not have answer to all, like ques ons related to the mall’s earning poten al, tenta ve future business models, etc. “How can I answer all these ques ons even before the ground is broken?” Prashant teased his mind. In fact, he did not have any idea about most of the issues related with the mall business.

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As a last resort, Prashant approached real estate brokers who could find investors for his project. He o ered the ownership of stores in the upcoming mall to investors for the money they would put in. However, the investors wanted commitment in terms of return on investment (ROI) and tenancy contracts, whereas prospec ve retailers wanted to see the project first. Then Prashant started construc on with whatever limited funds he had so that he could showcase the under-construc on project to poten al investors and retailers and ins l confidence into them about good prospects. But then the recession hit the industry. The retail real estate was one of the worst-hit sectors. Investors became cau ous and retailers put the expansion plans on hold. Standing in front of the bare skeleton of his mall, Prashant was wondering what went wrong. “Which financing model should I have gone for?” He was trying to answer this ques on.

INTRODUCTION In India, the first decade of the twenty-first century saw development of retail space taking o rapidly, thanks to the astronomical growth projections for the future retail trade. People hailing from all backgrounds jumped onto the shopping mall bandwagon without realising the exact nature of its business and its unique requirements, especially in terms of financing. Development of shopping malls is a capital-intensive business. It requires huge investments for buying land and pu ing up world-class infrastructure and for creating an ambience that can a ract tenants as well as retailers. Contrary to many Western countries where shopping malls are located away from the heart of the city, the Indian shopping malls are generally situated closer to population clusters. It is due to the factors like increase in the sale of small cars in India, lack of e cient and comfortable public transportation system, poor road infrastructure and chaotic tra c. All these factors make it di cult for shoppers to travel over long distances to do shopping. Plots of land closer to population clusters tend to be prime land. Developing malls on such plots means competing against land uses for residential and o ce projects. It inflates the price of the land. As a good shopping mall requires a considerably large space to accommodate a deep tenant-mix and to create a decent ambience, investment in land alone tends to be prohibitive for a mall project. Add to it the prices of vital ingredients of construction (such as cement, iron, and glass) that have shown a consistent upward trend in recent years, thus making shopping mall one of the costliest projects. In contrast to a normal shopping complex where the developer walks out a er transferring ownership to individual store owners, the developer of a shopping mall manages it perpetually. It is the developer’s responsibility to create footfalls that are tied to the returns (rentals) in many cases. As a shopping mall does not start a racting footfalls immediately and automatically, the developer has to put in a considerable amount of money during the initial period to a ract the shoppers. It also adds to the requirement of finances for a shopping mall.

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A comprehensive discussion on the financing issues concerning malls would entail discussing investment (capital as well as operating expenses) against the revenues that are generated. Di erence between the gross revenue collection and the cost (comprising the operating cost and the return on capital employed) would give the net cash flow from the project. The challenges of mall financing are as follows: (a) Keeping this net flow positive (b) Keeping it insulated from unwanted fluctuations in the short term (c) Looking for cushions to absorb revenue fluctuations (d) Ensuring long-term growth and sustenance of positive net cash flows Let us explore various capital sources available to mall developers.

CAPITAL SOURCES

FOR

MALLS

The finances required for developing shopping malls come from a combination of internal and external sources. The internal contribution occurs as the promoter’s contribution in cash and/or in terms of land valued at the market price. It is mandatory to have some element of internal contribution for tapping external sources of funds because it evokes confidence among outside sources. Funding from external sources might come in the form of debt or equity. The external sources could be or institutions. For the purpose of structured discussion, these sources may be divided into two categories: 1. Private funds 2. Public funds Each category must be examined by the mall owners prior to seeking commercial financing. They then need to examine the type of loans o ered by lenders as per their needs and the anticipated growth. Financing to mall project will depend on value of the business in the future, whereas in case of a residential real estate, financing is based on the value of a home at the time of its sale.

Private Funds Contributions from promoters may come as private debt or private equity. Sixty per cent of financing in the Indian mall projects comes from the capital contributed by the promoters from their personal ki y along with the debt taken from financial institutions (private debt). The rest 40 per cent of the requirement is met by the private equity. Investors in this category include high net-worth individuals (HNIs), institutional investors and global investors. Most of them invest through real estate funds (REFs). Some important private funding options are: (a) (b) (c) (d)

Internal accruals Loan from banks Loan against property Loan against future rent receivables

Financing and Revenue Model for Shopping Malls 67

(e) Note and mortgage (f) Contract for deeds (g) Trust deed (h) Real estate funds Let us know more about the above-mentioned private funding options.

Internal Accruals These include the accumulated retained earnings and depreciation charges. Managements of corporate houses use internal accruals for a number of reasons. Depreciation means simple allocation of capital funds for some asset that is expected to improve the financial condition of the organization. The charge on depreciation is an internal source of funds and is considered a non-cash charge. The retained earnings are shareholders assets. However, most companies retain some earnings for further financial growth. The retained earnings represented by reserves and surplus are an important source of long-term financing. Advantages and disadvantages of the retained earnings are described below. Advantages 1. Availability of the retained earnings is the greatest advantage and there is no obligation on the use of this fund. 2. Use of the retained earnings does not a ect the e ciency of the business. 3. Use of the retained earnings for financing is viewed as an excellent option by the stock market. 4. Issue costs and losses because of under-pricing are eliminated by the retained earnings. Disadvantages 1. Most of the companies have a well-established dividend policy in place. Hence, there is a cap on the amount of the retained earnings that can be utilized. 2. The opportunity cost of the retained earnings needs to be considered before utilizing them. Some companies neglect this opportunity cost and invest in sub-marginal projects.

Loans from Banks Banks o er a significant financing solution to various reputed retail chains. The product o ering includes providing an upfront loan to the landowner and discounting the future receivables every month (or on any other frequency), thus extending good liquidity in the hands of the landowner. However, financing real estate development has never been popular, because of perceived opaqueness of pricing in the market, lack of clarity and standardized practices, and associated risk of what is still seen as a speculative bubble.

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The situation became severe in 2008 owing to the economic recession, and banks have ceased lending. In case of mall projects, banks evaluate the loan eligibility of the prospective borrower on the basis of the following details: • Property profile including criticality of the premises for the lessee’s operations • Deal structure • Lessee details • Lesser details • Cash flow pa ern envisaged in the agreement(s)

Loan against Property The loan against property comes under the secured loan category where the borrower gives a guarantee by presenting his/her property as security. The property loan or loan against property is a type of loan awarded by the bank against the current assets of the customer. This type of loan is very useful when other resources of financing get exhausted. It is important to note that a property loan is not similar to a mortgage. While a property loan is obtained from the bank by keeping the customer’s current assets as a security against the credit, a mortgage is a security instrument for purchasing an asset. On the basis of the current market situation, the paid-up cost of the asset and other aspects, the cost of the loan against an asset can range anywhere from 40% to 60% of the asset cost. The eligibility criteria to get a loan against property vary from one bank to another. However, the common factors that all banks look at are: • Cost/value of the property mortgaged • The property owner’s income, savings, debt obligations • The property owner’s repayment track record for other loans, credit cards, etc. A loan against property is one of the best ways to raise money. The only disadvantage of such a loan is that if the borrower is not able to repay the loan fully, the bank or the financial institution can take possession of property kept as security. Hence, while deciding on a property loan, one should take into account one’s repaying capability.

Loan against Future Rent Receivables The loan against future rent receivables has been developed keeping in mind the growth potential of real estate in the metros and various urban centres, where many shopping malls are being developed. The mall owners approach banks for loans against securitization of future rent receivables from their properties. As these owners lack the financial resources required to improve the condition of their properties to enhance the prospects of earning higher rent, they opt for this type of loan. Before o ering the loan against future rent receivables, the bank will ensure that the following conditions have been met:

Financing and Revenue Model for Shopping Malls 69

• The property has been built according to the plan approved by the local government authorities. • There is a confirmed lease agreement between the property owner and tenants. • The property has been rented out. • The worthiness of the property owner and tenants is evaluated for extending the loan. Once the bank has checked the above criteria, it starts processing the loan application. Normally, the bank enters into a tripartite agreement with the property owner and tenants. Also a term loan agreement is signed between the property owner and the bank prior to the loan approval. As per this agreement, the rent from the tenants will directly go to the bank. The owner and the tenants will have to give an undertaking to this e ect to the bank. If the direct rent submission to the bank is not possible (typically in the case of a mall when there are many tenants in one property), the owner has to inform this to the bank. In that case, the borrowed amount along with the interest in equated monthly instalments (EMIs) has to be paid by the owner. Certain banks also allow the owner to open multiple rent loan accounts in case of many tenants. Once the owner’s papers are in order, the processing of his/her loan application begins. The owner may get a loan up to 90 per cent of the discounted value of future rent receivables. Interest rates di er from bank to bank. While most of the banks charge the floating rate interest on this type of loan, certain banks also o er the fixed interest rate option. The owner can expect to get the loan on a be er interest rate if he/she has a good banking relationship and an impeccable past repayment record with the bank. Additional charges include the processing fee, prepayment fee (if the owner plans to pre-close the loan), and overdue penalty if the owner defaults on making the loan repayment. The loan tenure also varies. Banks tend to o er the remaining period of the lease or rent agreement as the loan tenure. If the owner has di erent lease agreements with di erent tenants, then the bank o ers a loan for the remaining period that is minimum among all the lease agreements. For example, if the owner has four tenants, whose lease agreements expire in four, five and six years from the date of loan application, the bank will o er the loan tenure of four years.

Note and Mortgage Another financing instrument is the note and mortgage. A note is a promise to pay, while a mortgage is the pledge of a specific parcel of real property as collateral to secure this promise. A note, also called promissory note, signed by the mortgagor is a negotiable instrument that specifies the terms and conditions for the debt repayment.. A mortgage is an instrument that conveys an interest in real property to a lender as security for payment of a promissory note. The borrower (mortgagor) pledges a property to the lender (mortgagee) as collateral for a debt. A mortgage, signed by both the mortgagor and the mortgagee, establishes a lien on the collateral property on the date the mortgage is recorded. When the mortgage debt is paid in full, the mortgagee marks

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on the note “paid in full”, signs it and returns it to its maker along with the mortgage form that will clear the record of the mortgage lien. The promissory notes usually accompany security instruments that give the creditor leverage against the debtor and also give the debtor extra incentive to pay. A promissory note is advantageous to the lender because he/she has the right to accelerate the entire debt in the event of default and the authority of the court for the judicial foreclosure. However, time and expense involved with the judicial foreclosure are major disadvantages for the lender. The same turns out to be an advantage for the debtor as it gives him/her time to arrange for the money. But the debtor’s inability to miss a payment or two could compel him/her to pay o the entire debt to save the property because of the lender’s right of acceleration. A mortgage is duly recorded by judicial o cers. A public notice of the mortgagee’s interest in the property is issued once it is recorded. When the mortgagor pays o the balance of the mortgage, the mortgagee gives the mortgagor a satisfaction of the mortgage document that is also recorded. This document gives the notice that the mortgagee’s interest in the property is terminated. The mortgagee can foreclose on the mortgage if the mortgagor defaults on the loan payment or fails to pay property taxes or insurance.

Contract for Deeds A contract for deeds is both a sales agreement and a financing instrument between the buyerborrower-vendee and the seller-lender-vendor. The full terms of the sale as well as the manner in which the loan will be repaid are elaborated in this contract financing form. The buyer is granted the permission and control of the property during the term of payment under the conditions specified in the contract. The seller delivers the deed to the buyer who transfers full legal title when the terms of the contract are satisfied. Mall financing through the contract for deed is used when other financing means are not available. Trust Deed A trust deed is a three-party instrument in which the borrower (the trustor) makes payments on a note to the lender (the beneficiary). In order to provide the beneficiary a greater measure of security, the trustor actually gives the title to the property—in the form of a trust deed—to a third person (the trustee) to hold. Private Equity Investors Private equity (PE) investments are derived from high net-worth individuals as an essential source of early-stage funding for high-risk ventures. Individuals o en invest in malls through partnerships or specialist firms. Investments in malls are typically made via a private equity real estate fund, a collective investment scheme, which pools capital from investors. These funds typically have a ten-year lifespan consisting of a 2–3 year investment period during which properties are acquired, and a holding period during which active asset management will be carried out and the properties will be sold. The private equity real estate funds generally follow core-plus, value-added, or opportunistic strategies when making investments.

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Core Plus: This is a moderate-risk/moderate-return strategy. The fund will generally invest in core properties. However, some of these properties will require some form of enhancement or value-added element. Value Added: This is a medium-to-high risk/medium-to-high return strategy. It involves buying a property, improving it in some way, and selling it at an opportune time for a gain. Properties are considered value added when they exhibit management or operational problems, require physical improvement, and/or su er from capital constraints. Opportunistic: This is a high-risk/high-return strategy. The properties will require a high degree of enhancement. This strategy may also involve investments in development, raw land and niche property sectors. Investments are tactical. The PE investments mainly occur at the initial stages of the project and would facilitate the funding requirements for construction. Once the projects are sold o , possibly in 18–20 months, PEs would make an exit. The money from PE funds is typically useful at the land acquisition stage because therea er banks and other lenders are available to fund the actual development of the project. The PE firms are returning to real estate investments through projects rather than equity because an easy exit option coupled with the relatively higher returns from the sector helped them overcome their fear of loss. Since late 2008, the PE investors have been shying away from real estate investments as the stock market downturn took a heavy toll on real estate prices, which were quoted higher than the market price, resulting in many funds burning their fingers. Krishna’s Kotak Realty Fund, a unit of Kotak Mahindra Bank, invested Rs 2.5 billion in Emaar MGF’s two projects. Emaar MGF is a joint venture (JV) between the Indian lender MGF and Dubai’s Emaar Proper es. PE funds, including Kotak Realty Fund, Ci group, IL&FS Investment Managers and ICICI Venture of the ICICI Bank have made a total commitment of over $10 billion for the Indian real estate sector.

Public Funds Public funds may be routed to the mall projects through two channels—public debt and public equity. The public debt market in India, which comprises commercial mortgagebacked securities and corporate bonds, is still in its infancy as can be seen from the structured securitization products such as residential mortgage-backed securities that have just begun operations. The contribution of the public equity is also insignificant. The public equity may come through initial public o ers (IPOs) in the stock market, real estate investment trusts (REITs) or real estate mutual funds (REMFs). Vital public funding options for shopping malls are as follows: (a) Commercial mortgage-backed securities (b) Corporate bonds (c) Initial public o ers (d) Real estate investment trusts (e) Real estate mutual funds

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Commercial Mortgage-backed Securities Commercial mortgage-backed securities (CMBSs) are secured by the loan on a commercial property. A CMBS provides reasonable liquidity to investors investing in real estate and shopping malls. The increased use of CMBS, like other types of MBS, is due to rapid rise in real estate prices over the years. Because a CMBS is not standardized, there are a lot of details associated with it and these make CMBS di cult to value. However, compared to a residential mortgage-backed security (RMBS), a CMBS entails a lower degree of prepayment risk because commercial mortgages are most o en set for a fixed term. Corporate Bonds Corporate bonds are a major source of debt financing for companies. These bonds are issued by corporate bodies (mall development companies) and are sold to investors. These are generally backed up only by the payment ability of the company that is typically money to be earned from future operations. However, in some cases, the company’s physical assets may be used as collateral. Corporate bonds are considered high-risk instruments and hence they carry a higher interest rate (as compared to government bonds). Quantum of funds mobilized through corporate bonds and the rate of interest on the bonds depend on the company’s goodwill and reputation in the market. The higher a company’s perceived credit quality, the easier it becomes to issue a debt at low interest rates and vice versa. Corporate bonds may also have call provisions to allow for early prepayment if the credit availability in the market improves and the prevailing interest rates show a downward trend. Real Estate Mutual Funds (REMFs) Broad-based private equity participation in the real estate sector is constrained primarily by regulatory impediments. In 2005, the Securities and Exchange Board of India (SEBI) took a positive step by approving the formation of real estate funds (REFs). At present, REFs are only open to high net-worth individuals, institutional investors and global investors. But the expected entry of real estate mutual funds (REMFs) would herald a new era and open new avenues for commercial retail investors in the real estate sector. Although this segment has been growing at a decent pace, its huge potential is still untapped, for example, it may a ract huge investments from institutions such as pension funds and insurance agencies. REMFs will o er the real estate developers another source of funds, as the SEBI guidelines allow these funds to invest in the equity of public-listed or privately held real estate developer companies as much as 65% of their fund size. In a situation where the rising interest rates and reduced borrowing limits are leading to a cash-crunch situation for many builders, REMFs may become a good alternative for them to source capital. The SEBI guideline pertaining to the minimum investment by REMFs has been thoughtfully formulated to promote pure investment in the sector rather than speculation. The guideline says that the real estate MFs will invest at least 35% of the assets in those real estate properties that are already completed and usable. Under-construction projects, vacant land or properties specified for agriculture use will not be considered

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as “real estate property” for satisfying the 35% minimum investment norm under the SEBI guideline. Some prominent companies that have promoted real estate funds in India are HDFC Property Fund, DHFL Venture Capital Fund, Kotak Mahindra Realty Fund, Kshit Venture Capital Fund (a group venture of Pantaloon Retail India Ltd) and ICICI’s India Advantage Fund. India’s first real estate venture fund is HDFC India Real Estate Fund with a cumulative corpus of Rs. 1000 crore. This fund is owned by the HDFC Property Fund, a joint venture of India’s largest housing finance company, the Housing Development Finance Corporation (HDFC), and the largest Indian commercial bank, the State Bank of India (SBI).

Real Estate Investment Trusts (REITs) An REIT is a trust that invests funds in properties on behalf of many investors. It operates just like a mutual fund but the di erence is that it invests only in properties earning rents. Its major incomes are rental returns, and it is obligated to distribute most of its profit as dividend to its holders. It is a stimulating tool for accumulating income-making assets. It is not sold through banks or agents like the way mutual funds are sold. REITs are listed on stock exchanges. So, investors earn returns through capital appreciation from price fluctuations and dividends just like those investing in other listed companies’ shares. An REIT’s main income is from rental-earning properties like malls, corporate o ces and leasing properties. Since the rental properties generate consistent and high returns on investments, REIT is a secure source of investing money. Thus, REITs are highyielding stocks and very a ractive income-generating assets. As investors, we need to invest just a small amount to own some percentage in properties, like shopping centres, corporate plaza, etc. through REITs. We are free to sell it at anytime through stock markets without any hassles. There is minimal cost involved in exchange of property or buying and selling of property. The best part is that the investors need not invest wholly in just one single property, they can invest in several properties to diversify their risk. The safest and a high-yield bet is to invest in shopping centres as returns are quite a ractive and the probability of failure is low. The second best option is o ce buildings and hotels.

Initial Public Offers (IPOs) The most generic mode of mobilizing public money is through an IPO. Companies in manufacturing and services sector have done so successfully in the past, and Indian stock markets have been quite responsive to this mode. Barring a few cyclical fluctuations, sensex has mostly shown upward swings during the recent past. The Indian real estate sector, however, is an exception. Due to its inherent opaqueness, investors look at the real estate companies with great suspicion. Keeping in view the great bull-run in the stock markets between 2005 and 2007, a number of players, such as DLF, Omaxe and Parsvanath, planned their IPOs in the

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past. In fact, in 2006, the real estate IPOs were the second-largest mobilizers of funds (Rs. 3993 crore) from the stock markets, second only to energy companies. But the sudden crashing of stock markets a er the Reliance Power IPO in January 2008 has put a damper on IPOs, and market observers are a bit sceptical. Companies like Emaar MGF and Rahejas found the environment di cult for an IPO in the year 2010. However, the IPO mode has the potential to change the face and fate of the Indian mall business as funds would be available in abundance for a long (practically infinite) term with no or minimal commitment for returns. It would reduce the cost of capital and pressure to monetize the project.

SOURCES

OF

REVENUE

The money invested in a shopping mall as capital expenditure and for meeting operational expenses is o set by generating continuous revenues from multiple sources within the mall. The main objective of revenue generation is to meet all the current expenses, create a fund/corpus for future growth/modifications/contingencies and earn the expected return on the invested capital. Major sources of revenue for shopping malls are: (a) Lease rentals (b) Renting common area for activation (c) Retail merchandise unit (d) Kiosk leasing (e) Vending machines (f) Sponsorship (g) Event marketing: (h) Advertising and promotion (i) Temporary leasing of empty stores: (j) Parking facilities (k) Media activity inside the mall (l) Food courts (m) Miscellaneous sources Let us know about these sources in detail.

Lease Rentals Mall financing has undergone a dramatic transition from the way it was accomplished when the mall culture had just started in India. Learning from the early malls, which can be called ‘first-generation malls’, developers are now opting for the lease model instead of the earlier outright sale model. In the early days of the retail business in India, the retail market was neither well developed nor well organized. Also, the understanding of the retail market was in its nascent stage. As a result, to minimize the risk and reduce the money lock-in, developers preferred selling out the space. But, now the situation has changed, and the developers have understood the market. Also, because of the availability

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of multiple modes of financing, the financial risk has reduced significantly. So, the newage malls lease the shops rather than selling o the floor space. Leasing provides mall developers an excellent method to maintain control over the mall management. This is particularly important because if the developer has control on the management, then he/she can develop an image of the mall in an overall, cohesive manner which is di cult with the control shi ing to multiple franchisees. Globally, most malls use the lease model, but India is still in the initial stages of using this model. Not all the malls have gone for the lease model. Malls abroad are completely using the lease model,which allows the mall developer to focus on the identity of the mall.

Renting Common Area for Activation Today, malls and multiplexes have emerged as the favourite happening spots for the young generation. Because of the impact of globalization and the portrayal of the changing lifestyles on the electronic media, consumer habits are witnessing a marked change and so are the marketing strategies to connect with them. Activation strategies are all set to play larger roles in catering to the specific needs of consumer segments,. Such strategies are common in shopping malls in metros—brands keep the malls buzzing with their on-ground activities and contests. The activities work because the customer is unhurried and in the right frame of mind to hear the sales pitch. Also, the target group (TG) in a mall is much more filtered than the common man on the street. These brand activations help a ract the a ention of a large number of audience and interact with them face-to-face. As the malls today need to provide shoppers with an ambience to enjoy, developers are le with no option but to leave large vacant spaces in the malls as common area. The “common area” is the area within and outside of the mall (other than the fixed rental space) available to the tenants and their customers and is necessary for access to the tenants’ businesses. But, today mall managers are smartly utilizing such spaces by allocating them for brand activation and promotion campaigns. All these events and other associated services are completely focused on generating awareness among the customers about the product or service o ered by the client. This helps in driving sales and building brand equity and o ers creative ways to consumers and businesses to interact with brands. Since these below-the-line marketing activities are catching up quickly, they provide mall managers an alternate source of revenue generation. However, still very few promotional activities are organized in the majority of malls because developers perceive that these events only help increase footfalls but not revenues.

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Display of an SUV at Select City Walk Mall, Saket

A common practice in the developed retail markets such as the United States and Europe is the use of the revenue share model for determining rent. Under this arrangement, the tenant will either pay a fixed monthly base rent as minimum guarantee and/or a ‘percentage of sales’ rent, whichever is higher. This is beneficial to both landlords and retailers, as landlords are encouraged to organize promotional activities that would increase retailers’ revenues because they may have a percentage share in it. The model works successfully in both bullish and bearish market conditions. This unique approach is being adopted by Select City Walk, Delhi. The use of the revenue sharing model is expected to gain momentum in the future as more and more Indian developers become corporatized.

Retail Merchandise Unit RMUs are retail boutiques and special-purpose kiosk that are strategically located in the middle of the busy areas of malls where there is good flow of people. They replicate an island and their location makes them ideal for specialist product sales, product launches and test marketing. These small, desk-sized units were created to avoid lease conflicts with existing stores Retail Merchandising Units (RMUs), also called modern-day pushcarts, are known by di erent names such as Retail Kiosk, Mall Kiosk, Display Island, Shop-In-Shop, Vending Kiosk, Island Retail Unit, and Isle Kiosk. They have almost replaced the old carts in the specialty retail industry by eliminating the traditional wheels and adding retail fixturing and shelving. RMUs are illuminated with special lighting used in visual merchandising. Apart from these visually appealing features, RMUs have many security features, and the most significant being is their 360-degree exposure. Leasing space to a

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business for an RMU that is owned by the mall and leased to the business is part of the licence agreement. Typically, the capital invested by a mall on purchasing RMUs generates ROI in a one-year period, based on the size of the RMU installation plan and the projected licence fees for leasing the units.

Kiosk Leasing A retail kiosk (or mall kiosk) is a store operated out of a merchant-supplied kiosk of varying size and shape. Such a kiosk is typically enclosed with the vendor located at the kiosk centre and the customer approaching the vendor from across a counter. Although small in size, carts and kiosks are popular for many reasons, including high profit margins, low start-up costs, and the option of working only for a few months a year. Many kiosks are permanent, occupied by companies round the year. These companies operate retail or service businesses that do not require a lot of space. Information booths, cell phone companies and watch and jewellery sale/repair are some examples of permanent kiosk users. Malls also have temporary kiosks available for small businesses that operate only during certain times of the year, usually holidays. For instance, Diwali is a lucrative season for temporary kiosk renters, when they can make a lot of money in a short time. However, they can also make money on other holidays. This business opportunity is available to anyone who has a desire to earn more money and can fulfil the requirements of the mall. These requirements are state sales tax licence, local business permit and liability insurance. For these kiosks, some malls charge a base rent plus a percentage of sales. So, new businesses that can demonstrate major revenue potential have an edge in landing temporary kiosks.

A kiosk inside a shopping Mall

Due to the high visibility of these kiosks, mostly located in the common areas of malls, the businesses running from them can o en gain a relatively tractable monthly sales figure a er a three- or four-month trial. The benefits o ered by these kiosks include low

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overhead, small inventories, and low or non-existent common area maintenance (CAM), tax, utility, and marketing fees as compared to their in-line storefront counterparts, which can o en have fees equal to or in excess of the rents themselves. The primary key to the success of kiosk-based business is the product margin. Most kiosk and cart products average 300 per cent or more mark-up. Players like Baskin Robbins have used kiosks successfully in many Indian shopping malls.

Vending Machines The term “vending machine” conjures up images of dropping coins in a slot to buy cola, candy or chips. Since its inception in 1936, the vending industry has advanced by leaps and bounds with solutions for diverse o erings of products and services across the globe. Today’s newest vending machines are high-tech “automated kiosks” that with the swipe of a credit card dispense designer purses, clothing, iPods, digital cameras and beauty products, to name just a few o erings. The snazzy machines are winning a following from buyers in airports, grocery stores, malls and even inside department stores. While traditional vending machines represent a mature industry whose growth is slowing, their high-tech counterparts present a new strong growth area. A vending machine is all about convenience demanded by today’s consumers. With a huge amount of footfalls, malls are a great place to locate vending machines. For mall operators, the biggest advantage accruing from these business gadgets is the flexibility of locating them, leading to e cient space utilization. Most malls enter into high-commission agreements with large vending machine companies, which makes it a tough sector for small operators to break into..

Sponsorship Traditional media like TV, radio, and newspaper are becoming increasingly fragmented, making it di cult for advertisers to reach a broad audience with consistency and high frequency. Today, shopping malls have emerged as a new landscape for forwardthinking brands searching for the latest consumer marketing experience. Malls have been “discovered” by dozens of promotional marketing agencies and leading out-of-home advertising providers, and even by media monitoring services. There is no question about malls as an e ective marketing medium. As marketers seek new forums for customers to experience a product, the country’s top malls have emerged as an in-demand marketing solution. Mall-based marketing partnerships provide the best elements of traditional media, including huge numbers of impressions, exceptional reach, desired frequency within a trade area, and the ability to target messages to specific demographic profiles. The best practitioners bring their brands to life with experiential programmes that deliver a message to the key consumer at a time when shopping is foremost in his/her thoughts. Malls host many events round the year for the local customers. Retailers can become sponsors of several of the mall’s events. These events and programme sponsorships provide a tremendous amount of inmall media exposure and also external media and PR. They also provide mall owners an opportunity to earn quick cash. Additional revenue is generated through advertising on

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illuminated boards and mega posters hung all over the mall and its parking lots, and in centre magazines and coupon books. In future, malls are expected to launch a new sponsorship programme aimed at making the mall stroller service a part of their media mix. The stroller advertising delivers multiple exposures to consumers with greater frequency than other media because strollers move the sponsor’s message throughout the mall and in and out of retail stores. Six merchandise categories or industries have been identified that are most likely to become involved in shopping centre-related sponsorship in future: automotive, beverages, consumer-packaged goods, finance, telecommunications and technology. At a time when malls are looking for sources of income other than rents, there is going to be an enormous e ort to tap supplemental sources of income such as sponsorship once malls understand the potential of this type of arrangement. A good example of sponsorship is the Centro mall of Germany. In this mall, CocaCola Oasis, a circular food court area, is a sponsored facility of the Coca-Cola Company. Here the red-and-white Coke logo appears on everything from signage to cups and food trays. A video wall broadcasts sponsors’ (purchased) messages, and the Coca-Cola Stage provides an in-house venue for concerts, fashion shows and other promotional events. Possessing the exclusive rights to sell its products in most of Centro’s venues, Coke rings up 97 per cent of all beverage sales in Centro, making it the Coke’s biggest point of sale in Germany. Sponsorship yields further returns that are not financial in character. For example, tenants at Centro benefit from the favourable electricity rates negotiated as part of the power company’s sponsorship contract. The mall has also linked up with nontraditional sponsors, such as EVO, an Oberhausen-based regional power supplier that has an agreement to furnish Centro with Christmas lighting.

Event Marketing Almost every mall these days has some buzz in the air about an upcoming or an ongoing event. These events were initially conceived as promotional activities, but at present mall marketers use such events as brand building activity. Either way the idea is to generate extra revenue. The event marketing option works well for marketers since malls a ract a large number of people at one place and provide excellent exposure to the brand. A mall also serves as a place where the brand can try to sell experience of using their products to the mall visitors. Marketers pay substantial amount of money to malls for conducting events as they promise to be a very strong avenue for below-the-line (BTL) activities, providing the brand the right kind of exposure. They rent out the floor space on a day-by-day basis and pay the appropriate amount to the mall, which also includes charges for electricity, water, cleaning, etc. Events conducted in a mall may be categorized as: (i) There are some events which are conducted by the mall itself. These include celebrations like Independence Day, Republic Day or even Valentine’s Day which have a mass appeal. During such events, the entire mall is decorated with a particular theme, the music being played in the mall matches the theme and di erent brands can promote themselves using the same theme.

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(ii) Sometimes the mall tenants arrange for events such as store launch parties, fashion shows by apparel brands, and musical evening for their own brand promotion, which includes visits by brand ambassadors and display of products. (iii) Sometimes external parties can use the mall premises to conduct an event which requires large exposure and participation. These brands need not have a store in the mall but can just rent the mall space for their event. Such events where the mall becomes a venue partner are witnessing an upward trend. Mall areas are rented for brand launches, any events, and events in collaboration with various television/ radio channels. (iv) Some brands also want to use malls as venues for organizing corporate social responsibility-oriented events that are not aimed at colossal revenue generation but certainly help mall retailers connect with customers. The events organised in association with NGOs on occasions such as Women’s Day and Labour Day along with free health and yoga camp fall in this category.

Advertising and Promotion A tool for brand building and creating a connect with the customers, which has significantly grown over the last few years, is advertising and promotion. This is because of the huge footfalls that malls are generating since some time. Today, the mall advertising market is valued at approximately Rs 30–35 lakh per mall per annum. The below-the-line advertising activities have grabbed a substantial share in the overall advertising market. The promotional activities are now carried out in the way that the customer can actually feel the product. Companies are e ectively using kiosks for promotion activities.

Promotional displays on the façade of Inorbit Mall, Mumbai

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All the advertising activities from the ideation stage to the execution stage are being handled by advertising agencies. Marketers pay huge amounts of money to the mall. Generally, leasing of advertising space inside a mall is done on a monthly basis. Displaying a drop-down for a month inside a mall could cost a marketer anywhere between Rs. 50,000 and Rs. 1, 00,000. The cost is dependent on the size of the advertisement. Location is also a very important criterion for determining the advertising cost. Ad space which is easily visible or just in front of the entrance is more highly priced as compared to other places.

Promotional dropdowns at Spencer Plaza, Chennai

Following are some of the means of advertising inside a mall: 1. Billboards 2. Floor graphics 3. Standees 4. Drop Downs 5. Digital Signage

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6. Bluetooth 7. Plasma Screens 8. Ambient Marketing

Temporary Leasing of Empty Stores Vacant stores in malls are being leased out to vendors. The vendors utilize the stores for various purposes, like se ing kiosks for visual merchandise. Malls also generate revenues by leasing out their vacant stores for gatherings or exhibitions. Other uses include children playing area, salons, photo centres, etc.

Parking Facilities Parking facilities play an important role in the success of a mall, and their significance is increasing with time. Historically, parking did not enjoy such a premium status because unorganized markets used the storefront, pavements, slip roads and roads as uno cial parking lots. But shopping malls accommodate a large number of tenants and a ract customers from far-o places, resulting in a larger catchment area. Primarily, there are two models for generating revenues from the parking facilities: contract and non-contract models. In the contract model, a contract is signed between the mall owner and an external entity (contracting agency). They either enter into a revenue-sharing agreement or the contractor pays a lump sum amount to the mall owner and keeps the entire revenue generated from the parking facilities. The mall owner’s revenue share varies between 50% and 70% and this share is pure profit since it is the contractor who bears all the cost. Under the non-contract model, the parking facilities are managed by the mall management through its paid employees. The entire revenue generated from these facilities goes to the mall owner. In this case, the profit from parking facilities is the di erence between the revenues generated and the cost incurred in maintaining these facilities.

Media Activity Inside the Mall A lot of media activities regularly take place in malls, the most common being shooting for movies. Several big Bollywood superstars are seen shooting for movies across di erent malls in the country. For example movies like Garam Chai, Hide ‘n’ Seek, etc. feature scenes shot inside malls. Even movie premieres are taking place in malls. Most of the malls in India house a multiplex. This gives the movie producers a good opportunity to organize the movie premier along with a party in front of a huge crowd of mall visitors. Movies such as Raajneeti, Love Aaj Kal, and Jashnn were premiered in famous malls. Of course, for all these activities, the movie producers pay a heavy sum to the mall owners. All facilities of the mall are used during these activities including electricity, water, parking, theatre, passage, etc.

Food Courts The food orientation of the Indian culture is aptly exemplified by the number of people who are found in a mall’s food court at any time during the day. Malls are seen as places

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where cost-e ective foods of di erent cuisines are served. Needless to say, Food courts are one of the best crowd-pullers for a mall, having a conversion rate of about 65% of the visitors that visit the mall. To cash in on the Indian culture’s food orientation, food courts are generally located on the top floors of malls. When the visitors come to a mall for eating high-quality and cost-e ective cuisines, they walk in front of several stores on their way to the top-floor food court of the mall. This may induce some buying interest in the minds of the walking consumers. Inorbit Mall in Malad (Mumbai), realizing the growing importance of food court, decided to expand its food court space by about 2000 sq . Apart from Inorbit Mall, High Street Phoenix in Lower Parel (Mumbai) too has given due importance to its food court that covers 10–15% of the total retail area.

Miscellaneous Sources These sources comprise gi coupons, parking facilities, etc. The revenues from these sources are basically used to fund the day-to-day operations for the smooth functioning of malls. These activities are definitely an excellent source of revenue for malls even though very few people use them.

STRATEGIC DECISIONS

IN

MALL FINANCING

While taking financing and revenue decisions, mall developers and managers come across situations when there is a multitude of options available to them with each option having a di erent repercussion in a di erent time frame. Some options seem highly lucrative as they positively a ect the top line/bo om line, but their long-term implications are not so rosy. These decision dilemmas have strategic implications. Some of the issues that confront mall developers while taking financing and revenue decisions are analysed in the following sections.

Leasing vs Sell-off Mall developers have to make a conscious choice between two tenancy options— whether to lease out the mall space to retail tenants or sell o individual retail units (stores spaces) to investors who either use them to run their own business or further rent them out to other retailers. Selling-o the property to investors improves liquidity for the mall developer. It is common in situations where credit availability is di cult, the capital has been borrowed from short-term, high-cost sources and the capital has to be rotated between di erent mall projects. However, selling-o has the disadvantage of the developer losing control on the tenant-mix. It may happen that the investors may put the retail space to a use that does not synchronise with the planned zoning. Then the mall management may bring them in line either by imposing certain restrictions on possible space uses through contract agreements or take the responsibility of identifying tenants at a remunerative rental as part of sale agreement. Leasing by far is the most suitable arrangement for shopping malls as the management retains absolute control over mall

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operations and space use. It can also make desired changes in the mall with changing requirements. However, a decision regarding leasing/sell-o is guided more by financial considerations than marketing principles.

Long-term Debt vs Equity The term or time limit to repay a debt is generally commensurate with the value of an item or investment. Long-term loans are normally secured, first by the new asset(s) purchased (up to 65%) and then by other unencumbered physical assets of the business (for the remaining 35%), or failing that by additional funds from shareholders or personal guarantees from the principals. Creditors extend loans to those businesses that exhibit strong management ability and steady growth potential. The principal loan amount these cases is repaid over a period of time directly related to the useful life of the asset(s) (e.g. for land and buildings—up to 30 years and for computers—3 years). Loan carries both interest and principal repayment provisions in a set repayment schedule. Early repayment may entail a penalty because the lender had not planned an alternate investment for that money. The interest rate normally remains constant for the entire loan term. Each payment against the principal reduces the balance principal, and the subsequent interest is calculated on the reduced principal. Di erent lenders provide di erent types of term loans. Term loans o en carry lower interest rates than that of operating loans because the term is fixed and the loans are secured by assets (asset-backed). Long-term loan lenders include banks, trust companies, insurance companies, pension funds and various loan specialists. The mall management has to take a decision on whether to opt for long-term loans or not. Long-term loans are advantageous as they do not result in dilution of ownership. The only obligation on the part of the borrower is to repay the loan on time. Such loans are beneficial because the paid principal amount and interest are exempted from tax deduction. Despite carrying a relatively low rate of interest, these loans’ fixed monthly liability (repayment of the principal component and interest) eats into the cash flow that cannot be fully utilized for business purposes. The credit rating of a business may spoil with excessive debt. A common alternative to debt financing is equity financing. In this form of financing, a business is financed without incurring debt. With equity financing, the mall developer need not take out a loan since the funding is already coming from an investor in exchange for a piece of ownership in the mall business. Thus dilution of ownership is one evil associated with equity financing. Another drawback of equity financing is that equity mobilization does not solely depend on the credentials of a company. The prevailing market sentiments also greatly a ect equity mobilization. Hence even fundamentally strong company may elicit a poor response to its equity mobilization bid if the stock market sentiments are bearish. Other deterrents are various costs and commissions associated with the launch of a public o er apart from the mandatory public disclosure of vital information and meeting statutory requirements that could be very stringent.

Financing and Revenue Model for Shopping Malls 85

Refinancing Refinancing is the process of ge ing a secured loan to repay an already existing loan. At some point in the life of a mall, there could come a situation when the prevailing rate of interest in the market is lower than the one at which the project mobilized funds in the past. So the mall management has the option of paying back the costlier loan by going for a new loan at a lower rate of interest, thereby reducing the cash outflow. One thing to keep in mind is to consider the fees that will go into undertaking the option of refinance. Refinancing also gives the option of adjusting the quantum of loan (upwards or downwards) in the light of current needs. However, refinancing is not a viable option when real estate prices are sliding down. It is not advisable if repayment of your previous loan is being done for a long time and most of the equity has already been rubbed o .

Optimum Tenant Mix vs Higher Revenue Generation A tenant that is good from the financial perspective may not be ideal from the marketing perspective. Speaking clearly, the tenant who pays a higher rent may not be the best one for the mall. Seeing either the popularity or potential of the mall, many retailers may be willing to loosen the strings of their purses. But the question is — Do they really add value to the mall? It is very important to select the right tenant mix to ensure the success of the mall. The right combination of tenants with proper infrastructure appeals to both the focused and impulsive customers. Tenants are tra c generators, especially anchor and vanilla tenants. The right tenant mix generates the maximum footfalls. Tenant selection is crucial for a mall’s success. The right brand mix is essential to ensure maximum profits. The right tenant mix increases sales and the overall return on investment. In order to accommodate suitable tenants at a short notice in future, it is also crucial to have a proper portfolio of retail options.

Revenue Sharing Model in Malls When the mall concept started picking up pace, stores inside malls used to be leased out to vendors or retailers on a fixed rate basis. If the mall developer kept receiving this fixed amount per month/year, he/she was least bothered about the marketing and promotion of the mall. With retailers receiving li le help from the mall developer or management with regard to building awareness about their stores, the high rent they were paying for their stores started a ecting their bo om lines adversely. Retailers were discontented with this mode of operation and realized that carrying this way was not a viable option. Mall developers took notice of the retailers’ discontentment and realized that if the retailers’ problems were not solved, it could adversely impact them (mall developers). Hence to tackle this issue, mall developers and retailers came to a consensus and devised a win-win mechanism for both the parties. This solution is called the “revenue sharing model”. Revenue sharing model has the following advantages: • More number of vendors or retailers will get a racted towards the mall due to its lower fixed rentals.

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• When the sales are high, the mall owner would earn more from the retailers; when the sales are low, he/she would ease things for the retailers, le ing them continue to operate in the mall. • A low fixed rent would provide cushion against unpredictable sales to the retailer. • A revenue sharing model will push the mall owner to participate more in the mall positioning, mall management, and mall strategy or simply formulate the right tenant mix for the mall. Nowadays the total rent expected from a store in the mall is split between the fixed and variable components. How the split occurs depends primarily on the negotiating strength of the mall owner and the retailer. However, certain guidelines should be followed to arrive at a mechanism that in the long run works for the mutual benefit of the mall owner and the retailer. In any such this mechanism, the following two parameters are significant: 1. Reasonable fixed rent 2. Retailer’s Revenue

Reasonable Fixed Rent Determination of the fixed rent will depend on the prevalent market leasing rates, size of the property, facilities provided to the tenants, existing tenant-mix, anchor-tenants, etc. A strong retailer would ideally negotiate for a lower fixed rent. He/she would want to fix up a break-point, beyond which the revenue sharing process will commence. For the sales recorded beyond this break-point, the retailer needs to appropriately compensate the mall owner by revenue sharing. The mall owner would receive only the fixed rent for the first few years when the retailer is trying to gain a foothold in the area. But with the passage of time, as the retailer becomes stronger, the mall owner starts making more money from the retailer. It thus becomes imperative that the mall owner carefully evaluates the potential revenues from a retailer and the overall impact the retailer could have on the mall. The mall owner would want to earn higher rents every month. Ideally, the mall owner would like to set a relatively higher fixed rent so that he/she is somewhat assured of a reasonable monthly earning. However, he/she would also want to keep a portion of the rent variable that is linked to sales. This would enable the mall owner make more money when all the retailers in the mall are doing well. Under any circumstance, the mall owner would not want to wait for a very long time to start earning the variable portion of the rent from the retailer. To facilitate early earning of the variable portion of the rent by the mall owner, a clause could be inserted by him/her in the contract with the retailer, requiring the retailer to reach the break point within a stipulated time period. If the retailer fails to to reach the break-point within a stipulated time period, he/she could be asked to vacate the store or asked to pay higher rents from then on. In order to maximize the retailer’s sales and thus increase the mall owner’s chances of earning a higher variable rent, the mall owner can enter a clause in the contract prohibiting the retailer from opening another store within a specified area.

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Retailer’s Revenue It is important to identify what constitutes revenues and determine the appropriate amount for the revenues because the mall owner will get additional income as a percentage of this revenue, which is based on the success of the retailer. In order to arrive at the right figure for total revenues, the mall owner can demand the retailer to maintain all sale receipts which will be issued from within the leased premises. Such receipts could be of 1. 2. 3. 4. 5. 6.

Counter sales Sales by sub-tenants and licensees, operating from within the premises Sales with the help of the Internet, telephony, email or catalogue Advertisements and promotions payments Sales from vending machines Service charges The retailer can be asked to pay the additional percentage rents either for a year, quarter, month, or any other time period decided upon by the retailer and the mall owner. The mall owner should provide for the annual gross sales statements to be audited by a chartered accountant for clarity in the process of determining additional revenues for the mall. The mall owner should also reserve the right to ask a chartered accountant to audit the books of the retailer and all his/her subtenants.

SUMMARY Development of shopping malls is a capital-intensive business. It is a challenge for mall projects to maintain a posi ve flow of cash a er providing for the cost of funds. Funding for this business comes from public as well as private sources. Indian shopping malls get majority of funds from private sources. This sector badly needs public funding but it is just not happening. It is primarily due to the opaque nature of real-estate business. For genera ng adequate returns on investment, shopping malls need to add more op ons to the conven on revenue stream, i.e. rentals from retail stores. Leasing out stores is not the only source of revenue for shopping malls. They generate revenues by providing space for retail, promo onal displays, promo onal events and parking. Last three years have been very di cult for mall projects as occupancy and rentals have moved southwards. Present circumstances press for more collabora ve approach towards rent determina on.

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REVIEW QUESTIONS 1. What are the di erent sources of financing available to mall developers in India? 2. The Indian malls have very less exposure to public sources of funding. Why is it so? What impact does it have on the management, opera ons and performance of shopping malls in India? 3. What are the risks associated with relying too much on the short-term sources of financing for capital investment in shopping malls? 4. What are the di erent avenues for revenue genera on in shopping malls? 5. “A good tenant for a shopping mall may not be the one who pays the highest rent.” Comment. 6. Which of the two is a be er strategy for shopping malls in the long run: leasing out space directly to retail brands or selling o the retail space to investors? 7. How can one minimize the nega ve repercussions of selling out the retail space to a large number of investors who do not plan to use it for running their own business? 8. “Lease rentals are not the only source of income for a shopping mall.” Explain. 9. Explain the significance of retail kiosks in a shopping mall from the finance perspec ve. 10. Discuss the merits/demerits of the revenue-sharing model for shopping malls.

PRACTICE EXERCISES 1. Visit a shopping mall of your choice. Observe and note down di erent ac vi es and services that are contribu ng to its revenue genera on. Iden fy the ac vi es that are poten al revenues generators but are not being used. Probe why it is so. 2. Scan the secondary finance sources and develop a list of mutual funds that invest in real estate and shopping malls. Examine the details of promoters and the investment pa ern. 3. Prepare a list of the ini al public o ers (IPOs) launched by the companies engaged in mall development. Find out the investors’ response to these. 4. Observe and track the share price of a select group of companies engaged in mall development. Do so for a year and compare it with the general movements in the sensex. What does it reflect?

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SUGGESTED READINGS 1. Datamonitor (2008), ‘Global Real Estate Investment Trusts’, London, UK: Datamonitor Group, report reference code 0199–2131 2. Hussain, S. (2008), ‘Cash-strapped developers look to buyers to fund construc on’, The Mint 27, May 7 3. Images F & R Research Analysis (2007), ‘Mall space in India: a demand and supply analysis’, In: A. Taneja (Ed.), Malls in India: Shopping Centre Developers and Developments, New Delhi, India: Images Mul media, pp. 150–155 4. Mehta, R. (2007), ‘A study on the Indian real estate market for investment: a qualita ve approach’, MA (Finance & Investment) disserta on, University of No ngham, UK 5. Newell, G. and Kamikeni, R. (2007), ‘The significance and performance of real estate markets in India’, Journal of Real Estate Por olio Management 13(2), pp. 161–172 6. Pa l, S. (2008), ‘The dra real estate investment trusts Regula ons, 2008—a cri que’, h p://www.Indialaw.com, accessed on 14 May 2009 7. Roy, D. and Masih, N. (2007), ‘Mall management: a growing phenomenon in Indian retail industry’, New Delhi, India: report by Jones Land LaSelle Meghraj 8. Securi es and Exchange Board of India (2008), Dra Securi es and Exchange Board of India (Real Estate Investment Trusts) Regula ons, 2008, Mumbai, India: circulated for public comments by Securi es and Exchange Board of India 9. Singh, H. and Bose, S.K. (2008), ‘My American cousin: comparison between Indian and the US shopping malls’, Journal of Asia-Pacific Business, Vol. 9(4), pp. 358–372 10. Singh, H.; Bose, S.K. and Sahay, V. (2010), ‘Management of Indian shopping malls: impact of the pa ern of financing’, Journal of Retail and Leisure Property, Vol. 9(1), pp. 55–64 11. Singh, V. and Singh, K. (2009), Prospects and problems of real estate in India, Interna onal Research Journal of Finance and Economics, Vol. 24, pp. 242–254 12. Srinivas, S. (2008), ‘Capital ideas: realty check’, Business World, February, pp. 33–34 13. Taneja, A. (2005), ‘Keynote address’, 2nd annual ICSC—India Shopping Center and Retail Conference, 29–30 August, Mumbai 14. The Financial Express (2006), ‘Mall developers prefer lease management’, 31 October, h p:// www.fi nancialexpress.com/news/mall-developers-prefer-lease- management/182310/2, accessed on 14 June 2009 15. Wang, Q. (2005), ‘Economies of scale in shopping centre industry’, Master of Science Thesis, Royal Ins tute of Technology, Stockholm, Sweden, 291, April 16. Yadav, B. and Mahajan, S. (2006), Indian Real Estate, Hyderabad, India: Report for Karvy Stock Broking Limited

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CASE

Multiple Owners Can’t Manage Malls In the early and mid-2000s, India saw a great mall rush with developers seeing them as the best way to maximize profits. Developers looking for quick returns built malls, sold them piecemeal to dozens of investors and exited, leading to mul ple owners. Anshuman Magazine of CB Richard Ellis says that un l recently, almost 95% of the malls in India were owned by mul ple owners—some mes in the 10s and some mes even in the 100s. Maintenance and upkeep became the biggest casualty due to mul ple owners. Centre Stage su ers from this problem. The promoters of the mall, the Chadha Group and Shipra Estate Ltd, sold almost 80% of the 350,000 sq. mall to various investors. “If a mall doesn’t have single ownership, it loses direc on,” says Magazine. B. S. Nagesh of Shoppers Stop echoes Magazine’s concerns, saying 60% of the malls failed in India because of mul ple owners. Shoppers Stop ensures that the developer plans to hold on to the mall before signing on as a tenant.“That’s a big factor because you are going there as a tenant and if the owner himself is not an owner... you don’t know what the fate of the mall is going to be,” says Nagesh. “Who will run it and who will maintain it?” Experts say India’s most successful malls—Select City Walk in Delhi, Forum Mall in Bangalore, Inorbit Mall and High Street Phoenix Mall in Mumbai—are owned by single companies. “The retailers are doing phenomenally well in these malls,” says Anuj Puri, country head of Jones Lang LaSalle. The lessons have been learnt by developers, say Nagesh and Magazine. “If you look at some of the last few malls that have opened, I would say, yes, things are beginning to be okay,” says Nagesh, referring to new proper es such as Inorbit Mall in Pune, City Centre Mall in Siliguri and Mantri Mall in Bangalore. “These are the new malls which have been (made) sustainable. From the real estate perspec ve, malls make money between the seventh and the 15th years,” said Nagesh. “So, unless you have a long-term perspec ve, a mall cannot be successful.” Most developers are beginning to look at malls as long-term investments, says Magazine. It took several decades for companies in the developed countries to understand mall management, say experts. India, in their opinion, has come a long way in just one decade. Source: “The Recipe for a Successful Mall”, Rasul Bailey, retrieved from h p://www.livemint. com/Ar cles/PrintAr cle.aspx?ar d=C260D0CC-6F5C-11E0-B67E-000B5DABF613, accessed on 6 May 2011.

CHAPTER

5 Tenant Mix

LEARNING OBJECTIVES This chapter will enable the readers to • Understand the concept of zoning and tenant-mix as applied in shopping malls • Get an idea of the role and significance of di erent types of tenants, like anchor tenants and temporary tenants • Know about the factors guiding the alloca on of space to brands in a mall • Understand how to maximize the produc vity of the mall space by accommoda ng novel formats, tenants and ancillary uses • Know about the major issues concerning tenants and the tenant-mix management

IS IT REALLY ‘ALL SOLUTIONS UNDER ONE ROOF’? Mrs. Asthana is a housewife in her mid-for es. She recently moved to Gurgaon with her husband and family. She was quite upbeat about being in the ‘mall hub’ of India, but six months down the line, she is disheartened and confused at the way things have turned out. Despite the tall claims of mall developers of providing all solu ons under one roof, she has never been able to complete her monthly shopping from a single mall, as something or the other is missing in all the malls. Though all the malls look di erent, when viewed from outside, it is di cult to spot the di erence once you enter the mall and stand in the atrium: similar products, services and brands everywhere! Presence of the same brand and absence of a prominent brand in all the malls is not an uncommon observa on. To her u er surprise, in some malls stores are located in a weird manner. Even for purchasing the convenience goods, she is compelled to traverse all the floors

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as such stores are spread all over. Such a thing is not seen in our old city markets. How come it is the case with mul -crore shopping malls built by renowned developers using exper se of trained and experienced professionals!

INTRODUCTION The problem faced by Mrs. Asthana is neither uncommon nor confined to a particular geography. One comes across such situations in shopping malls in almost all Indian cities. But these situations defeat the very purpose, that is, to provide comfort and convenience to consumers, for which a shopping mall is developed. The major inconveniences faced by the shoppers in such malls relate to two aspects. The first aspect is the choice of suitable tenants. The suitability of a tenant for a particular mall is assessed in terms of characteristics and expectations of the target customers. Taking care of this aspect means deciding the ‘tenantmix’ for the mall. The second aspect is the location of specific groups of tenants inside the mall. Developers cannot place any tenant anywhere in the mall. Certain locations inside the mall are more suitable for types of tenants/retailers. Deciding on tenant locations means applying the concept of ‘zoning’ on the mall.

ZONING Zoning refers to the division of the mall space into tenant-specific zones. The idea is to present each zone as the hub or one-stop solution for a particular need category for a particular segment of consumers. Thus each zone is turned into a cluster of stores selling complementary merchandise. Zoning is necessary as it facilitates the financial feasibility of the tenant in the mall. And, the success of the tenant’s business, in turn, contributes to the success of the mall. Generally, there are two types of consumers visiting malls—the focused buyers and the impulse buyers. The time spent by a focused buyer in the mall is relatively lower than that spent by an impulse buyer who also enjoys window shopping. Retailers can do li le to a ract the focused buyers who usually know what they require and from where. However, the formulation of the right tenant-mix following a diligent zoning exercise leads to optimum retailer placement in the mall. This helps retailers a ract both types of consumers, especially the impulse buyers. On the one hand, the right tenant-mix helps retailers a ract and retain shoppers by o ering them multiple choices to satisfy their multiple needs. On the other hand, it facilitates the smooth movement of shoppers within the mall, avoiding clusters and bo lenecks. A hassle-free, pleasant shopping experience has a great impact on the shoppers’ mall preference and frequency of visits. It also helps in sketching a distinct image of a mall in the minds of shoppers. A distinct identity is critical for the mall’s success, considering the large number of upcoming malls. Another important advantage of optimum retailer placement is that it can actually be used as a tool for controlling the circulation of shoppers within the mall. By placing stores catering to di erent categories at di erent locations, one can ensure that all the

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parts/floors of the mall get reasonable footfalls. For example, ensuring at least one anchor on each floor and tenants like multiplexes, food courts and discotheques on higher floors, results in guiding the shoppers to the places and floors that they would not have thought of visiting without these temptations. Locating anchor stores at specific spots and clustering vanilla stores around them is a smart zoning decision to feed o the shopping tra c generated by anchors The successful execution of the zoning plan in the mall is carried out through lease management on an ongoing basis. Forging good leases with retailers is a prerequisite for ensuring the presence of the right retailers in the mall. Zoning in Forum Mall Bangalore’s Forum Mall is designed in a ‘dog bone’ fashion—an anchor tenant at each end and vanilla retailers in the middle. Landmark and Westside are the anchor tenants of this mall. Forum has positioned the food court on the top floor to a ract consumers vertically up. Built in 2003, Forum was the first mall in Bangalore. Since the Forum launch, six new malls have been constructed in the city and yet Forum continues to command the highest foot tra c. It also continues to be one of the most successful malls in the city in terms of annual revenues. It is widely believed that one of the factors driving the success of Forum is its zoning and superior tenant-mix compared to its competition.

CONCEPT

OF

TENANT MIX

The term ‘tenant’ refers to someone who occupies space provided by someone else for personal or commercial use. In the context of retailing, tenant is a brand that occupies the space for carrying out retail activity. The premises from where retailing is carried out, belongs to the landlord (the developer, in most cases), but it is the tenant who handles the customer interface. The term tenant-mix essentially refers to the cluster or combination of retail shops occupying the space in a mall. As is the case of the ‘marketing-mix’, it is the synergy aspect of the tenant-mix that needs to be understood. According to A.O. Kaylin, the tenant-mix is defined as follows: The tenant-mix refers to the combina on of business establishments occupying space in a shopping centre to form an assemblage that produces op mum sales, rents, service to the community and financiability of the shopping centre venture. The above definition of the tenant-mix stresses the underlying objective of maximizing the shopping centre profitability, and is therefore investor-oriented. In discussions on the tenant-mix, the provision of di erent types of merchandise is almost always replaced by a proxy, namely various categories of retailers, to classify the merchandise on o er. The retailer or merchandise classification focuses on characteristics such as price and quality, appeal to di erent lifestyle groups, and service levels. Kirkup and Rafiq (1994) provide a measurement-oriented description of the tenantmix as

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“...a combina on of factors, including the propor on of space or number of units occupied by di erent retail/service types, as well as the rela ve placement of tenants in the centre” .

A grand view of tenants at MGF Gurgaon

Importance of the Tenant-mix The marketing and financial success of a shopping mall is dependent on many factors. The main success factors include the tenant-mix, the quality of location and accessibility, catchment size and quality, car parking provision, internal layout and good ambience. Among these success factors, the tenant-mix of a shopping mall widely recognized as a critical factor for all parties concerned—consumers, retail tenants and the developer/ landlord. From the marketing point of view, securing an appropriate tenant line-up is critical to a ract and retain customers, as the image of a mall is largely determined by the tenantmix. The tenant-mix has been identified as a critical factor in the success or failure of special-purpose shopping malls that rely on a di erentiated image as a key element in their marketing strategy. Early le ings and strong tenants are particularly crucial for a new mall to help entice customers away from their established shopping destinations, to build a successful image, to establish appropriate positioning in the marketplace, and to win market share. The initial line-up of tenants is a key factor contributing to the consumers’ first experiences in a new mall. And, good first impressions have been noted as a vital component in building a successful mall.

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A full line-up of strong and well-placed traders is also important to the retail tenant whose performance is dependent on the level and type of footfall a racted and may also be dependent on micro-retail linkages. The success of individual tenants and the success of the entire mall are interdependent and enhanced by the cumulative synergy generated by the mix of stores. Clearly, in all shopping malls, the developer/landlord must ensure that the number of unlet units and tenant failures are minimized. Vacant premises are more noticeable in an enclosed mall, and they indicate failure of the mall to the shopper, hinder footfall and retail synergy, and impact significantly on marketing and financial success.

IMPORTANT TERMS RELATED

TO THE

TENANT-MIX

The tenant-mix design essentially focuses on provision of a range of merchandise and services, carefully chosen to appeal to the catchment shopping population. These services may include restaurants and other catering outlets, and lately these also include leisure facilities such as cinemas. A thorough understanding of the concept of tenant-mix requires understanding the following terms:

Comparison Goods Comparison goods are the ones that are purchased at irregular intervals for long-term use, with suitability, quality, price and style being important factors in their selection. The comparison goods group is epitomized by fashion and footwear, jewellery and expensive household equipment. The reason for the increase in sales when comparison goods retailers cluster together is their a raction to shoppers wanting to compare similar goods before making a purchase. R. L. Nelson while stating his Law of Compatible Retailing explained the phenomenon as follows: Two compa ble businesses located in close proximity will show an increase in business volume directly propor onate to the incidence of total customer interchange between them, inversely propor onate to the ra o of the business volume of the larger store to that of the smaller store and directly propor onate to the sum of the ra os of purposeful purchasing to total purchasing in each of the two stores.

Comparison shopping is an important motivation for visiting shopping malls, and this has long been considered a primary reason for designing and managing a tenantmix. The concept of comparison shopping used in the tenant-mix management therefore needs to focus on the selection of tenants as well as their relative locations within the shopping mall.

Convenience Goods Convenience goods are the ones that are purchased regularly. Therefore in their use the convenience of the seller location, selection and buying is important. The group includes food, newspapers and drinks — products that are typically sold from local corner and parade shops, supermarkets and unit shops, some of which are situated in shopping malls. The relative importance of convenience shopping and comparison shopping in

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the design and management of the tenant-mix varies according to the size and nature of the shopping mall.

Anchor Tenant An anchor store is always relatively large and well regarded in terms of quality, price or function to be a destination in its own right. Other outlets will cluster around it and will feed o the shopping tra c it generates.

Main Space Users The choice of anchor tenants determines which main space users (MSUs) can be a racted to the second highest units. MSUs are usually smaller than anchor stores. Some of them may have su cient appeal to be the shoppers’ destinations, but many function only as part of a comparison or convenience cluster. The anchor and its satellite MSUs together determine the a raction of the shopping mall for many other retailers needed to create a full range of comparison and/or convenience merchandise for maximizing the mall’s appeal in the catchment area.

Retail Demand Analysis It is the process of estimating the retail demand potential of the catchment area of a mall for all product and service categories. It is the very basis for identifying di erent product/service categories and brands for allocating the mall space them.

Out-shopping Out-shopping is the process under which customers residing in the natural catchment area of a retail store or mall actually go to another store or mall for fulfilling some or all of their needs. Out-shopping by people from the catchment area of a mall indicates inherent weaknesses in the tenant-mix, management or promotion of the mall. Generally, mall managers try to discourage out-shopping in their own catchment while inducing it in the catchment areas of their competitors.

FIVE ATTRIBUTES

OF THE

TENANT-MIX

An ‘ideal’ tenant-mix strives to achieve a balanced diversification of the mall space while accommodating retail shops, places for entertainment and leisure activities, facilities and services like parking and wash room. Prominent tenants for shopping malls include department stores, supermarkets, apparel stores, book stores, food courts and multiplexes. Besides, there are ‘magnet’ or anchor tenant stores that a ract customers to a mall. Traditionally, department stores, hypermarkets and variety stores dominated the tenant-mix of large shopping malls. However, with the emergence small malls, other kinds of tenants have become more prominent. The tenants who dominate small malls include restaurants and fast-food outlets, apparel stores, institutional tenants (e.g. banks and post o ces), retail service (e.g. hairdressers), book stores and multiplexes.

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Display showing tenant-mix of UB City Mall, Bangalore

Merchandising Merchandising is the first of the ‘big four’ a ributes of a shopping mall’s image. A mall’s image is influenced by four merchandise-related parameters. These parameters are: assortment, quality, pricing, and styling or fashion. Merchandising is an important image a ribute because it represents the ‘core product’ of a mall. It induces excitement in the mall se ing, thus influencing the mall’s image in the consumer’s mind.

Accessibility The second of the ‘big four’ a ributes, accessibility, concerns the ease of ge ing in and out of a mall. Accessibility can be further divided into macro-accessibility and microaccessibility. Macro-accessibility concerns the condition of access road to the mall and the mall’s proximity from the customer’s place of work or residence. Unlike macroaccessibility, micro-accessibility refers to parking facilities and ease of navigation within the mall. A shopping mall should be easily accessible in a reasonable time without any psychological costs to consumers, like stress and frustration.

Services Services constitute the third of the ‘big four’ a ributes of a shopping mall’s image. These services relate to the behaviour of retail employees, such as courtesy, knowledge and

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friendliness. Thus these services can be classified as personal services. Shopping malls also provide communal services like ATM, vertical circulation options (such as escalators and li s) and amenities (such as parking and restrooms). Both personal and communal services are central to the shopping centre image because they represent the ‘augmented product’ that supports the merchandising (core product) and also adds value to the total shopping experience of customers

Atmospherics The fourth of the ‘big four’ a ributes concerns the atmospherics of a shopping mall. Five common atmospheric items measured are: ambience, colour, decor, music and layout. Atmospherics are critical because they act as environmental cues that consumers use to imply the quality of a shopping centre. Further, atmospherics have been reported to stimulate consumer excitement at a shopping mall.

Entertainment The retail strategy of integrating entertainment into a shopping mall’s marketing mix has been gaining popularity over the past few years. The level of shopping enjoyment experienced varies from individual to individual, as people have di erent reasons for shopping at malls. The mall shopping enjoyment can be a ected by several factors such as location, atmosphere, tenant-mix and promotions within the mall. The provision of means of entertainment can extend a shopping mall’s trading areas, lengthen shopper stays and increase revenues for tenants. Entertainment (such as movie theatres, food courts and fashion shows) can enhance the ambience of a mall making it conducive for an exciting and pleasant experience by shoppers. Entertainment draws consumers to air-conditioned shopping centres, o ering visitors long-duration recreational a ractions such as music, movies, games and dining out. A mall visitor can meet with friends, enjoy and play a game, and then see a hit movie at a multiplex within the mall.

BENFITS

OF

TENANT-MIX

A shopping mall can significantly improve its prospects by taking care of decisions like which tenant occupies space in the mall and when and where does the tenant set up his/ her shop. If due care is taken while zoning a mall and planning its tenant-mix, the mall would surely gain easy acceptance among shoppers and admiration among tenants. A targeted and balanced tenant-mix is the outcome of a systematic and conscious research by the mall development company. The research would involve the retail demand analysis of the catchment area with a focus on the expected demand potential over the next 10–15 years. If planned in a meticulous manner, the tenant-mix would accrue many benefits to the mall. These are discussed below.

Attracting Customers Customers visit a shopping mall for satisfying their shopping needs in the most convenient, pleasant and economical manner. Therefore while choosing brands, care must be taken that the prospective shoppers should take interest or pride in visiting the

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mall on a regular basis. The key lies in the customers developing a liking for the mall. Placing brands that have strong acceptance and/or aspirational value for prospective shoppers plays a vital role in a racting more and more customers on a frequent and regular basis towards the mall. Perhaps the simplest expectation is that a mall should a ract as many shoppers as possible.

Providing Shopping Comfort Shopping comfort and ease is one area where high-street locations o en score over shopping malls. Hence it is a challenge for the malls to provide superior shopping comfort in all facets of shopping—be it visibility, approach, shopping timings, parking, facilities or assortment. ‘All solutions under one roof’ is by no means an ordinary promise, and if kept by a shopping mall, it would definitely provide convenience and comfort to shoppers. However, ‘all solutions’ doesn’t mean that all the brands existing in the market should be accommodated, as it would be wasteful, confusing and unviable. ‘All solutions’ in this context refers to the solutions desired by the customers living in the mall’s catchment area. Hence if the tenant-mix is designed to cater to the needs and a ributes of the catchment area, the target customers would definitely feel a racted towards the mall. Facilities like parking, circulation paths, floor plans, li s, escalators and wash-rooms should be designed to extend all-round comfort to the shoppers.

Adding to Shopping Experience In the era of sti competition, increasing awareness, demanding customers and undi erentiated malls, so er aspects like shopping experience would act as tie-breakers. The overall shopping experience does depend on ambient factors like aesthetics, temperature control, background music and ambient odour. However, the presence of world-class brands also adds to the aura and experience associated with shopping in a particular mall. Similarly, aspects related to location, number, variety and size of stores contribute to the overall experience as the satisfied customers do recall their last pleasant shopping trip.

Making Optimum Use of Available Retail Space People visit shopping malls for purchasing myriad products and services having di erent monetary value, functional/emotional significance and level of involvement. Similarly, tenants available in the market also comprise retailers with di erent formats and space requirements. No single size fits all. Hence an ideal tenant-mix would consist of anchors, large stores, mid-sized stores, small stores and kiosks. Moreover, all the stores need not be on the ground floor or on the front side. A diversified tenant-mix will help in optimum utilization of all kinds of retail spaces in the mall.

Generating and Enhancing Rentals To begin with, the tenant-mix should be such that it occupies all the available space in the mall as per the guidelines discussed earlier. The rentals received from the tenants

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would help in recovering the investments made in the project by developers/investors. As shopping malls are project with huge investments and long pay-back periods, the mall management must ensure that the revenue stream does not dry down with time. It means that the mall’s rental value (per square feet rental) does not decline. It is possible only if the mall is managed in such a manner that customers continue patronizing it by shopping and tenants patronize it by renewing their lease contracts. An ideal scenario would be when more tenants are lined up than the space available at the time of lease expiry.

Ensuring Mall Profitability All the elements of tenant-mix management should be put in place in such a manner that the shopping mall remains profitable not only in the short run but during its entire life. It is possible only when the shoppers find the tenant-mix exciting, the tenants see ever-increasing sales per square feet of retail space and the mall sees higher footfalls and consequently higher rentals.

List of tenants displayed outside Sahara Mall, Gurgaon

Enlarging the Catchment Area If the tenant-mix of a shopping mall is unique, it may also a ract shoppers from outside its planned catchment area. It is not uncommon to see people travelling some distance to reach a store or brand that is the only one in the locality. For example, Country Club

Tenant Mix 101

Mall in Vaishali (Ghaziabad) is otherwise a very small mall but because of the presence of Brand Factory (the only such outlet near to Delhi’s trans-Yamuna area), it has been able to a ract shoppers from East Delhi as well.

Holding Shoppers for a Longer Time A comprehensive tenant-mix with stores aligned in the form of genuine clusters representing di erent zones could be so fascinating and captivating that customers feel like having a good look at all the stores. People spending more time willingly would add life to the mall apart from increasing the chances of more sales.

Encouraging Cross-shopping and Impulse Buying If stores are clustered appropriately in the form of zones catering to unique customer needs, shoppers o en end up buying much more than their shopping list. Smart positioning of complementary products and services can either remind or kindle the desire to buy the product/service even though it was neither on the customer’s top of the mind nor a priority. Lists of tenant highlight the importance of selecting a balanced variety of tenants and locating them carefully within the mall in relation to the mall’s layout and in relation to each other. The location of anchor tenants and MSUs are critical decisions, drawing people to the mall through specified access points so that maximum possible number of tenants take advantage of the generated footfall.

Imparting Distinctive Image to the Mall In the era of ‘cut/copy and paste’ development resulting in identical shopping malls, the presence of unique and prestigious brands can have a telling e ect on the image and positioning of the mall. One major responsibility of the mall development and management teams is to identify such brands and convince them to occupy space within their malls. The tenant-mix should create a specific image for the mall, and position it in relation to competing malls. The need to di erentiate a mall from its competitors has grown with the rising number of malls. Positioning a shopping mall in the retail hierarchy is therefore largely achieved through unique and prestigious stores present in the mall.

Ensuring 100% Location to All the Tenants If le alone, every tenant would like to occupy the ‘so-called prominent locations’ such as ground floor, front stores and corner stores without realizing that their business model, retail format and customer segment may not require this. It has been observed that the ‘first-come-first-served’ model of mall space allocation results in a ‘loose-loose’ situation for the developer, tenants and customers. The developer ends up violating the zoning, leading to dead-zones at other locations/higher floors. The tenants end up paying a higher rental which makes it di cult for them to break-even. And, the customer does not get the convenience and/or the experience associated with shopping. For example, it is a horrible idea to allocate the anchor space to an electronics store on the ground floor, but it does happen.

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TYPES

OF

RETAIL TENANTS

In every shopping mall, the most important element of survival are its tenants. The retail tenants are usually categorized into two types: tra c a ractors and tra c users. A tra c a ractor is the tenant who draws the human tra c to the mall. This type of tenants, usually of a good reputation and with an extensive range of goods and services, are able to draw huge crowds to them wherever they are located. Among tra c a ractors are anchor tenants like large department stores with a recognized name, and they generate mall tra c that indirectly increases the sales of lesser-known stores. The second type of tenants, tra c users, depend on the visitors drawn to shopping malls. Such tenants range from specialized shops to small retailers, and it is perceived that their survival depends on the success of the tra c a ractors. Figure 5.1 gives diagrammatic representation of di erent types of tenants accommodated in shopping malls.

Figure 5.1 Types of retail tenants

Anchor Tenants An anchor store, as defined by Konishi and Sandfort is a store that increases, through its name’s reputation, the tra c of shoppers at or near its location. The anchor tenant sets the tone and image of the shopping mall. It takes up space ranging from 20,000 to over 200,000 . It can be a major department store, a hypermarket, a discount store or a large home centre. In general, shoppers are likely to visit a shopping mall because of its anchor tenant, and this in turn helps generate sales and profits for the other tenants. The success of a shopping mall rests on the anchor tenant. In fact, it is said that there will not be a shopping mall until there is an anchor tenant. Anchor tenants are the determining elements in the initial design, layout considerations and financial negotiations of a mall development. Later in the chapter, the concept of anchor tenant has been discussed in detail.

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Micro-mini Retail Space (New-age Tenants) The importance of anchor tenants has been stressed earlier, yet it would be a mistake to think that a shopping mall could prosper without independent small tenants. Small tenants are essential for the success of a shopping mall. The new-age retail tenants are undoubtedly a new phenomenon that has caught the retail industry, targeting the teens and young adults, by storm. Even though some anchor tenants do provide a wide selection of goods and services at a discounted price, they are not tuned in to fulfil the ever-changing needs of consumers. On the other hand, small retailers may carry a limited range of products and services, but they are more flexible and yet specific in catering to consumers’ needs. Moreover, small retailers yield higher rentals per square metre as compared to anchor tenants in the same shopping mall.

Entrepreneur Tenants The entrepreneurs’ factory outlet model is highly commercialized because it represents a high percentage of the overall business. Many independent entrepreneurs/small unorganized retailers, who were early adopters of this model, have grown their business within factory outlets and then diversified into high-street retail as opposed to the more conventional way round. The entrepreneur tenants are typically highly opportunistic and were a racted by the early inducements o ered by factory outlet centre developers and the low- risk profile of the model.

Vanilla Tenants Vanilla tenants are next to the anchor tenants and they draw customers from the customer base of anchor tenants. In other words, vanilla retailers cluster around an anchor tenant and feed on the shopping tra c the la er generates.

TENANT CATEGORIZATION

ON THE

BASIS

OF

LEASE CONTRACT

The successful execution of the zoning plan in a mall is carried forward through lease management on an ongoing basis. Forging good leases with retailers is essential to ensure the presence of right retailers in a mall. All the tenants housed in a mall do not opt for lease contracts of uniform length. Even if it happens to be a possibility, sensible developers prefer to have varying lease lengths with di erent tenants to make sure that their revenue stream remains stable over a longer time period. On the basis of lease length, tenants can be classified into the following categories:

Long-term Tenants Among all tenants, the tenants of this category sign the lease contract for the longest duration. Their lease contact ranges from 7 to 20 years. Mostly, the tenants in this category are the anchors who occupy the mall space at highly concessional rates. They aim at developing a large and loyal clientele. They also invest significantly for improving the vanilla shell which would be a sunk cost if they have to vacate the mall early. Common examples of long-term tenants are multiplexes, hypermarkets and department stores.

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Medium-term Tenants The tenants of his category occupy the mall space for an intermediate range, say 5-7 years. They are main space users dealing in a wide product range, and they pay rentals higher than the anchors. Common examples are the tenants dealing in electronics, home furnishing and, in many cases, apparels.

Short-term Tenants The tenants of this category are generally vanilla stores who do not have very high exit barriers in their way to switching locations. They generally occupy smaller spaces and are clustered around the anchors. They pay the highest rentals among all the permanent tenants. Their decision to shi depends primarily on the anchors’ performance. They are akin to the rats on a ship who are the first ones to leave the ship as it drowns.

Temporary Tenants These include kiosks and stalls in malls. Normally, there is no defined space for them, and most of them occupy common areas of the malls such as atrium and corridors. These tenants pay the highest rental among all the tenant (permanent as well as non-permanent) categories, occupy very small spaces, cater to seasonal and impulse needs and add to the mall revenues significantly. Later in the chapter, the concept of temporary tenant has been discussed in detail.

Temporary tenants inside MGF Gurgaon

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TENANT-MIX DECISIONS While deciding about the tenant-mix, a series of decisions need to be taken by those responsible for planning it. These decisions relate to the following areas:

Retail Demand Analysis It is an assessment of the demand potential for di erent products and services in the mall catchment area during next 5-10 years. It is normally done by a specialist or by the developer in consultation with some researchers or specialists. While working out the demand potential, these factors are taken into account—the absolute population size, rate and direction of population change, qualitative changes in the demographic profile and macro/micro economic scenario including competition. The retail demand analysis gives the aggregate demand for all the product/service categories. The aggregate demand is then broken down into the expected/target market share for the shopping mall.

Selecting Prospective Tenants For each product and service category, an exhaustive list of the available options (tenants/ brands) is prepared. This master list is then pruned on the basis of criteria like the presence or otherwise of a potential tenant in the catchment area, whether the existing tenant (brand) store is in a high-street location or a competing mall, whether the brand would be willing to come and whether it fits in the developer’s scheme of things in terms of image, positioning and branding of the mall. The shortlisted brands are then contacted and the final list is frozen a er negotiations.

Tenants’ Floor Area Requirements The prospective tenants may assess their space requirement in the mall on the basis of their standard norms or fanciful notions about the market potential. However, equipped with the knowledge about the catchment and the retail demand analysis, it is advisable for the mall developer to counsel the tenants about the actual area that would be appropriate for them. Else the mall developer may end up commi ing too much or too less space for the tenants. It can have a negative impact on the concept of the mall as well as on the competing brands. Major considerations involved in space allocation to the tenants’ are: (i) Deciding the ratio of the floor area taken up by comparison shops and convenience shops to the total floor area of the mall. (ii) Deciding the ratio of the floor space taken up by the large space users to the total floor space.

Influencing Tenants’ Location in the Mall The tenants might get tempted to occupy the most prominent (and costliest) space in the mall. However, it may not be the most appropriate location for them. Di erent stores/formats require di erent sizes, frontage, perimeter wall and depth. So the mall management team must ensure the allocation of the most appropriate location to the

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tenants. It is also in the interest of the mall that the location of individual stores is in consonance with the mall concept so that the overall synergies are maximized. Hence it is advisable for the mall management to play the role of a consultant for the tenants and give them reasons why the location being o ered suits them the most.

TENANT MIX MODIFICATION

TO

FLOW

WITH

TIMES

An ideal tenant-mix should not be considered ideal for all times to come. As time changes, the old tenant-mix may become obsolete, necessitating the need for refining it in the light of contemporary needs. Retail formats are continually changing, and with the growth of retailing via the Internet and interactive television, the changes are expected occur at an accelerating rate. To make the tenant-mix respond to the changing times, the mall management is required to continuously monitor and evaluate the evolving consumer needs and accordingly mould the tenant-mix. Following are the reasons for the increased di culty in maintaining a successful tenant-mix: • Heightened competition among malls, arising from their proliferation and due to the increased consumer mobility, has created pressures for di erentiation by the means of tenant mix. • Ever-changing demographics, fashion and consumer demand are leading to the decline of some old retailers and the brisk expansion of new ones, o en with di erent space requirements. • With more products, services and formats coming into existence, it becomes imperative to accommodate them in the old concept so as to stay relevant. For example, none of the pioneering malls in India (Spencer Plaza, Chennai; Crossroads, Mumbai and Ansal Plaza, Delhi) has a Multiplex, as multiplexes had just entered India when these malls were developed. But now multiplexes are so popular that it is practically impossible to think of a shopping mall without a multiplex as an anchor.

MODES

OF

TENANT-MIX IMPROVEMENT

The tenant-mix can evolve organically through the operation of market forces; unsuccessful retailers leave and are replaced by others. Alternatively, the mix can be planned and actively managed. Whereas most commentators assume that the centre (mall) asset manager is responsible for this process. “...notwithstanding the centre manager’s responsibili es...it is the ul mate responsibility of the retailers in a centre to govern the retailer mix. Indeed, they are probably the only body... who are fi ed to do so.”

The mall developer may engage an asset manager who, in turn, may appoint an on-site centre (mall) manager. The mall manager is the day-to-day point of contact with the retail occupiers. One or more le ing agents may also be involved. All three management layers, and potentially others, are involved to a greater or lesser extent in the management of the tenant-mix.

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Monitoring Tenant Mix A prerequisite for successful management of the tenant-mix in any mall is to monitor its performance—that is, the level of profit achieved by its retailers and its implications for the mall’s rental income and capital value. Constant monitoring of sales performance, competition and demographics for this purpose is also important. The continuous manager-tenant communication is necessary to allow managers understand the tenants’ business needs. The most obvious indicator of the need for a change in the tenant mix is the failure of a retailer. This may result in an unexpected vacancy and a request to assign or sub-let the lease.

Proactive Management Proactive management of the tenant-mix is be er than relying on changes instigated by retailers. This can involve negotiations for surrender of leases, possibly involving a payment to the retailer. More radically, a mall may be wholly or partially refurbished and the tenantmix repositioned towards a changed demographic or competitive environment. This may also involve the merger or subdivision of units to meet new retail requirements.

Lease Management Case Law Landlords and their agents have evolved management tools to deal with the complications arising out of the leasing issues. Retail leases commonly include clauses requiring the landlord’s approval before a lease can be assigned or sub-let. There is also a user clause that restricts the types of merchandise that can be sold from the leased retail store. These tenant’s clauses are the mall developer’s main means of controlling which retailers trade in the mall and the mix of merchandise on o er.

ANCHOR TENANTS An anchor store is the tenant occupying a place and space of prominence in a mall. The anchor store is always relatively large and su ciently well regarded, either in terms of quality, price or function, to be a destination in its own right. Other outlets will cluster around it and feed o the shopping tra c it generates. Therefore the choice of anchor tenants is vital to the success of the overall tenant-mix. The location of anchors within a mall creates pedestrian flows. By careful management, these flows can be used to a ract shoppers to all areas of the mall, thus maximizing the sales potential and the rental income from the available floor-space.

Privileges of an Anchor In most of the shopping malls, anchor stores are roped in by extending them special benefits. Some of the privileges enjoyed by anchor stores in shopping malls are as follows:

Discounted Rentals It is a common practice to extend heavy discount on rentals to the anchor tenant, ranging from 25–75%. It is not a loss making proposition for the mall developer, as the loss in

108 Mall Management

revenue generation from the anchor space is made good by charging higher rentals from other tenants who enter only because of the presence and proximity to the anchor. Many malls have gone to the extent of revenue sharing arrangement with the anchors instead of charging fixed rentals.

Tenant Improvement Some tenants like multiplexes and hypermarkets need to make specific changes/ improvements in the vanilla shell. For example, hypermarkets may require ramps while multiplexes may require theatre-like (stairs or ramps) flooring. Normally, changes in the vanilla shell are done and borne by the tenants. However, under special arrangements, mall developers are more than willing to carry out these changes/improvements for their anchors. Special Displays Display space and options for tenants are confined normally to their stores only and are chargeable for other locations. However in the case of anchors, malls are magnanimous enough to permit them to have displays within and on the façade/frontage of the mall. This facility is especially provided to anchors who are occupying space in the basement and posterior of the mall. Involvement at Design-board Stage Anchors occupy large space and are supposed to be the magnets for a racting shoppers and other tenants. As some of them may require special features in design/location, mall developers consider it worthwhile to consult them during the designing phase of the mall. Preferential Location Anchors are normally placed at locations from where they can appeal and service a large number of customers. However, it does not mean that the location is allocated to them solely as per their discretion, without giving a thought to the original concept, zoning and planning of the mall. Dedicated Infrastructure A vital benefit extended to the anchors is the special infrastructure dedicated to them so that they can carry out their retailing in a smooth manner. This infrastructure includes special entry and exit points, service li s, etc.

Significance of Anchor Tenants Shopping malls extend various privileges to their anchor tenants because they gain from the anchors’ presence in the following ways:

First Ones to Come Anchor stores are normally the first ones to move in. Malls are normally made operational when one or more anchor stores are already in place. This helps is building tra c from

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the word go. A case in point is Mahagun Metro Mall, Vaishali where Bharti Wal-Mart’s Easyday Hypermarket became the first tenant to become operational in February 2010 even though the mall was still ge ing its finishing touch. Anchors normally a ract shoppers from a larger catchment, hence the message spreads to a larger geography. The tra c generated by such anchors is the best inaugural publicity for a Mall.

Major Space Occupiers As anchors occupy a large chunk of space, they improve the occupancy ratio of the mall significantly. As a result, the mall looks active and live.

Generate Revenue in Bulk Even though anchors give lower rentals, the quantum of space occupied by them is so large that they end up being the largest revenue providers in almost all the cases.

Impart Image to the Mall Presence of a renowned anchor adds significantly to the image of the mall. It is especially important for a shopping mall that does not belong to an established group and is a lesser known and newer entity. On the contrary, its anchor could be an established player in the market. Over a period of time, classical conditioning comes into play and people start a ributing some of the qualities of the anchor to the mall itself. Result in Cross-shopping As mentioned earlier, anchor stores a ract a large number of people from long distances. Even if a fraction of those shoppers spill over to the other smaller stores, it means handsome business for them. That is why vanilla stores in the proximity of anchor stores are valued the most in terms of rentals.

TEMPORARY TENANTS Temporary tenants are those who occupy smaller chunks of non-regular space for a very short period. The duration of a contract for a temporary tenant ranges from a few days to a few months, but never more than a year. Even if a temporary tenant intends to stay for a longer period, the contract is signed for a year at a time and renewed subsequently. Temporary tenants are normally in the form of kiosks and stalls for which there is no formal provision in the mall design. These are placed in common areas like atriums and corridors. Though these occupy very small spaces, they end up paying the highest rental per square feet. These tenants extend the following benefits to the mall:

Generate Revenues out of Common Areas Common areas of the mall (atrium, corridors, etc) are supposed to be an expense head, as the mall needs to spend money in their maintenance and upkeep. However, by placing temporary tenants in common areas, shopping malls can generate revenues. What makes this proposition more profitable is the fact that tenants pay for the upkeep of common

110 Mall Management

areas (by paying CAM charges), but the mall developer generates revenue from these areas by renting them out.

Keeping the Mall a Happening Place A number of kiosks placed strategically with a few customers around each kiosk makes the mall a happening and lively place. It is especially important during o -peak hours and days when most of the mall activities are is confined to the atrium around such kiosks.

Filling Gaps in the Tenant-mix There might be some gap in the original tenant-mix because an appropriate option (tenant) was either not available or not willing to step in. In such cases, it is not a bad idea to fill the gap by placing some temporary tenants who extend same or similar service till the time an exact replacement is arranged.

Take Care of Seasonal Trends/Needs Most parts of India are subject to the extreme climate—either too hot or too cold. The kind of food or snacks required during these extremes also varies. It is not possible to place a number of specialists in each category on a permanent basis, as the season keeps fluctuating. However, a large number of kiosks take care of such seasonal trends and needs.

Kiosk in the atrium of Mahagun Mall, Vaishali

Tenant Mix 111

ANCILLARY USES

OF

MALL SPACE

Shopping malls are considered to be the shopping hubs, therefore every square inch of the mall space should be dedicated to retailing of products and services. However, it is not practicable, especially in India. Because of very high real estate costs, mall developers in India are compelled to develop the plot fully by exhausting the FAR completely. As a result, we come across malls that are 5-6-storey high. However, going by conventional retailing wisdom, the retailing ends at the second floor. Beyond the second floor, it becomes very inconvenient for the shoppers to browse and shop. There are a few options available for higher floors in the form of multiplexes, food courts and fine-dine restaurants. However, many malls are still le with unutilized mall space at higher levels. The situation is further complicated by the fact the developer divides the mall space into a large number of small stores as it is easier to sell/rent small stores. In such cases, it is advisable to divert a part of the mall space, particularly the higher levels, to other commercial yet non-retail activities. It can give the following advantages to the mall: 1. The presence of other commercial services/activities will increase the focal-point value of the mall. 2. It would start a racting a large number of shoppers belonging to diverse groups. It is likely that some of these shoppers may actually opt for shopping in the mall while carrying out their routine commercial activities. 3. As the mall becomes a hub for diverse activities, its significance as a place of convergence and meeting increases, which again means higher footfalls. 4. Most important, it would result in utilization of upper floors which otherwisewould have remained vacant. Some possible uses of upper floors of a mall are: 1. 2. 3. 4.

Storage space for stores operating in the mall. Show-rooms for B2B products and services. Services like banks, insurance o ces and health clinics. Studios and work rooms like photographic studios and recording studios, and hobby classes for dance and music. 5. Recreational options like indoor sports and gymnasiums. 6. Cultural and educational facilities like lecture rooms, conference rooms, library, art gallery and museums. 7. Residential options like flats, hostels and studio apartments.

Fundamental Issues Related to Ancillary Uses Opting for non-retail uses is a sensible decision for the optimum utilization of surplus mall space, particularly at higher levels. However, one must address the following basic questions before taking a call in this ma er: 1. Is there a genuine demand for such commercial applications? 2. Would these activities result in increased footfalls at the mall?

112 Mall Management

3. 4. 5. 6. 7. 8.

Would it not a ect the image and branding of the mall? Are the mall design, architecture and column placement compatible with this use? Would the ancillary activities interfere with normal retail activities of the mall? Would the ancillary use consume a reasonable share of utilities? Is it possible to apportion operating costs to the ancillary use? Would ancillary uses synchronize with the mall timings?

FUTURE DIRECTION OF TENANT MIX MANAGEMENT Until very recently, most Indian developers considered the mall management synonymous with the facilities management. The realization that they are di erent and that the professional mall management will a ect the long-term viability and success of a mall is sinking in gradually and is being accepted across developers, landlords and retailers. The shortcomings pertaining to mall management in India have been discussed in the introductory chapters of this book. To overcome these shortcomings, developers must conduct professional mall management practices—starting from undertaking rigorous feasibility exercise or market research to providing facilities, ambience and finance management of a mall. A common practice in the developed markets such as the United States and Europe is using the revenue share model in determining rent. Under this arrangement, the tenant will either pay a fixed monthly base rent as minimum guarantee and/or a ‘percentage of sales’ rent, whichever is higher. This is beneficial for both landlords and retailers as landlords are encouraged to organise promotional activities that would increase retailers’ revenues because they may have a percentage share in it. The model works successfully in bullish and bearish market conditions. When the market is weak, retailers are protected from rising rental costs. This unique approach has been adopted by Select City Walk, Delhi. The tenant-mix determines the success of malls as shopping destinations, so the tenant mix management is fundamentally important to shopping malls. The traditional property asset approach to shopping malls tends to be far removed from the customers who are the malls’ life-blood. It is also too conservative. Shopping malls would be more e ectively managed as retail businesses, based on the marketing concept of business.

SUMMARY The success of a new shopping mall depends on its ini al tenant-mix that is dominated by the choice of anchor tenants. The tenant-mix strategies need to be based on a thorough research of the local consumer requirements and the need for compe ve posi oning. The marke ng of retail units to poten al tenants needs to be more targeted, with firm control retained over the tenant-mix decisions. The posi oning of the mall in rela on to its compe on, its a rac on to shoppers and its poten al for drawing repeat patronage are all strongly influenced by the tenant-mix.

Tenant Mix 113

REVIEW QUESTIONS 1. Define zoning. Why is it important to decide about zoning before the actual space alloca on to tenants? 2. Dis nguish between ‘anchor tenants’ and ‘main space users’. Is it advisable to have mul ple anchor tenants in a mall? Jus fy your answer. 3. Define tenant-mix. What advantages are accrued to a mall if its tenant-mix is in accordance with the needs of its catchment? 4. What are the pre-requisites for a healthy tenant-mix? 5. Explain the process of tenant-mix planning by discussing the en re sequence of decisions taken during the process. 6. Does the tenant-mix of a shopping mall remain the same throughout its life? Jus fy your answer. 7. How does the tenant-mix of shopping malls evolve with me? What role does mall managers play in catalyzing this evolu on? 8. What are the privileges enjoyed by an anchor? Why do developers extend these privileges to them? 9. Write a note on the significance of temporary tenants in a shopping mall. 10. How can the mall management milk the shopping mall to the maximum by looking beyond the conven onal tenant categories? What are the basic considera ons to be kept in mind while devo ng mall space to ancillary users?

PRACTICE EXERCISES 1. Study the tenant-mix of a mall of your choice. See the floor-wise distribu on of tenants. Does the alloca on of the mall space follow any pa ern? What are the important product categories that have been allo ed space on the ground floor and around the central atrium? 2. Visit at least 5–6 shopping malls in your city having mul ple anchor tenants. Note down their names and loca ons. Do you see any pa ern in placing anchors at par cular loca ons and across floors? 3. Visit a few shopping malls and find out the following details: (a) Temporary tenants that are occupying space for a whole year. (b) Temporary tenants occupying space on seasonal basis. What conclusions do you draw from your findings?

114 Mall Management

SUGGESTED READINGS 1. Abra , R.; Fourie, J.L.C. and Pi , L.F. (1985), ‘Tenant mix: the key to a successful shopping centre’, The Quarterly Review of Marke ng, Spring, pp. 19–26 2. Bloch, P.H.; Ridgway, N.M. and Dawson S.A. (1994), ‘The shopping mall as consumer habitat’, Journal of Retailing, Vol. 70(1), pp. 23–42 3. Cushman and Wakefield (2009), ‘Mall vacancies: cause for concern’, A report by Cushman and Wakefield, In A. Taneja (Ed.), Malls in India, pp. 58–63, New Delhi: Images Mul media Pvt. Ltd. 4. Greenspan, J. (1987), ‘Solving the tenant mix puzzle in your shopping centre’, Journal of Property Management, Vol. 53(4), pp. 27–31 5. Gross, J. (1993), ‘The magic of the mall: An analysis of form, func on and meaning in the contemporary retail built environment’, Annals of the Associa on of American Geographers, Vol. 83(1), pp. 18–47 6. Kaylin, A.O. (1973), ‘In depth analysis necessary for shopping centre game’, Shopping Centre World, August, pp. 46 7. Kirkup, M.H. and Rafiq, M. (1994), ‘Managing tenant mix in new shopping centres’, Interna onal Journal of Retail and Distribu on Management, Vol. 22, Issue 6, pp. 29–37 8. Nelson, R. (1958), The Selec on of Retail Loca ons, New York: F.W. Dodge Corpora on 9. Ng, K. (2009), ‘Strategies for challenging mes’, In A. Taneja (Ed.), Malls in India, pp. 164– 168, New Delhi: Images Mul media Pvt. Ltd. 10. Sheikh, A.I. and Fa ma, K. (2008), Mall Management, New Delhi: Himalaya Publishing House 11. Ward, J.C.; John, B. and Mary, J.B. (1992), ‘Measuring the prototypically and meaning of retail environments’, Journal of Retailing, Vol. 68(2), pp. 194–220

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CASE

Retailer-Developer partnership: a way forward The fourth edi on of The India Shopping Centre Forum, the mega congrega on of shopping centre developers and retailers was organized in May 2011 at Mumbai. The forum opened with an in-depth delibera on among industry leaders on the key challenges faced by the sector and the way forward for the retail industry especially shopping centres. This year the theme was ‘Challenges before Shopping Centres’. During the forum proceedings, B.S. Nagesh, Vice Chairman, Shoppers Stop, spoke on the changing retailer-developer rela onship. Thomas Varghese, CEO, Aditya Birla Retail, chairman CII, Na onal Commi ee on Retail, and S. Raghunandhan, Chairman, SCAI, and CEO, Pres ge Retail Group, also touched upon the changing retailer-developer rela onship and how both can create a win-win situa on through a mutually beneficial partnership. The panel agreed that shopping centres are an integral part of economic growth. They symbolize the civiliza on and lifestyle development of the economy. Mr. Nagesh spoke about the changing scenario in the retail sector. The industry has gone through mul ple stages star ng from bullish op mism six years ago to pessimis c bent and then back to posi ve op mism last year. Today it is at the stage of truism. This is possible because of the ‘revenue sharing model’ adopted by the mall developers. This model has brought the trust factor in the partnership between the retailers and the mall developers. Insis ng on developing a partnership not limited to the retailers and the mall developers, Nagesh emphasized the need to involve the en re eco-system including the customers, the mall employees and the society as a whole. Source: ‘Retailer-developer partnership is the way forward’, retrieved from h p://www.indiaretailing.com/PrintStory.aspx?newsId=5670, accessed on 14 May 2011

CHAPTER

6 Leasing Administration

LEARNING OBJECTIVES This chapter will enable the readers to • Familiarize the reader with key concepts and terms rela ng to leasing and its applica on in the context of shopping malls • Explain the process of leasing as applied in prac ce • Discuss di erent clauses that are used to safeguard the interests of tenants as well as landlords • Make the reader aware of the nuances of leasing documenta on • Understand how leasing is administered and supervised at the ground level

ADVERSE LEASE CLAUSE TRANSLATES INTO BUSINESS LOSS ‘Emo ons, Gi s & Gree ngs’ is an upcoming chain of gi s and gree ng cards stores in north India. In an a empt to expand its network, the company books a 2000-squarefoot store on the first floor of ‘Exo ca’ shopping mall in Gurgaon for a five-year term. Commercial prospects are bright as Exo ca is a new and nice property catering to a decent catchment area. The Emo ons store at Exo ca does well during the first year but soon finds itself in rough weather. The reason: The Exo ca management has commi ed a 3000-square-foot store on the ground floor to ‘Truly Yours’, India’s largest brand in the social expressions business. The Exo ca management sees a great future thanks to their new rela onship with Truly Yours. A field study conducted by Exo ca reveals that the presence of Truly Yours on the ground floor would add significantly

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to the mall’s pres ge as its target customers hold the la er brand in high esteem. However, Emo ons is not enamoured of the entry of Truly Yours in Exo ca, which is bound to spell doom for its business. Emo ons threatens legal ac on. But the Exo ca management explains to the Emo ons management that the lease agreement between them does not promise exclusivity for the gi s and gree ng cards business to Emo ons. Stung by the fact, Emo ons decides to book retail space in ‘Grand County’, another mall coming up adjacent to Exo ca. However, the Emo ons management is shocked when they receive a legal no ce from the Exo ca management. The no ce men ons that due to a specific clause in the exis ng lease contract, Emo ons cannot open a new store within a radius of two kilometres around Exo ca. Emo ons is unable to terminate the lease contract as the terms of the exit clause are loaded highly in favour of the Exo ca management. Now, the managers at Emo ons Gi s and Gree ngs realize that had they been more cau ous while signing the lease agreement they would not have stuck in the present situa on.

INTRODUCTION A big debate is going on in India on the merits and demerits of two models of renting out malls—fixed rental model and revenue-sharing model. The centrepiece of this debate is the term ‘leasing’. Other related terms like lease rental and commercial leasing are commonly used in the context of mall management. Going by retail researchers, improper leasing is a major cause of failure of shopping malls. Let us first understand the meaning of lease. Lease is a contractual agreement through which a person is given the right to use a property by its owner for a limited period of time, subject to certain conditions. The property is given in exchange for something of value, and its ownership remains with the original owner. For giving a property on lease, it should be a legal property. A lease agreement is entered into between the property owner (lesser) and the person taking the property on lease (lessee). Through the lease agreement, the lesser authorizes the lessee to take and use the property owned by the lesser for a certain period of time without becoming its owner. A lease agreement also includes a statement of consideration; it means that the lessee must pay something in value for using the property of the lesser. Lease creates a right to use a property for the lessee. Unless there is a transfer of such an interest, there can be no lease. Section 105 of the Transfer of Property Act 1882 defines what a lease is. As per the Act, ‘a lease of fixed property is a transfer of a right to use the property, made for a certain time, express or implied, or in perpetuity, in consideration of a price paid or promised to the transferor by the transferee, who accepts the transfer on such terms’.

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Brands that leased space at TI Mall, Indore

IMPORTANT TERMS RELATED

TO

LEASING

A lease contract involves two parties: a lessor and a lessee. One who owns the property and transfers the right to use the property to another person is referred to as the lessor. The transferee who is given the right over the property for a specified use is called the lessee. The money is called rent for the lease. The two parties to a lease are bound by a legal document called lease agreement (contract). The period for which the property is o ered on lease in called the term of lease.

TYPES

OF

LEASE

Depending on the mode of rental payment, the leasing arrangement between two parties (lessor and lessee) could be of two types: (a) Gross lease: It is an arrangement under which the lessee pays a single component as lease rental. There is no separate payment for operating/maintenance charges as the gross lease amount is expected to take care of these charges. The gross lease is also called ‘full service’ lease. (b) Net lease: Under this arrangement, the lessee pays rental only for using retail space, and the operating/maintenance charges are payable separately. For the same space, the amount payable as net lease is generally lower than the gross lease amount, as it does not include additional payment for maintenance.

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The net lease is considered be er because it provides transparency in mall maintenance operations. It is possible for tenants to find out how much money is collected for maintenance, and how much of it is actually utilized. It also proves very useful in distributing the lease rental between the investors, who own individual retail units, and the mall developer, who controls common areas and mall management. In such cases, the net lease rental goes to the investors, whereas the maintenance charges go to the mall developer or mall management company.

Prerequisites for a Lease For a lease to exist, the prerequisites are: (a) (b) (c) (d)

There should be a transfer of right from the lessor to the lessee. The lessee should have a separate alienable interest in the property. The interest should be in the fixed property. The interest should entitle the lessee to the right to the possession of the property in accordance with the lease agreement. (e) The right to use the property under lease should be for a certain period of time. (f) The right should be given in return for some consideration to be paid periodically or on certain specified occasions. In case of a lease, there is a separation of the right of possession of property from the ownership of property. It is because in case of a property lease, the lessee generally requires to possess the property in order to use it. Thus the word ‘use’ includes possession also. However, it is to be noted that a mere occupancy or possession of fixed property will not constitute a lease. It should be backed up by a contractual arrangement between the two parties. The lessee has only the right to use the property, and the ownership of the property continues to remain with the lessor. A lease can be made from year to year. If the term of a lease exceeds one year, the rental may still be decided or revised on a year-to-year basis. A lease can be made only by way of a registered document. Both the lessor and the lessee or their duly constituted authorities should execute such registered instruments. The instruments that create a lease need to be properly stamped, executed and registered.

MAJOR PROVISIONS

OF

A LEASE AGREEMENT

Names of All Leaseholders Every partner in the business who occupies a rental or leased unit should be named as the leaseholder and should sign the lease or rental agreement. This makes each leaseholder legally responsible for all terms of lease, including the full amount of the rent and proper use of the property. This means that the lessor can legally seek the entire rent from any of the leaseholders should the others skip out or be unable to pay. If one leaseholder violates an important term of the lease or rental agreement, the tenancy of all leaseholders, covered by that agreement, can be terminated.

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Lease Term The lease term is the duration or period of the lease agreement. This term states the starting and ending dates of the agreement. Using the lease term, the lessor can lock the tenant for the period specified in the term. But the term does not rule premature eviction of the tenant by giving a prior notice. This option is generally provided in the exit/termination clause.

Rent Payment The lease agreement mentions the amount of rent and its due date for the leased property. The mode of payment (by cash or cheque or any other mode) is also stated in the agreement. The lessor can also add an additional clause stipulating fine/penalties in case of late or insu cient payment of rentals by the tenant. Else, these may be mentioned as a part of a separate heading called ‘Fees, fines, charges’ as discussed subsequently.

Maintenance Charges In most cases, tenants are expected to pay a charge for the maintenance of common areas. It is called CAM (Common Area Maintenance) charge. The lease agreement must clarify whether this amount is meant only for maintenance operations or may also be used for marketing and promotional activities. The agreement should also clarify whether the maintenance charge is only for routine/preventive maintenance or it may be used for major overhauling/modifications/structural changes.

Fees, Fines, Charges The lease agreement can mention the charges that the tenants are required to pay in case of late rent, rent shortage, bounced cheque, etc. This provision also mentions the utilities that the tenant can use if the charges for utilities are not mentioned..

Security Deposit The owner of a real estate property has the right to charge an advance payment of equal to the monthly rental for a few months. This is nothing but a security for damages or unpaid bills. The lease agreement does indicate a process for it, the duration for which it is to be held, the time/date of its refund and permissible/due deductions at the time of refund.

Number of Occupants The tenant should state the total number of persons who would use the real estate property. If needed, the lessor can put a restriction on the total number of occupants by inserting a special clause to this e ect.

Hazardous Materials The lessor may put restrictions on the storage/handling/use of materials that he considers risky for the property. Materials may be unsafe, inflammable or explosive that may cause accidental fire around the property. The lease agreement should mention details of such materials.

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Responsibilities This provision includes each and every responsibility of both the owner and the tenant. It should be mentioned who is going to share the responsibility for certain repairs, maintenance or damages.

Usage This provision determines certain prerequisites governing the use of property by the tenant. Some important prerequisites are: (a) The property has to be used exclusively by the tenant as per the agreement. (b) No permission is granted for illegal businesses. (c) The tenant cannot change the nature of the agreed upon use of the property during the lease period

SIGNIFICANT CLAUSES

AND

EXIGENCIES CONCERNING LEASE AGREEMENT

Apart from the salient components mentioned above, the lease agreement also contains clauses covering di erent aspects of the property and the business. Application of these clauses is purely circumstantial, hence varies from case to case. Some of these clauses are enforced by the lessor to ensure security of his/her ownership and property, whereas others are requested by the lessee to ensure continuous occupancy and flexibility required to run his/her business. Some important clauses are discussed below.

Use Clause This clause is put in by the lessor for clarifying to the lessee how the property space has to be used. It is suggested that the lessee (tenant) must review this clause cautiously and, if needed, discuss it with the lessor (property-owner). The reason is that the use clause may impose unreasonable restrictions on the way the lessee plans to grow his/her business. The lessor imposes this clause to protect his/her property, but its improper interpretation regarding space usage may restrict the lessee’s ability to properly conduct his/her business.

Exclusivity Clause This clause is generally inserted at the insistence of the lessee who does not want competing businesses to come up next door. The lessee may ask for the total absence of any other competing store in the vicinity or may seek restrictions on the number and location of competing stores. In other words, restrictions could be requested in terms of either no space to a competing tenant/player/brand or no space to a competitor on the same floor or within a specified distance from the lessee’s store. Imposition of this clause requires serious thinking on the part of the lessor, and it cannot be imposed whenever requested. There are certain retail formats where it is mandatory for a mall to have multiple brands, and in some cases these brands need to be clustered together. It is especially true in case of comparison goods.

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In special cases, even the lessor can impose the exclusivity clause when he/she is apprehensive of the intentions of the lessee. It happens when the lessee is a prominent brand and is seeking permission to open more stores in the upcoming malls in the vicinity. In due course the lessee may observe the performance of its stores in all those nearby malls. Then a er analysing the stores’ performance, the brand may se le in favour of the mall where its store is most successful, shu ing down the stores in the other malls. To rule out this possibility, the lessor may impose the exclusivity clause barring the lessee from opening more stores in the vicinity.

Premises The premises stated in the lease need to be defined clearly. For example, if one is leasing a store does it include the parking facility? If one is leasing o ce space in a mall, does it include a kitchen area or bathrooms? What is the boundary of the store stated in the lease and what is defined as common area? To avoid any ambiguity or conflict in future, these things should be spelt out clearly.

Security Another major aspect to be dealt in the lease agreement is security. Both the parties should work to include in the lease agreement the relevant clause(s) that address the following security-related questions: (a) Who is responsible for securing the premises? (b) What does security constitute? (c) Is a security system there? If not, will the mall management install one? (d) Does the mall management intend to have way in the tenant’s area?

Repairs and Maintenance The best defence against rent-withholding hassles and other problems is to clearly set out in the lease agreement the responsibilities of the mall management and the tenant regarding repair and maintenance. The clauses on repairs and maintenance should address the following aspects: (a) The leaseholder’s responsibility to keep the rental premises clean and sanitized and to pay for any damage caused by his/her abuse or neglect of the premises. (b) Requirement that the tenant would alert the mall management about defective or dangerous conditions in the rental property. (c) Specific details about the procedures for handling complaints and repair requests. (d) Restrictions on repairs and alterations to be done by the tenant, for example, installing fitments and fi ings or painting walls without permission.

Entry to Rental Property To avoid the tenant’s complaints about illegal entry or violation of privacy rights, the lease or rental agreement should clarify the legal right of the mall developer and his/ her representatives (the mall management team) to access the property—for example, to

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make repairs. It should mention the period for which an advance notice will be given to the tenant before entering the property.

Restrictions on Tenant’s Illegal Activity To avoid trouble among the tenants, to prevent damage to the property and to rule out lawsuits from people living in the neighbourhood, the mall developer should include in the lease agreement an explicit clause prohibiting disruptive behaviour, such as excessive noise and illegal activities.

Other Restrictions The mall developer/managers must ensure that the lease agreement complies with all relevant laws including rent control ordinances, health and safety codes and occupancy rules. Any other legal restrictions, such as limits on the type of business a tenant may run, should also be spelt out in the lease agreement. Important rules and regulations covering parking and use of common areas should be specifically mentioned in the lease agreement.

RENT CHANGES

IN

LEASING AGREEMENT

Lease agreements are signed for durations ranging from one year to 20 years. During the term of the lease contract, the lease rental does not remain the same. There are inbuilt provisions in the lease agreement to enhance the rental. In many cases, the initial lease contract also spells out conditions for rent determination on lease renewal. Normal trend is that the lease rental increases by a specified percentage each year during the lease term, whereas on lease renewal it undergoes either a percentage hike or revaluation based on a benchmark. Some methods for determining the lease rental are described below:

Flat or Fixed Rental Under this arrangement, the lease rental remains the same during the entire lease term. The fixed rental is is normally charged in cases where the lease term is very small, say one year, or when there is a huge demand-supply mismatch loaded in favour of the tenant.

Graduated Rental This is the most commonly prevalent method. It mandates that within the currency of the lease contract, the rental is liable to increase a er a specified duration. The lease rental is generally increased every year for lease contracts whose duration is more than a year. For long-term contracts, say with anchor tenants, an upward revision could be due a er 3-5 years. The hike is generally in terms of a percentage of the base rent for the preceding year.

Revaluation Generally, revaluation of the lease rental is contemplated during lease renewal. People tend to feel that rentals can only go up with time. However, the trend may reverse, especially when the real estate is hugely overvalued and recessionary trends lead to

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corrections in the market. In such situations, many tenants ask for a rental revaluation. The benchmark for such a revaluation are prevailing rental rates in the market. Sometimes the lessor also agrees for rental revaluation when new tenants are hard to find and the current rental rates in the market are not very a ractive, and they expect a steep increase in rentals in future.

Accommodating unique tenants requires different leasing termsEDM Haat on the lines of Delhi Haat at EDM, Kaushambi

Index-based Rental When both the parties (lessor and lessee) agree for rent evaluation during the lease renewal, there should be a benchmark that is objective and acceptable to both the parties. The most objective method is benchmarking the rental against some index. Some examples of index are: the Wholesale Price Index (WPI), the Consumer Price Index (CPI) and the Share-market Index (sensex). However, the most relevant index for shopping malls would be indices related to real estate, retail or construction sectors. In the western world, shopping malls periodically compile and declare their footfalls, and this footfall index becomes the basis for rent escalation. However, this trend is not yet prevalent in India.

Percentage Rental A very stable and suitable mode of rent revision in uncertain times is the percentage rental. Under this arrangement, the lessor shares a certain percentage of the gross sale

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revenues generated by the tenant. For this mode to succeed, it is mandatory that the lessee agrees to share its sales data with the lessor. In most of the cases, the lessor also pays a minimal amount as a fixed commitment towards maintenance.

LEASING PROCESS So far our discussion hovered around the concept of lease and the lease document. It may give a false impression that the leasing activity comes into picture only when the mall has been built and tenants are required to fill the empty mall. But the reality is that leasing as a process starts right at the drawing-board stage of the proposed mall. This you will understand by learning about the di erent stages of the leasing process described below.

Determining the Tenant-mix of the Proposed Mall Though not strictly a part of leasing, determining the tenant-mix is the foundation on which all the leasing activities of future depend. The mall developer decides the tentative tenant-mix considering the a ributes of the mall catchment area and the specified zones for placing di erent product/service categories in the upcoming mall.

Developing a Leasing Plan It is an action plan to lease vacant space. In other words, the leasing plan outlines the action that the mall management will take to lease the vacant space. This is an elaborate document containing details of available retail spaces and tentative lease rentals that may be collected from each retail space. Rather than specifying the exact rental amount for a retail unit, it indicates a range of possible rentals. Estimation of the rental range depends on various factors like the prevailing rental rates in the market, the expected hike in rentals by the time the mall is operational, and the growth rate of specific industry segments. The leasing plan gives a range of gross revenue that can be generated from the project. This mode of estimation of a leasing plan is called ‘bo om-up approach’. Another approach for doing this is called ‘top-down approach’ in which the estimators start from the total investment on the mall project. Then they arrive at the expected gross revenue on the basis of the expected return on investment from the project. Finally, the expected gross revenue is divided among the mall floors and retail units to arrive at the rental per square feet for each retail unit.

Preparing a Portfolio of Retail Options Technically, this task comes in the domain of sales and marketing. However, commercial leasing cannot be done e ectively if this process is not carried out diligently. Depending on the intended tenant-mix, a portfolio is prepared by including all valid options available for each product/service category. This shortlisting is done on multiple criteria, like positioning of the brand, its relevance for the target consumers and its availability or otherwise in the catchment area. Once the portfolio is ready, the leasing team starts approaching specific targets (prospective tenants) for leasing.

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Approaching Prospective Tenants During this stage, the leasing team members approach the prospective tenants and motivate them to book retail space in the shopping mall. However, direct contact is just one of the many modes available for contacting the prospective clients. Some popular modes of approaching the prospective tenants are described below.

Tenant Contact Database The tenant contact database contains the contact details of many retailers. The database provides important information about the names/designations, addresses, phone numbers and e-mail addresses of the relevant people in the target organizations. Leasing Brochure A brochure containing vital details of the project (mall) should be prepared. The information provided in the brochure should reflect rosy business prospects to motivate the prospective tenants. However, one should not compromise with facts and reality while presenting such information. Even a er the completion of the initial leasing phase, the shopping mall management should seriously consider preparing another leasing brochure when the mall may well be into business for some time (say, 18 months). It is because vacancies may also crop up if some tenants do not renew the lease agreement a er the expiry of the initial lease agreement. Cold Canvassing This can be done either in person or by phone. For this purpose, the mall management team may develop a script that should be read out. However tele-callers should be suitably trained so that they may handle queries that come up a er the script has been read. A specimen of the script is: “Good morning Sir, my name is XYZ. I work for so and so company. We are currently looking for a category retailer for the ABC Shopping Mall. Would you have any interest in this opportunity?” If the potential tenant is interested, you should describe the mall and its premises in simple and honest terms, detailing its size, floors, anchor-tenants, connectivity and catchment area. If the potential tenant remains a entive to your description, it is important to commit him/her to action. There is a particular method to ask questions to ensure action. You may frame your questions in the following way: (a) When would you be able to visit the mall to view the site? Or be er (b) Can we make an appointment to visit the mall on Thursday? But never say (c) Give me a call if you want to view the site.

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Direct Mail A standard le er i prepared detailing the location and strengths of the mall together with details of available vacancies. Forward this le er to the retailers who deal in businesses for which stores are vacant in the mall. To find out the addresses of such retailers, the Yellow Pages, the tenant contact database and the directory published by the retail trade associations are good options. “For Lease” Signage In some cases a “For Lease” signage is erected on the shop front. In a mall where there are a number of vacancies, the mall manager should choose the best locations for hanging this signage. One should not go for too many signboards as it conveys a negative impression. All signboards within the mall must conform to the standard signage format adopted by the mall management. Print Media Advertising The mall management may decide in favour of giving an advertisement for vacant stores in a newspaper. Adequate budget must be approved for it. While opting for newspaper advertisement, the real challenge is to select the specific newspaper, supplement, page number, day of the week, frequency (in case of a series of advertisements) and the advertisement size. The advertisement may or may not contain the name and exact details of the property.

Letter of Interest and Intent These documents are prepared before the signing of the actual lease agreement. These are normally used when the mall is in the development stage and the actual possession is expected to take some time. However. these are also used in cases of re-leasing when the mall management is sure about the non-renewal of the lease agreement by some tenant(s) and the actual day/date of lease expiry is a few weeks/months away. Once the prospective tenant shows the intention to lease the property, the leasing team might present the dra le er of intent to be signed by him/her. It is a formality to elicit some sort of commitment from the prospective tenant and helps the mall management know the occupancy status of mall from time to time. The le er of intent generally contains the salient features of the mall and major terms and conditions of the deal. The signing of the le er of intent is generally accompanied by some advance payment by the prospective tenant so that the mall management could reserve the desired property for the said tenant and stop looking for clients. In some cases where it is too premature to sign a le er of intent (especially when the project is in very early stages with no certain commitment of deadline for completion), the leasing team may opt for ge ing the le er of interest signed before presenting the le er of intent.

Signing the Formal Lease Agreement The formal lease agreement is signed by the two parties at a stage when things are quite in shape in terms of project completion and business commencement. The formal

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agreement is an exhaustive document covering all aspects of business. Signing of the agreement is generally kept closer to business commencement so as to have the most relevant estimate/quotation for mall rentals. It is also a normal practice to treat the date/ time of the agreement signing as the base year for calculating rent escalations. However, the tenant may press for an alternate base year (the year business commencement) and may also seek a rent-free period.

Fit-out Letter Once the mall construction is complete, the developer writes a fit-out le er to the tenant o ering temporary possession of the premises to enable the la er to get the fit-outs work done. This le er is important for the tenant as many permissions and licences needed to run the business require furnished and ready retail stores. The fit-out period specifies the duration within which the task must be completed along with necessary dos and don’ts for the tenant during this time.

Occupancy of the Store Once all the formalities in terms of documentation, payments and licensing are over, the developer hands over the retail store to the tenant so that he/she can start his/her business. The rent starts accruing from this day only. However, as stated earlier, the tenant may ask for a rent-free period.

DOCUMENTATION USED FOR INTERACTION

WITH

PROSPECTIVE TENANTS

The le er containing lease details for the prospective tenant and the lease application form are the documents that are used for interaction with prospective tenants.

Letter Containing Lease This le er is to be used in any discussion held with regard to the premises up for leasing. It contains suitable details to enable a prospective lessee to make a commercial decision with regard to the premises. This le er should always have a floor plan a ached in which the said premises is highlighted. It can also have details of the mall, if required by the tenant.

Lease Application Form The document requires the applicant to provide substantial details about his/her business. It is a healthy practice to use this document as an ‘agenda’ for meetings with potential tenants. This will ensure that the mall developer covers all areas in a methodical way.

BEST LEASING PRACTICES The following are the best leasing practices:

Vacancy Report/Leasing Report The leasing report is to be maintained and updated on a minimum monthly basis or as instructed by the lessor. The mall manager should liaise with the leasing operatives to ensure accuracy in communication.

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Meetings with Tenants Good business practice dictates that the mall manager should, whenever practicable, personally discuss all leasing ma ers with the lessee (tenant). If possible, a second member of the sta should be in a endance at this meeting and sign o on the file note.

Draft Lease to be Available to Applicant One set of complete dra lease except for details of the lessee, term and rent must be available at the mall manager’s o ce before a shop is o ered or advertised for lease. It should be available for the prospective tenants to review on request.

Database Development All enquiries relating to permanent lease, received at the o ce of a shopping mall, should be passed on to the leasing department. This will facilitate in providing information to the prospective tenant about any opportunities in other malls developed by the same developer. Besides, details about the prospective tenant will also get added to the tenant contact database for future reference.

Misrepresentation As per the law, it is not acceptable to misrepresent information to the prospective tenants. Therefore it is the responsibility of the mall manager to clearly state all facts in a true and correct manner. It is his/her responsibility to ensure that the prospective tenants get a clear understanding of their responsibilities before they commit to the lease agreement.

Bank Guarantee This is a document provided by the tenant’s bank to verify that the security money, if stipulated by the lessor, has been put aside in the landlord’s name, to be drawn by the landlord if the tenant defaults on certain terms of the lease. The document must exactly match the lease in stating the names of the tenant and the landlord. The bank guarantee is valuable to the landlord who usually keeps it in a safe or bank. The only tenants who are exempt from providing bank guarantees to their landlords are usually well-known and respected businessmen or national chain operators.

Advance Rental Payments/Security Deposits Security deposits are to be held by the mall’s accounts department in a local bank into an interest-bearing account. These should be deposited for a duration corresponding to the tentative date of refund.

Measurement of the Premises Area The correct area of a shop is important as it forms the basis of the lease rental and CAM charges and in some instances the base rent. It is important that scale drawings for the area already constructed are available so that the factual position may be verified. The measurement of any area needs to be carried out by a qualified surveyor.

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Fit-out of Premises The fit-out of a premises is the single most important issue that a ects the appearance of the interior of a shopping mall. At the commencement of a fit-out, the mall manager must ensure that adequate services are available for it. All tenant fit-outs are to be approved by the mall management and the lessor’s architect, if required. The mall manager must make every e ort to ensure that the tenants undertake to upgrade their premises on the renewing of the lease.

Fit-out Prior to Lease Execution Most shopping malls follow the policy that no lessee can commence fit-out or take occupation of the premises until the lease is executed and returned or without the lessor’s approval. Fit-out plans should also be approved by the lessor prior to handing over the premises to the lessee. In certain circumstances and only on the lessor’s wri en authority, the lessee may be granted permission to commence fit-out prior to lease execution. But in this case also, the lessee must complete the standard le er of indemnity before starting the fit-out work. Under no circumstances should the lessee be allowed to take possession of the premises without first consulting the lessor’s solicitors as to the possible implications of the lessee’s proposal for occupancy.

LEASE PREPARATION Generally legal representatives or solicitors prepare lease agreements on the instructions of the mall developer or the mall management team. This is done to ensure total adherence to local and current lease legislation. Although this method of lease preparation is costly, it can save the mall developer from incurring significant expenses due to damages caused by an improper or wrong lease documentation. The mall manager provides all the relevant details including special lease conditions to the solicitors. He/she is also required to thoroughly check the lease documentation for accuracy prior to forwarding it to the tenant for signature.

LEASING ADMINISTRATION The leasing work does not end a er signing of the lease agreement. Due care must be taken to ensure that no clause of the agreement is violated. This task is generally delegated to the mall management with occasional guidance and support from leasing specialists as and when required. The signed lease agreement (master copy) is generally kept in the head o ce in case of organizations having multiple malls. However, a copy of the same is kept with the o cer/manager in charge of the mall.

Record of Tenant and Lease Details Before the retail tenant commences business, his/her tenancy must be accurately recorded on the mall’s database. Due care must be taken while collecting and recording the following information about the tenant:

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• • • • • • • • • • • • • •

Shop number Shop area (in square feet) Shop name Retail category Lease term (including commencement and end dates) Base rent (in Rs.) CAM charges (in Rs.) Marketing fund contribution (if applicable) Base rent review dates and method of review Revenue share (in %) Lessee name and address Address, contact name and contact number for leasing ma ers Address, contact name and contact number for rent collection Address and contact name and phone number for sales figure collection

Rent Collection Collection of rent as specified in the lease agreement is an important function of the mall management. It is also a frustrating, time-consuming and di cult task for the mall management. Usually rent is due from every retailer on the first day of every month. Rent collection means receiving all monies payable under the lease (i.e. base rent, CAM, promotion key, etc.). The mall management reviews all recurring charges and also calculates any special charges to be levied. Normally, invoices are issued to all retailers in last week of each month. Once retailers pay their rent, it is necessary to receive, record, deposit and allocate it properly.

Rent Reviews Lease terms of three to five years are commonly observed. Some leases, as in the case of anchors, may have a longer term. The method for determining the rental increase is agreed upon during the finalization of the lease agreement. This method may go by the market review of rental rates or may opt for fixed rental increases or take into account an increase in specific index, say consumer price index (CPI). In many instances, the rent increase is based on two or more of these methods: The following example illustrates it for a mall over a five-year time-horizon. The lease agreement provides for an index based rent hike up to the third year and provides for a market review during fourth, which is followed again by an index based rent hike for subsequent years. Year Lease Rental (i) Year 1 — Rs. 45,000 (ii) Year 2 — Year 1 + index-based increment (iii) Year 3 — Year 2 + index-based increment (iv) Year 4 — Market Review (v) Year 5 — Year 4 + index-based increment

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All commercial leases other than those of a very short term contain some form of rent review.

Maintenance and Repair Issues The lease agreement clearly delineates the responsibility of the mall management for certain categories of maintenance and repair activities that are to be carried out using CAM charges. However, any act of maintenance or repair (especially the ones within the tenants’ stores) is beyond the CAM mandate and its expenditure must be borne by the tenants. It is the responsibility of the mall management to get such work done in a tenant’s store and present the bill for the same to the tenant. Key issues in maintenance and repair are: categorizing maintenance and repair work under free and payable heads, promptness in heeding to the tenants request and issues relating to courtesy.

Subleasing and Lease Assignment The only legal way to get out of a lease is to sublet (subleasing) or transfer (assignment) your lease. Once the decision to either sublet or assign the lease has been made, the landlord should be notified in writing. In certain cases, there may be restrictions on the right to sublet or transfer the lease. Let us understand the di erence between subleasing and assignment.

Subleasing Although the term sublease (sublet) is widely used, it only applies when the person who signed the lease intends to vacate the unit for a short period of time and expects to return to it a er the said period. Under a sublease, the landlord is not obliged to agree to an extension of the current lease with the sub-tenant. If the sub-tenant wishes for any reason to file a claim, it must be done by the person who holds the lease and not the sub-tenant. While the landlord should be notified as to who will be replacing the original lessee, and for how long, it is the person who holds the lease who should work out the arrangement with the sub-tenant. If the original lessee does not intend to assume the leased space again in future, it is be er to assign than to sublet. The reason is that in a sublet, the holder of the lease continues to be responsible for any damages to the apartment and also for the payment of rent for the duration of the sublease. Assigning the Lease If the person who signed the lease does not intend to run his/her business from the leased premises then the lease must be assigned (transferred) to a new tenant. In assignment of lease, the lessee hands over all his/her rights to the assignee. The lease assignment (transfer) releases the original lessee as tenant from all the rights and responsibilities from the date of assignment. When a lease is assigned, the new tenant assumes all the legal rights and responsibilities for the retail space and can take action against the landlord directly. In most cases, the assignment is a superior option for the lessor as well as the lessee. It is good for the lessee as he/she gains immunity from any liability arising out of the lease

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agreement. The lessor gains in the sense that he/she deals directly with the person who directly occupies and uses the retail premises. Table 6.1 lists some titles related to subleasing and assignment of lease. Table 6.1: Titles relating to subleasing and assignment of lease

Term Sub-lessor Sub-tenant Assignor Assignee

Description The occupier who sublets the retail space to the sub-tenant. The person to whom the occupier sublets the retail space. The occupier who is assigning his lease. The person to whom the occupier assigns the lease.

Tenancy Schedule It is the main reference document for the mall and contains all tenancy details. Most landlords require the mall management team to audit the tenancy schedule against individual leases on an annual basis to ensure that there are no discrepancies. Most automated systems rely on the dates and details recorded in the schedule to prompt events such as rent reviews. Therefore an error in the documentation due to wrong recording or missing of a rent review can prove costly for the landlord. .

Lease Renewal and Re-leasing Tenants sign lease agreements for occupying retail space in shopping malls for di erent terms and at di erent times. Consequently, all the lease agreements do not originate and end at the same time but are staggered over a long time period. Sometimes the mall leasing and mall management teams purposefully keep the lease expiry staggered so as to avoid sudden workload and the risk of sudden vacancy in the shopping mall. Ideally, there should be a few lease renewals every year. The concerned section should prepare a schedule of lease expiry and set trigger/reminder for lease renewal 3 to 6 months before the actual expiry. Renewal of lease to an existing tenant within a mall management is an easy decision. Each renewal must be examined taking into account the actions outlined in the mall business plan and the current situation. It is very important that no informal comment is made prior to any formal lease renewal decision as it may give the existing lessee the wrong impression of the impending lease expiry and subsequent renewal. It is important to start following up the tenants 3 to 6 months before lease expiry because of the possibility that some of them may not opt for renewal. In such a case, the leasing team must identify suitable replacements for them in due time. A ready portfolio of retail options in the market always comes handy to do so e ciently.

Monthly Holdover If a lease is not to be renewed, the landlord and tenant may agree to maintain the lease arrangement on a monthly holdover basis. This agreement is usually ended by either

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party giving one month’s notice in writing. This is the usual practice when the landlord plans to redevelop the mall or part thereof and cannot provide security of tenure to the tenants by way of fixed term lease.

EXPIRY

AND

TERMINATION

OF

LEASE

The contractual relationship between the lessor and the lessee as defined by the lease agreement exists as long as the lease agreement survives. The lease agreement may cease to exist in two cases: (i) The lease expiry in a natural way (ii) Termination of the lease before the expiry of its term. The lease expiry takes place at the end of the term as specified in the lease agreement if both the parties do not agree to extend it further on the same or modified terms and conditions. Normally, a notice specifying that the lease will not be renewed is given to the other party 3 to 6 months before the end of the term, either by the landlord or the tenant. The lease agreement also outlines the conditions about the state of the premises under which the tenancy will be handed back to the landlord. So an inspection of the premises is arranged, and when the lessor is convinced that the premises are in a satisfactory condition as per the lease agreement, the bank guarantee (if asked under the lease agreement) is returned to the tenant. In case of premature termination, the initiative may be taken by either party. The procedure for termination is governed by the exit clause included in the lease agreement. A notice to this e ect is given to the other party in this case as well. When the tenant places the request/notice for termination of lease, it is called lease surrender. Basic considerations in lease termination are: reason for termination (contractual violation of a serious nature), length of the notice period, compensation payable to the aggrieved party, dispute redressal mechanism and issue of jurisdiction in case of a legal suit. It may be noted that the tenant may have legal rights to renew a tenancy for the premises which are occupied for business purposes, and which have not been excluded from protection. The law generally prohibits contracting-out, but such an application may be permi ed if the lease is for a fixed term and a joint application is made to the court by both the landlord and the tenant.

SUMMARY Mall lease is a contractual agreement through which the mall developer gives the right to use his/her mall space (retail store) to the other person (tenant/retailer/brand) for a limited period of me, subject to various condi ons. It is a win-win situa on for both the mall developer and the tenant as both make money by leveraging on other’s competence while limi ng their exposure to their area of exper se. A lease agreement defines the rela onship between the landlord and the tenant. It contains a number of clauses and subclauses that safeguard the interests of both the par es. A good lease agreement ensures that cri cal events like occupancy, possession, opera ons, rent determina on and revision and termina on/assignment of lease are clearly delineated. Both the par es need to follow a due process for signing a lease contract and must complete documental formali es in the form of various pro forma and le ers.

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REVIEW QUESTIONS 1. What are the di erent modes of occupying retail space in shopping malls? 2. Define leasing? What are the di erent types of leasing prevalent in India? 3. Dis nguish between the ‘right of ownership’ and the ‘right to use’ in the light of a lease agreement. 4. What are the prerequisites for signing a lease agreement? 5. Discuss major components of a lease agreement. 6. Describe the clauses in a lease agreement that aim at safeguarding the interests of mall developers? 7. Discus some clauses of a lease agreement that tenants may insist upon to safeguard their interests. 8. Explain the en re process of commercial leasing for shopping malls in India? 9. What are the di erent op ons available to a tenant if it doesn’t want to con nue doing business from a shopping mall a er having occupied a retail space on lease for a long term? 10. “The task of leasing does not end a er the lease agreement has been signed”. Comment.

PRACTICE EXERCISES 1. Visit a nearby shopping mall and find out the number of tenants (brands) in each product category. Try to iden fy the product/service categories for which there could be an exclusivity clause in lease agreements. Also confirm the same from either the tenants or the mall authori es. 2. Contact any prominent mall development and management company and find out the structure of its leasing department. Find out whether the structure centralized or decentralized. 3. Select a shopping mall of your choice. Find out the total number of lease renewals e ected in the mall last year as a percentage of total leases that were due to expire. Would you like to label your finding as ‘successful’ in terms of the lease renewal? 4. Select another mall of your choice. Examine the new brands that came in as a result of releasing a er ini al lease agreement expired. How many of these non-renewals were at the behest of: (i) Mall developers (ii) Tenants. Do your findings convey any meaning to you?

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SUGGESTED READINGS 1. Benjamin, J.D.; Boyle, G.W. and Sirmans, C.F. (1990), ‘Retail leasing: the determinants of shopping center rents’, Real Estate Economics, 18, pp. 302–312 2. Dillman, R.J. (2007), The Lease Manual, IL: ABA Publishers 3. Gilbert, D. (2003), Retail Marke ng Management, 2nd edi on, New Delhi: Pearson Educa on 4. Magazine, A. (2009), ‘Leasing of space’, In A. Taneja (Ed.), Malls in India, p. 22, New Delhi: Images Mul media Pvt. Ltd. 5. Real Estate Educa on Company (1989), Successful Leasing of Retail Property, NY: Grubbs & Ellis Company 6. Roy, D. and Masih, N. (2007), Mall Management: A Growing Phenomenon in Indian Retail Industry, New Delhi, India: report by Jones Land LaSelle Meghraj 7. Singh, H. and Banga A. (2010), ‘Lessons from India’s pioneer malls’, Shopping Centre News, November–December, pp. 36–38 8. Singh, H.; Bose, S.K. and Sahay, V. (2010), ‘Management of Indian shopping malls: impact of the pa ern of financing’, Journal of Retail and Leisure Property, Vol. 9(1), pp. 55–64 9. The Financial Express (2006), ‘Mall developers prefer lease management’, 31 October, h p:// www.fi nancialexpress.com/news/mall-developers-prefer-lease-management/182310/2, accessed on 14 June 2009 10. Wheaton, W.C. (2000), ‘Percentage rent in retail leasing: the alignment of landlord–tenant interests’, Real Estate Economics, 28, pp. 185–204

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CASE

Retailers down shutters India’s leading real estate and mall-development company, XYZ Retail Developers Ltd, faced an awkward situa on in April 2009 when retailers at two of its malls in Delhi went on indefinite bandh, pulling down shu ers. “The rental in these malls is exorbitant and business is nearly zero which is totally because of the company’s failure at marke ng and promo ng the mall,” said a retailer who has a store each in both the malls. The bandh resulted in all big brands shu ng shop in protest. Their demand for the reduc on in rent comes a er XYZ began giving incen ves to new entrants, which include rent-free spaces ll November 2009, contracts signed on pure profit-sharing basis, no fit-out charges for the new retailers to enter the mall. The rentals, which were decided three to five years ago, were anywhere between Rs 200 to 400 per sq which lead to a rent of up to over Rs six lakh a month. But shop owners felt they didn’t need to be burdened if there is no business. “The mall developer (XYZ) has been in mida ng us for the past one year to open our respec ve shops when the mall is not even func oning. They have been con nuously giving us opening dates of the mall since early 2008 but their failure to give the precise date of opening has damaged our merchandise over the past year,” said another retailer. The president of the Malls Welfare Associa on of the area said, “We are being treated like bonded labour just because we supported them, made ini al investments and ed up for several years.” The managing director of XYZ Retail Developers Ltd said, “These malls have been recently opened a er obtaining all clearances and house some of the top interna onal and domes c brands. We are commi ed to make them successful and will be shortly introducing the hugely successful mul plex in both these malls.” Retailers shared that the malls opened with less than 40% occupancy. The comple on cer ficate for both the malls came months a er the developer actually forced the retailers to open the stores. And once the mall got the comple on cer ficate, they tampered with the structures and made addi ons to it. Out of the two malls in ques on, ABC Mall is located next to Premier Cakewalk, a popular mall in that locality and which does not seem to be undergoing any recession blues as crowds are s ll flooding it every day. A mul plex was expected to open with the mall early last year but was nowhere close to opening for at least another month. “XYZ has been a sad experience for us,” said a retailer, who revealed that the revenue from his store in a mall in Ghaziabad is five mes more than XYZ mall, simply because when people don’t know even about the opening of the mall how can one expect customers.” “Our experience indicates that a mall usually takes at least one year to pick up a high number of foo alls. We are sure these two malls will emulate the success of our other malls. We would expect our retail partners to move along with us in a collabora ve manner,” said MD of the company. But the retailers were looking for op ons including taking legal ac on against the XYZ and suing them for claims from Rs 4 crore to Rs 200 crore for the investments made.

CHAPTER

7

Marketing and Promotion Activities for Shopping Malls

LEARNING OBJECTIVES This chapter will enable the readers to • Understand the concept and need for marke ng and promo onal ac vi es for a shopping mall • Know about di erent marke ng and promo onal ac vi es that are relevant to shopping malls • Relate the marke ng and promo onal ac vi es with specific stages of a mall’s life cycle and development • Appreciate specific characteris cs of and condi ons for carrying out these ac vi es

PROMOTION BRINGS FOOTFALLS TO MAGNA Magna Mall, built by a leading mall development company of India, was inaugurated on April 1, 2009, in the city of Hyderabad. The half-a-million square feet mall was located on the highway joining Hyderabad with Chennai but was four kilometres away from the nearest residen al cluster. The developer was sure to overcome this barrier as the mall had excellent ambience and an enviable tenant-mix. All the leading brands in India were present in the mall. However, foo alls never reached the expected level. Tenants blamed it on the overconfident mall management team that believed the developer’s name and the tenant-mix alone would be su cient to a ract shoppers. Independent studies carried out by some tenants revealed that a large propor on of the target segment was not aware of the mall or the brands present in the mall. Results of the studies were placed before the mall management team. Therea er, the management team worked out a series of promo onal events to improve shoppers’ awareness of the mall, and the tenants also agreed to share a part of the addi onal expenditure.

Marketing and Promotion Activities for Shopping Malls 139

The management team prepared supplementary promo onal calendar for the next year. One major event was planned every month. The events included live performances by various ar sts, appearances by film and TV stars and visits by sportspersons. These events were widely publicized through FM, hoardings, and inser ons in newspapers and leaflets. Each week, a select group of shoppers was allowed to meet the visi ng celebrity. Between each major event, each weekend was packed with at least one promo onal contest for which freebies and gi s were sponsored by the tenants. These contests were promoted through targeted leaflets, displays near schools and colleges and FM radio. Thanks to the high-voltage promo onal campaign, Magna Mall witnessed a sustain inflow of shoppers every week. Once people visited the mall, the ambience and stores were good enough to make them patronize it.

INTRODUCTION Malls compete with other retail establishments and leisure activities to grab a share of the customer’s free time. Besides, continuing growth in mall development means that consumers have several alternative malls to choose from for their leisure or shopping trip. This competition has forced mall developers to provide more stimulating environments and greater potential for leisure satisfaction. It is also observed that traditional leisure activities are being emphasized to a ract people to the mall. Another challenge before mall developers is to a ract tenants. Prominent highstreet locations can ensure huge footfalls for a mall, enticing retailers to make a beeline for every square feet of retail space available there. However, very few shopping malls can claim to have this privilege. Due to various reasons, retailers are not always enthusiastic to occupy space in all shopping malls at all times. Market sentiments keep fluctuating and mall developers need to convince prospective tenants that their o er (mall space) gives value for their money. There are numerous instances of shopping malls seeing gradual decrease in their occupancy level, malls opening with less than optimum level of occupancy and, worse, mall projects being put on hold due to lack of takers for mall space. Thus, mall developers need to present their case before prospective tenants in an e ective and credible manner. This is where marketing and promotions come in the picture.

CLASSIFICATION

OF

MARKETING ACTIVITIES

IN

SHOPPING MALLS

Shopping malls are engaged in a wide range of activities under the major head ‘marketing’. Some of these start as early as the drawing-board stage of the mall project. Some activities commence when construction is going on and some relate to launch of the shopping mall, whereas a host of activities become a regular feature of the mall when it becomes and continues to be operational. However, a few of these activities cut across di erent timelines and continue through all these stages. There are three distinct sets of stakeholders who are relevant for mall marketing and promotional activities—investors, tenants and customers. Di erent marketing

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activities carried out during the life of a mall are aimed at di erent stakeholders. One set of activities targets the investors who put money in the mall project, another set of activities targets the prospective tenants to persuade them to occupy space, and yet another bunch of activities aim at the shoppers to generate footfalls for the shopping mall. Chronologically, marketing and promotional activities in a shopping mall are categorized into the following two main phases: (a) Marketing and promotion during planning and construction phase (b) Marketing and promotion during launch and operations phase

MARKETING PHASE

AND

PROMOTION

DURING

PLANNING

AND

CONSTRUCTION

Though all three stakeholders (investors, tenants and customers) could be targeted at this stage, the focus is on investors and tenants. No project can see the light of day without arranging adequate finances. Identifying, approaching and persuading investors to put money in the mall project constitute the key activity at this stage. As identification of prospective tenants and negotiations with them may also take some time, this activity also starts at mall conception stage. Finally, it is not a bad idea to create curiosity, sensation or awareness among target customers even before the mall is inaugurated. These marketing and promotion activities, specific to each category of stakeholders, in the planning and construction phase are discussed as under:

Targeting Investors As discussed in Chapter 4 on Financing and Revenue Model of Malls, the money for mall development comes from multiple sources—public or private, debt or equity (long-term or short-term), a small number of large creditors or a large number of small sources. Di erent tools used to tap these sources are discussed below.

Detailed Portfolio of the Mall Project Preparing a detailed portfolio of the mall project is strictly not a marketing task. The detailed portfolio is a complete set of documents that are generally demanded by prospective lenders like commercial banks and financial institutions. Most high net-worth individuals also insist on these documents as they get the o er ve ed by experts/consultants. The detailed portfolio consists of documents relating to dimensions, valuation and title of the property, approved construction plan, project brochure (if ready), tentative business plan, construction estimations, received approvals (if any) and audited financial reports of the mall developing company. Project Brochure It is a concise, artistically designed document containing vital details and graphics of the proposed mall. Information contained in the brochure is not highly technical, as it focuses more on business potential and visual appeal of the mall project. Computer-generated graphics are a vital part of the brochure. Project brochures invariably contain contact details

Marketing and Promotion Activities for Shopping Malls 141

of persons concerned. They may also contain details of investment options either in the body of the brochure or as a separate sheet accompanying it. Project brochures are either given personally during a personal interaction or posted and followed up subsequently.

Project/Company Website Today, the Internet is a widely used and e ortless source of information. It must be put to good use by mall developers. People generally identify a mall website with its customer (shopper) interface. However, during the initial stage of mall development, there is nothing to sell. Still it is essential to develop a website carrying relevant and positive information about the project, as prospective investors are expected to cross-check/ verify the information a er receiving the investment o er. If the proposed mall has a website, the potential investor is likely to come across favourable information rather than pieces of information posted by someone else. The website also comes handy in case of casual investors who are looking for investment options on the Net. The website may be designed to generate leads and develop a database for further follow-up.

Landing page of ‘theforumexperience’

Mass Media The mass media is a very e ective means if mall developers aim at a racting public finances through an IPO or mutual fund. Mass media advertisements (electronic and print) evoke trust among potential investors. However, financial institutions are least interested in the mass media portrayal of the proposed mall. Casual and retail investors who invest through real estate brokers (discussed next) may develop faith in the mall project through such advertisements.

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Real Estate Brokers Brokers play a vital role in mall financing, specifically speaking mall refinancing. Mall developers start mall development work using personal funds or those generated from private sources at a relatively high cost for a short duration (say, 3–5 years). To repay this loan and replace with low-cost (practically no-cost) funds, developers look for retail investors, and real estate brokers help in identifying such investors. These investors are generally individuals who wish to park their surplus in a project that gives them capital appreciation as well as assured income. The assured income comes in the form of monthly rental coming from the stores. Monthly rental expected from a mall store is converted into capital value to be charged for the store (capitalization). Key issues involved in individual investments are return on investment (ROI), payment terms (white versus black component) and payment schedule. Brokers have a network of o ces through which they initiate contact with prospective investors. Some brokers also use print advertising and leaflets/brochure to contact the investors.

Role of Real Estate Brokers Real estate brokers play a significant role in arranging finances for the mall. Their intervention is specifically towards refinancing of the project. Instead of waiting for 15–20 years to recover investment and arranging fresh funds for each new project, developers resort to capitalization that provides liquidity within two to three years. And, the funds thus generated are invested in other projects. This way the same funds could be rotated over a number of projects over a period of time. It is not possible without the active support of real estate brokers. Brokers are generally individuals or partnership entities. Most of them are unregistered and operate as stand-alone shops. The more successful ones open multiple o ces or collaborate with like-minded brokers to form a sort of consortium. However, there are very few big brokers operating as a professional entity. Most of the brokers deal in both residential and commercial real estate. There is no central or state authority that trains, certifies, regulates or controls the working of these brokers. Most of them are not highly qualified though the bigger ones do employ qualified managers and executives.

Working of Brokers Brokers operate from their o ces in a locality. For awareness and promotion, they use display media. Prominent publicity tools used by them include signboards, wall paintings, banners, print advertisements (classified ads in the real estate supplements of newspapers), leaflets (either distributed through newspaper or handed over door to door) and advertisements in local cable TV. Their o ces also contain display and informational material like posters, brochures, layout maps and building plans. These are meant for customers who visit their o ces. It is not uncommon for brokers to patronize or sponsor events and festivals organized by the local community. They use these social, cultural or political platforms to develop a rapport with the community. The deciding factor in this business is the element of trust

Marketing and Promotion Activities for Shopping Malls 143

that they command. They also have associates who work with them on a part-time and commission basis.

Arrangement with Mall Developer The mall developer may appoint one or more brokers for selling the mall space to investors. The appointment may be formalized (a wri en agreement) or informal. As influence of brokers tends to be local and they are appointed in such a manner that all potential geographies/localities are covered. Sometimes, the developer identifies one large broker for each locality/area who, in turn, identifies sub-brokers for smaller geographic divisions. Selling/brokerage rights for a mall are generally not given to a single broker. It is particularly true in case of large projects where more than one broker is involved. Under highly systematic arrangements, di erent parts of malls (di erent retail units) are assigned to di erent brokers to avoid selling of the same unit to di erent customers through di erent brokers. Each broker has the exclusive right to sell the assigned stores for a specified time period. This right is called mandate. In lieu of mandate, brokers may be required to deposit a specified security amount. Progress made by the broker is reviewed from time to time, as the developer cannot run the risk of waiting till the end of the mandate period because it may spell doom if the broker does not perform. Depending on performance of the broker, the terms and ambit of the mandate may be modified. Brokers are advised to sell the space to investors at a price specified by the developer. Remuneration varies from case to case. In some cases where brokers are supposed to sell the space at a fixed price, remuneration comes in the form of commission which is an agreed upon percentage of the sale proceeds. In other cases, brokers are conveyed a floor price at which they earn a fixed commission. Any increase in the space price beyond the floor rate may be passed on fully or partly to the broker. A typical example is given in Table 7.1. Table 7.1 Broker–developer arrangement: an example

Model 1: (a) Range: Rs 125-150/sq. (i) (ii) (iii) Model 2: (a) Floor rate: Rs. 150/sq. Ft (i) (ii)

Price/rate

Broker commission

@125: 2% For incremental gain i.e. 3% between 125 and 150 @ > 150: 4% Price/rate

Broker commission

At the floor rate 2% For incremental gain To be shared by the broker beyond the floor rate and developer in an agreed-upon proportion

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Precautions while Appointing Brokers Brokers are independent entrepreneurs with their own objective (profit maximization). Since they carry the developer’s mandate while negotiating the deal with customers (investors), they represent the developer. During the deal, their behaviour is guided by their objectives but they should not compromise the image of the mall developer while doing so. To ensure this, the developer must take due care while appointing brokers. Some major concerns and precautions in this regard are listed below: 1. Brokers should be having their own o ces in the area where they intend to sell the retail space. They should also have a network of close associates. Only then they will be able to carry out the task. 2. They must be operating in the area for a considerable time and must have a decent reputation. A thorough check of their history and credentials must be done. 3. It must be ensured that brokers share all the details of the project with the customer fairly. They should not make any claim that the developer does not support or cannot fulfil. When a false promise made by a broker is not honoured by the developer, it may lead to customer dissatisfaction and litigation. 4. Brokers must be advised to report every finalized deal as early as possible so that the developer is aware of the latest status. It becomes all the more important when the same retail units are allocated to di erent brokers. In such cases, the same retail unit may be sold by di erent brokers if the developer is not updated in time. 5. Brokers must abide by the price advice given by the mall developer. They should not try to manipulate prices as di erent prices quoted for the same or similar retail units in a mall can tarnish the image of the mall. 6. Brokers should have adequate and appropriate manpower to handle the work.

TARGETING RETAIL TENANTS A racting retail brands to a shopping mall might take considerable time, hence this activity is initiated as soon as the architectural details are ready. While initiating e orts to a ract tenants, it is assumed that a detailed analysis of the catchment area has already been done and vital information regarding the market potential and existing competition is already available. Another prerequisite is the preparation of the tentative tenant-mix plan in terms of product/service categories and proposed zoning scheme. The task of a racting tenants overlaps with the work of the leasing team. The tools used in this task are described below:

Portfolio of Retail Options In the light of the proposed tenant-mix and available options under each product/service category, the marketing/leasing team should prepare a list of all retail tenants that may be considered for each category. From the exhaustive category-wise lists of potential retailers, the following cases are excluded: (i) The ones who are already present in the catchment area and doing good business.

Marketing and Promotion Activities for Shopping Malls 145

(ii) The ones who would not like to come to this mall. Reasons could be rentals, image or strategy. (iii) The ones whom the mall would not like to accommodate. Reasons could be their paying capacity, brand image and past experience with the brand.

Database of Target Tenants Contact can be initiated with the selected potential retailers if the marketing/leasing team has access to an updated database of retailers. Vital pieces of information required in the database are the names, designations, addresses, phone numbers and e-mail addresses of the persons who take leasing decisions in the target retail companies. Such information may be collected through company websites, public o ces (SEBI, ROC) and databases sold by trade associations. While using data bought from trade associations, due care must be taken to validate it.

Website of the Shopping Mall The website of a shopping mall does not sell retail space, but it does supplement selling e orts of the mall sales team. A er the mall has made initial contact with a retail brand through an e-mail, mailed brochure or a telephone call, it is common for the retailer to look for more information about the proposed mall. The most convenient mode of doing so is the Internet. The person concerned in the retail company can get much more detail from the mall website as compared to what could be encapsulated in an e-mail, brochure or a telephonic conversation. A ractive visuals, audio-visual e ects, floor-plans, architectural and engineering details, three-dimensional graphics and virtual tours provided in the mall website can make a deep impact on the prospective tenant. A good website also handles queries by the visitors and helps in developing a database.

Leasing Brochure It is the document that contains vital marketing details in an appealing manner. It is developed in so as well as hard copy formats. The so copy of the leasing brochure is mailed immediately to a large number of targets, but its hard copy is despatched to select targets a er screening the database. Though the so leasing brochure has the advantages of cost and speedy delivery, providing its hard copy is also necessary as many organizations have a tall hierarchy and the leasing proposal needs to be put up before a number of people for approval. The hard copy is definitely more appealing because the print-out of the so brochure, if taken by the recipient, is likely to be black and white. A leasing brochure contains contact details of the persons who should be contacted for leasing the space.

PowerPoint Presentations Once the sales/leasing team succeeds in securing an appointment with the person/ authority in charge of the leasing decision in the target retail company, the team must prepare a detailed presentation containing all vital details about the space being o ered on lease. The presentation should be crisp and may include details regarding the catchment

146 Mall Management

area, target customers, business potential, break-even estimates, charges and rentals and services o ered. A good PowerPoint presentation should not try to answer everything but also stimulate a few questions. Excessive details should be avoided as they could make the presentation monotonous, leaving no scope for interaction/clarification during the question-answer session a er the presentation. Selection of presenters is very important. The presenter must be have a clear idea of whatever is presented on the slides. The presentation could be handled by a team of two or more persons. Of whom, the more communicative ones give the presentation, whereas the most logical ones handle the Q & A session.

Mass Media Advertising The decision to opt for retail space is a B2B decision and is highly rational. Such decisions are seldom a ected by mass media advertisements. However, a mass media advertisement can make retailers aware of the retail space o er even before the marketing/leasing team approaches them. In some cases, retailers might themselves initiate the deal if the mall happens to be at a happening location.

TARGETING CUSTOMERS It seems too premature to think of targeting customers during the planning and construction phase, that is, before the mall is ready or operational. The customer can get the real feel of a mall only when it is operational. However, the developer may try to create a sensation or aspiration in the minds of customers about the proposed mall. The marketing tools used to introduce the proposed mall to customers during this phase are described below:

Mall Exteriors The exteriors of a mall under construction are su cient to evoke interest among customers. If they see it developing day by day, they may develop a curiosity to visit it when it opens. If the pace of construction is rapid and uninterrupted, it conveys the message that the mall is a good project. It is advisable to display logos or names of the prospective tenants at strategic locations of the under-construction mall as and when they sign the le er of interest/intent. However, permission must be taken from them to do so.

Hoardings There should be a large hoarding in front of the mall project so that people passing by could see it regularly. The hoarding should contain the name of the mall, its developers (especially, if they are prominent ones), the graphic of the completed mall and the logos of prospective tenants (with their permission). In addition, the marketing team may decide to have more such hoardings at major locations in the catchment area.

Leaflets Distribution of leaflets is generally done at the time of mall inauguration. However, leaflets may also be distributed when the shopping mall is at an advanced stage of construction. The leaflet should contain information as specified for hoardings.

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Advertisements Print advertisements are rarely issued before the completion of the shopping mall. However, a series of smartly scheduled advertisements can actually raise the consumer’s level of curiosity about the upcoming mall, , especially if it is a large project. Advertisements could also be in a ‘teaser’ format. Such advertisements may generate the valuable word of mouth about the mall.

MARKETING

AND

PROMOTION

DURING

LAUNCH

AND

OPERATIONS PHASE

The marketing and promotional activities during this phase focus primarily on tenants and customers. Under ideal circumstances, the initially planned tenants should be in place and the focus must be on finding temporary tenants and for re-leasing (a er the expiry of initial lease contracts). Connecting to customers is the key issue during this phase. Di erent activities planned in this phase vary in terms of time orientation. Some activities have short-term, tactical goals (such as mall launch campaign and placing suitable kiosks for seasonal/festive occasions), whereas others aim at achieving long-term objectives (like customer relationship and customer loyalty). The launch and pperations phase comprises two sub-phases: 1. Launch phase 2. Operations phase

Activities During the Launch Phase It is important to make prospective customers aware about the launch date of the new mall. It becomes more important in the following cases: • When the new mall is away from the population cluster. • It is at some distance from tra c arteries, and its construction work was not noticed by many people. • The view of the mall is obstructed significantly by other buildings. • A number of buildings of di erent nature are coming up in the catchment area, so the new construction does not evoke much interest. • Competition is intense in the form of already operational shopping malls or upcoming ones due for inauguration very soon. In such cases, the developer is desperate to ensure initial footfalls so that the mall gets a fair chance to impress upon the customers.

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Displays announcing opening of MGF Saket

An a empt is made to create a buzz or hype around the new mall and its launch to ensure that people living in the catchment feel tempted to visit the mall during initial days. Important tools used to make the mall launch splendid and a ract people are described below:

Inauguration ceremony/event The mall may be inaugurated a er a small havan/prayer/religious ceremony that is a personal, non-glamorous a air. However, the developer may decide to invite a celebrity for the occasion. Film stars, sportspersons (especially cricketers), TV actors and politicians are generally preferred in the same order to cut the ribbon. Many people make it a point to be there just to have a look at the celebrity. The fact that a celebrity is being invited to inaugurate the mall must be widely publicized through display media and the mass media. If the developer wants a prolonged presence of customers, a performer (a prominent singer or dancer) may be invited. The entry should be free and this information should also be widely publicized. It works really well provided the performer is selected intelligently. Even in case of a simple havan, the list of invitees may include ‘who’s who’ of the area/region. Once publicized, it may have a positive impact on the people’s perception about the mall.

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Inaugural Décor The mall should present its best foot forward in terms of decoration on the inauguration day. It assumes significance, as a large number of people visit and gain the first impression about the mall at the inaugural. The inaugural décor may include use of flowers, colours, banners, props and lights (depending on the time of the day). Apart from aesthetics, due care must be taken about issues like approach, congestion, parking, drinking water, complimentary snacks/sweets (if planned), upkeep of wash rooms, condition of li s/ escalators and collection/disposal of trash. Hoardings/Display-boards The marketing team must identify the locations where congregation and flow of people is decent at certain or all points of time. The display media (hoardings and display boards) must be installed at these places to convey the message of mall launch. Some of these locations may be having pre-existing hoardings or frames. The marketing team needs to identify the persons or the agency that holds rights for these places and negotiate the rates for display. At other places, the team must negotiate with the property owners and take approval from the municipal authorities by paying the required fee. Locations falling in the la er category are complicated to handle because one first needs to install metallic or wooden pillars and frames. Banners can be of good use in many situations, especially across the roads. Another task is to manage the layout and contents of hoardings/banners, but it is generally outsourced to a creative agency. However, specifications regarding content and base material are to be conveyed to the agency. Newspaper Advertisement/Leaflet Insertion Shopping malls cater to a small geographic area, whereas newspapers generally target a larger territory. Hence advertisements in the main body of newspapers will not be cost-e ective. But advertisements may be given in local supplements of newspapers that target a smaller area. These advertisements are more e ective and economical. A series of advertisements starting a few weeks before the inauguration makes a good impact on the potential visitors. Still a more economical option is leaflet insertions in newspapers. The marketing team may get leaflets printed and approach the local newspaper distributor to distribute leaflets along with daily newspapers. Whereas an advertisement is confined to a single newspaper, leaflet insertions could be done in all the newspapers distributed in the target area resulting in much higher penetration. However, due to their size and nature, leaflet insertions may not be taken seriously by the readers. Many companies develop large insertions equivalent in size to a newspaper page. Such insertions are folded like a newspaper page and distributed along with it conveying the impression of being a dedicated supplement. Door-to-door Campaign Not ready to take any chance, most developers arrange distribution of leaflets to each and every home using a field force. Leaflets may simply be put in the le er-boxes of residential units or a field force may hand them over personally along with a verbal

150 Mall Management

invitation or request. The verbal invitation makes more impact if the mall has invited a celebrity or a performer. It is also necessary when either the mall or some tenants are o ering special promotional schemes to mark the inauguration. Sometimes these leaflets are designed like invitation cards requesting people to come.

Roadshow/Announcements The most penetrative method of announcing the mall launch is a road-show. It consists of a group of people specially dressed up and stationed atop an open vehicle along with promotional displays and props. The vehicle has a public address system and pre-recorded messages. Sometimes there is an announcer on the vehicle making announcements. The vehicle may be accompanied by more people on four-wheelers or two-wheelers. The convoy passes through major tra c routes, conveying the message of the mall launch to people. Some promotional material and goodies/souvenir items may also be distributed. However, the organizers need to take prior approval from the local administration for the roadshow. Advertisements on FM Radio FM radio channels serve as an excellent and cost-e ective medium for reaching out to people in urban areas. These have excellent reach and acceptability. The marketing team must identify the FM channel(s) most admired by the target segment. Promotional messages and jingles may then be broadcast on these channels. Cable-TV Advertisements In towns where the DTH penetration is not very high, cable TV is a good option for announcing the shopping mall inauguration. Deal is negotiated with the cable operator and promotional message/content is given to him. Advertisement could be in the form video, still pictures with background announcement or a liner at the bo om of the screen. Activities when the Mall is Operational During the initial days, the shopping mall might a ract footfalls due to its their ‘novelty-value’ but the real challenge is to sustain and enhance customer footfalls. It becomes more important when competition crops up in the form of newer malls in the vicinity. Dwindling footfalls may have a negative e ect on lease renewals. The tenants might shi to other malls having higher footfalls or push the rentals downwards while re-negotiating the lease. Many developed countries have a system of declaring footfalls every month and the lease rentals are fixed as per the movement of the ‘footfall index’. Apart from a racting customers, the marketing and promotion activities also act as a supplementary source of income for shopping malls. This income is particularly valuable to the management team in those malls whose retail stores have been sold to investors. As the lease rental goes to the investor-owners, the mall management team is le with only the CAM charges. As time progresses, a higher proportion of CAM charges gets exhausted in routine maintenance (unless otherwise provided for)

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resulting in a lower level of motivation for the management team to run the mall. However, the management team’s exclusive claim over the income generated from the utilization of common areas can re-kindle their interest in the mall. Di erent marketing and promotional activities carried out during the operations phase of a mall are described below:

Temporary Tenants Temporary tenants include kiosks, stalls and carts accommodated inside a mall apart from the existing shops. These tenants are temporary, as almost all of them have contracted for durations less than a year (ranging from a few days to a couple of months except for players like Baskin & Robbins). The retail space for temporary tenants is very small (generally less than 100 square feet) and their shops are not a permanent construction. These tenants generally pay very high rental when calculated on per square feet basis, but the rental includes electricity, water and other municipal charges. They are located in the common areas like atrium, corridors, near li s/escalators and at parasite locations near major stores (such as super-markets, multiplexes, food courts and entertainment zones). It is wrong to treat temporary tenants only as a source of revenue, as they play a very significant role in infusing life in the common areas (if not done in excess) and bridging the gaps in the tenant-mix to fulfil customer requirements that are purely seasonal in nature. For instance, people expect varied options for cool/chilled/frozen items during peak summer, but their demand remains only for a few weeks. Kiosks are also a very suitable mode to test the acceptability of a new product/service/brand. If successful, the same product/service/brand may be accommodated as a regular tenant. Kiosks also bring the window-shoppers and low-income segments into the shopping domain by o ering low-value items. Once a bond is developed, some of these customers may upgrade to costlier items/formats. Advertising Displays These include hoardings, banners, posters, standees and drop-downs. Prominent locations for their display are mall facade, mall entrance, atrium, base and side panels of escalators, inside li s, railings, walls near utilities and frontage of vacant stores. Rates are negotiated on the basis of size of display, location, duration of display and timing (whether it coincides with festive season or not). Many shopping malls make special provisions for display frames on the profile and facade of the mall. Drop-downs are huge, elongated strips of display that hang downwards from the ceiling in the atrium. Special provisions like chains and pulleys must be incorporated during the designing and construction stage of the mall if drop-downs are to be used as a regular feature. Apart from generating revenues, these displays add to the aesthetics of the mall and make it look like a happening place.

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Promotional display by an anchor

Digital Display Screens These are large LCD/plasma screens installed at prominent locations inside the mall. These screens break monotony and provide positive distraction for shoppers who are waiting for something. Important locations to install these screen are: in and around atrium, in front of li s, in front to seating space (benches) and any other place where people are expected to stop and wait for some time. The marketing team generally gets in touch with a specialized agency dealing in such media and negotiates a contract. The agency would pay the fee (as per the agreed amount, schedule and terms/conditions), install its display screens, approach prospective advertisers and broadcast their advertisements. The fee for a digital display generally depends on the duration of the advertisement and the timing of display (festive season or otherwise). It is very common for advertisers to sign bulk deals if the agency holds display rights for multiple locations/malls. Product Displays and Promotions This opportunity can be encashed when companies wish to showcase, display or demonstrate their new product to prospective customers. It is be er than door-to-door canvassing, especially when the demographics of the target segment overlap with that of mall visitors. People are more open to stop, observe and try new things in a pleasant environment as compared to a road-side location. The shopping mall provides good places where new products can be displayed. Prominent locations for such displays are: just at the entrance and in the middle of atrium. However, smaller products/displays can be arranged elsewhere as well. The mall management negotiates fee on the basis of location, size of display space, duration of display and its timing. The mall provides infrastructural support for the display.

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Promotional Events Shopping malls organize various events to a ract visitors. Such events form an integral part of mall management. Activities like food festivals, handicra exhibitions and celebrity visits increase foot tra c and, in turn, sale volume. Organising cultural events has time and again proved vital in a racting consumers to a mall. These activities also act as a di erentiator for a mall. At times it becomes necessary to organize promotional events to thwart the challenge from existing or upcoming shopping malls. Some promotional events are planned by the mall management team on its own as part of its promotional events calendar. Such events are funded out of their regular funds (CAM charges or promotional charges decided beforehand). The inability to carry out any of these events would be a breach of contract. Individual tenants may tie up with the mall management/marketing team to piggyback their o ers and schemes onto the promotional events to take advantage of them. Shopping malls also organize promotional events at the behest of one or more tenants. Clearly, such events are funded by the tenants who request for them. Ansal Plaza, the first mall in Delhi, is an example of a successful mall led by good promotions and marketing mall management practices. Regular promotional activities at Ansal Plaza including cultural events have ensured steady foot tra c in the mall since its inception in 1999. The mall also has an amphitheatre dedicated to these promotional activities. Organization of promotional activities has been a major factor behind the success of Ansal Plaza that has a less optimal design and tenant-mix compared to new malls in the NCR.

Summer camp at City Mall 36, Raipur

Re-leasing Though not strictly a marketing activity, re-leasing has a strong association with it. E orts put in re-leasing are inversely proprotional to the e orts put in for marketing and

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promotion of the mall. If the mall carries out a series of promotional activities successfully, it would be able to generate and sustain footfalls and that in turn would sustain the interest of the existing tenants in the mall. Consequently, a larger proportion of tenants would prefer to get their lease contracts renewed at the terms and conditions favourable to the mall developer. If the tenants are to be replaced, the marketing team must identify and target suitable replacements. Re-leasing includes the following steps: (a) (b) (c) (d)

Identifying weak links Identifying gaps in concept Identifying bright prospects in the market Approaching and negotiating with prospects E cient re-leasing requires development of a portfolio of retail options. Developing such a portfolio is a continuous process and can be suitably handled by the marketing team.

MALL PROMOTION CALENDAR This calendar is a tool that shows what marketing events, media campaigns and merchandising e orts are happening when and where, and what are their results. The mall management develops a marketing calendar as part of its mall marketing strategy to keep track of what is going on and where the mall should turn its a ention next. It is good to announce events that coincide with some major festivity of the relevant community. For instance, Indian malls organize special promotional schemes and events near Deepawali, Holi, New Year, Republic day and Independence Day. Then there are more options like Mother’s Day, Father’s Day, Friendship Day, and April fool’s day etc. However, if one can not think of a great tie-in promotion during these events, one should consider declaring one’s holiday or event. Do not let a marketing opportunity pass by. Promotional calendar of a typical Indian mall would contain a multitude of promotional activities as depicted in Figure 7.1.

Figure 7.1: Mall promotion activities

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Malls opt for promotions with the hope that customers would be encouraged to purchase something from the mall stores. Promotions depend on the kind of format that one operates in. An in-store promotion for a Food Bazaar will be di erent from a Pantaloon promotion and will di er for a Shoppers Stop or a Lifestyle. Various kinds of promotions are described below.

Theme-based Promotions These promotions are held on a theme, like adventure, environment, tradition, etc. Appropriate decoration and fixtures in the common areas are done so as to create an environment conveying the spirit of the theme. Though it is an initiative made by the mall management team, its success requires collaboration by key tenants in the form of additional promotional discounts/schemes. Such promotions are generally planned during vacations or coincide with major festivities

Brand Promotions Brand promotions are of two types—in-store and national.

In-store Brand Promotions In this type of promotions, the store manager will concentrate only on the various inhouse brands, popularly known as private labels, for example Bare and John Miller. National Brand Promotions These promotions are run within the store but for the national brands like Reid and Taylor and Allen Solly. In these promotions, the store manager will concentrate only on the sale particular national brands.

Festivals India is a land of festivals. The store promotions have to be based on festivals of di erent states. Since visual merchandising has also to be changed as per individual state’s preferences, one cannot have a combined promotion for the entire country.

Event Marketing Events like Miss World and fashion shows can be organized to promote the brand of the outlet, for example Father’s day was an event held by Oberoi Mall in association with Central Mall.

Entertainment Di erent entertainment-based promotions are done by the mall stores to make customers feel that something is happening in the stores, for example, War of DJ’s. Again entertainment-based promotion will depend on the kind of store. If it is a store like Big Bazaar, it may have di erent entertainment for its customers.

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Strategic Tie-ups Strategic tie-ups for promotion happen for a particular time period, depending on the relationship of the particular mall with the promoter. For example, OSIM the massage chair has a tie-up with Central Mall where it sells its chairs at a discount.

Blood donation camp at Himalaya Mall

FROM MARKETING

TO

RELATIONSHIP

It is important for mall managers to plan and execute promotional events as these generate footfalls. Yet the promotional events do not provide a competitive advantage as most of the planned activities, once executed, are known to all (including competitors) and can be copied. Many researchers argue that due to this reason marketing and promotion do not provide competitive advantage. They say that the ideal scenario for a capital-intensive project like shopping mall would be where shoppers not only prefer but patronize a

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shopping mall. For that to happen, mall developers need to take the relationship with customer to the next level. As discussed in chapter two, the shopping mall is not only a place for shopping but also a venue for social interaction and congregations. Therefore how fast the mall can make itself an inseparable part of the community decides its success. To move in this direction, malls must organize events and create platforms like walking clubs. Some shopping malls in Delhi NCR have been regularly organizing aerobics and yoga sessions in the morning. Similarly, Inorbit Mall in Mumbai has decided to permit morning walkers and joggers inside the mall. Some shopping malls have also been providing kiosks for the ‘Pulse Polio Day’. These decisions bring the mall closer to community without interfering with its regular business. Mall managers are providing facilities to enhance traditional recreation available inside the mall. Some malls provide day care centres to look a er the kids while their parents browse leisurely in shops that are not suitable for small children. Food courts, movies, arcades, home improvement expos, art exhibits, auto shows and live entertainment are all being developed and emphasized to increase the recreational options available to customers during their mall visit.

SUMMARY In the fiercely compe ve scenario, shopping malls compete not only with one another but also with popular high-street loca ons. For ensuring decent foo alls and a healthy occupancy rate, the mall management should involve prospec ve shoppers through marke ng and promo onal ac vi es. These ac vi es may be chalked out during the planning phase, launch phase or opera ons phase. Selec on of marke ng and promo onal ac vi es during each of these phases would vary as the marke ng objec ve also varies during each phase. Di erent ac vi es are also targeted towards di erent stakeholders like investors, tenants and shoppers. Generally, malls prepare a calendar of events and more events can be added to it in consulta on with the tenants on a collabora ve basis. Rather than just adding to foo alls, the promo onal ac vi es should aim at developing a long-term rela onship between the mall and its shoppers.

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REVIEW QUESTIONS 1. Comment on the pervasiveness of marke ng ac vi es in a shopping mall. 2. What are the di erent categories of marke ng ac vi es in a shopping mall? How do these di er from each other? 3. How do mall developers iden fy and persuade prospec ve investors to invest in the mall project? 4. Why is it important for mall developers to maintain liaison with real estate brokers? What are the possible pi alls of working with these brokers? 5. What does a prospec ve tenant look for in a new shopping mall? How does the mall marke ng/leasing team persuade retail tenants? 6. If shopping malls are managed with a focus on long-term sustenance and growth, why is a short-term, one- me ac vity, like launch of the mall, given so much importance? 7. Looking beyond mall rentals, what are the other sources of revenue genera on for shopping malls? 8. What are temporary tenants in a mall? How they add value to a shopping mall? 9. ‘Organizing events, contests and shows is a gainful distrac on for a shopping mall.’ Comment. 10. What are the di erent types of promo onal ac vi es undertaken by shopping malls?

PRACTICE EXERCISES 1. Visit three to four shopping malls in your neighbourhood. Observe the various displays outside as well as inside these malls. How many of these relate to exis ng tenants and how many are for outside brands? Rank these malls in terms of displays by outside brands as a propor on of total displays in malls. 2. Collect brochures of some upcoming malls. Find out the informa on components that are common to all the brochures. What is the significance of each of these elements in brochures? 3. Visit a shopping mall of your choice. Note down the temporary tenants present in that mall. Which of these tenants are at an inappropriate loca on? Are there any loca ons that could have accommodated more temporary tenants?

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SUGGESTED READINGS 1. Ahluwalia, R.; Burnkrant, R.E. and Unnave, H.R. (2000), ‘Consumer response to nega ve publicity: the modera ng role of commitment’, Journal of Marke ng Research, Vol. XXXVII, May, pp. 203–214 2. Anderson, J.C. and Gerbing, D.W. (1988), ‘Structural equa on modeling in prac ce: a review and recommended two-step approach’, Psychological Bulle n, Vol. 103, No. 3, pp. 411–423 3. Arora, R. and Stoner, C. (1996), ‘The e ect of perceived service quality and name familiarity on the service selec on decision’, Journal of Services Marke ng, Vol. 10, No. 1, pp. 22–34 4. Bansal, H. and Voyer, P. (2000), ‘Word-of-mouth processes within a services purchase decision context’, Journal of Service Research, Vol. 3, No. 2, pp. 166–177 5. Bone, P.F. (1995), ‘Word-of-mouth e ects on short-term and long-term product judgments’, Journal of Business Research, Vol. 32, No. 2, pp. 63–76 6. Caruana, A.; Money, A. and Berthon, P. (2000), ‘Service quality and sa sfac on—the modera ng role of value’, European Journal of Marke ng, Vol. 34, No. 11/12, pp. 1338– 1352 7. Degeratu, A.M.; Rangaswamy, A. and Wu, J. (2000), ‘Consumer choice behavior in online and tradi onal supermarkets: the e ects of brand name, price and other search a ributes’, Interna onal Journal of Research in Marke ng, Vol. 17, pp. 55–78 8. Ennew, C.; Banerjee, A.K. and Li, D. (2000), ‘Managing word of mouth communica on: empirical evidence from India’, Interna onal Journal of Bank Marke ng, Vol. 18, No. 2, pp. 75–83 9. George, W.R. and Berry, L.L. (1981), ‘Guidelines for the adver sing of services’, Business Horizons, Vol. 24, No. 4, pp. 52–56 10. Grove, S.J.; Picke , G.M. and Sta ord, M.R. (1997), ‘Addressing the adver sing of services: a call to ac on’, Journal of Adver sing, Vol. 26, No. 4, pp. 1–6 11. Hauss, D. (1993), ‘Measuring the impact of public rela ons’, The Public Rela ons Journal, Vol. 49, No. 2, pp. 14–20 12. Holden, S.J.S. and Vanhuele, M. (1999), ‘Know the name, forget the exposure: brand familiarity versus memory of exposure context’, Psychology & Marke ng, Vol. 16, No. 6, pp. 479–496 13. Kempf, D.S. and Smith, R.E. (1998), ‘Consumer processing of product trial and the influence of prior adver sing: a structural modeling approach’, Journal of Marke ng Research, Vol. XXXV, August, pp. 325–338 14. Mangold, W.G.; Miller, F. and Brockway, G.R. (1999), ‘Word-of-mouth communica on in the service marketplace’, Journal of Services Marke ng, Vol. 13, No. 1, pp. 73–89 15. O’Leary-Kelly, S.W. and Vokurka, R. (1998), ‘The empirical assessment of construct validity’, Journal of Opera ons Management, Vol. 16, pp. 387–405 16. Ross, J.K. III, Patertson, L.T. and Stu s, M.A. (1992), ‘Consumer percep ons of organiza ons that use cause-related marke ng’, Academy of Marke ng Science, Vol. 20, No. 1, pp. 93–97

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17. Stern, B.B. (1997), ‘Adver sing in macy: rela onship marke ng and the services consumer’, Journal of Adver sing, Vol. 26, No. 4, pp. 7–19 18. Stern, W. (1983), ‘A good name could mean a brand of fame’, Adver sing Age, Vol. 17, January, pp. M53–54 19. Swanson, S.R. and Kelley, S.W. (2001), ‘Service recovery a ribu ons and word-of-mouth inten ons’, European Journal of Marke ng, Vol. 35, No. 1/2, pp. 194–211 20. Yoo, B. and Donthu, N. (2001), ‘Developing and valida ng a mul dimensional consumerbased brand equity scale’, Journal of Business Research, Vol. 52, No. 1, pp. 1–14 21. Van Osselaer, S.M.J. and Alba, J.W. (2000), ‘Consumer learning and brand equity’, Journal of Consumer Research, Vol. 27, June, pp. 1–16

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CASE

Summer Carnival at Oberoi Mall, Mumbai To a ract kids, Oberoi Mall came up with a host of promo onal ac vi es under the banner ‘Toon World Summer Carnival’ in May 2010. During the carnival, the mall o ered games based on popular cartoon characters. It created huge spacious houses, especially for cartoon characters like Doraemon, Hello Ki y, Garfield and Archie to ensure that kids have a rollicking me during summer holidays. Each house had a number of games set inside it. Nature of games selected for each house depended on the characteris cs of the cartoon character. For example, lazy Garfield had a golf game inside the house, the Archie house had a dartboard game and the Hello Ki y house had a ring throwing game. Apart from a rac ng kids towards the mall, the carnival a empted at mixing fun with educa on. According to Nirzar Jain, General Manager of the mall, the event tried to subtly tell kids to be aware about the environment they live in. The character Doraemon along with his friends Nobita, Suneo, Jian and Shizuka was spreading awareness about being ecofriendly. They highlighted topics such as cycling to school, saving water, saving electricity and controlling noise pollu on. The carnival also included useful and crea ve ac vi es like personality development, origami, art and cra to engage children in crea ve learning ac vi es. Children learnt how to make paper bags out of old newspapers and to have fun with basic mathema cs. There were also workshops on singing, salsa, book reading, yoga, and flameless cooking. The carnival was very well received by the target group and well appreciated by the community and industry. Even though Toon World was targeted at kids, it received an overwhelming response from the young and old alike. This event won the ‘Best Retail Marke ng Campaign of the Year Award’ at the 7th edi on of Reid & Taylor Awards for Retail Excellence held by the Asia Retail Congress. Commen ng on the award, Nirzar Jain said, “At Oberoi Mall, we have always ensured that we have a strong value proposi on for our customers through our various marke ng and promo onal campaigns. The award is a reassurance of our belief to o er our customers a fulfilling shopping experience which entails on-ground ac vi es along with the fine blend of fun, food, fashion and films that the mall o ers. ” Sources: ‘Tune in to the Toon World Summer Carnival at a Mumbai mall’, Ankit Ajmera, retrieved from http://www.dnaindia.com/lifestyle/report_tune-in-to-the-toon-world-summer-carnival-at-amumbai-mall_1386223-all, accessed on 28 May 2010 ‘Oberoi Mall bags Best Retail Marke ng Campaign of the Year Award’, India Infoline New Service, retrieved from h p://www.indiainfoline.com/Markets/News/Oberoi-Mall-bags-Best-RetailMarke ng-Campaign-of-the-Year-award/5078396554, accessed on 28 May 2010.

CHAPTER

8

Facilities Management in Mall Operations

LEARNING OBJECTIVES This chapter will enable the readers to • Understand and appreciate the role of the facili es management in the overall management of a shopping mall • Get an idea of the various facili es provided in a shopping mall • Understand specific do’s and don’ts associated with each facility • Help develop an integrated view while planning and maintaining facili es for a shopping mall

POOR MAINTENANCE, FALLEN LIFT, AND BRUISED IMAGE Gandharva Mall in Mumbai was in the limelight but for the wrong reason. All the TV channels and newspapers were discussing the accident of a li falling from the first floor to the ground floor of the mall. Though the li occupants miraculously escaped any serious injury, the accident did injure the reputa on of the mall. Gandharva Mall is situated in the heart of Mumbai, a rac ng close to 20,000 foo alls on weekdays and 35,000 on weekends. The li accident created panic among the shoppers and foo alls registered a sudden downhward shi . Complica ng things further, one injured shopper filed a complaint with the police against the Gandharva promoters. Some local poli cians also joined the issue, and an inquiry was ordered to pinpoint the causes of the li accident. The inquiry came out with startling revela ons. The li was carrying load higher than its capacity. Ideally, the li should not have moved when overloaded, but its load control system was dysfunc onal for three days prior to the accident. Though the company that installed the li was informed about the malfunc oning load control system, neither the

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li company nor the Gandharva management showed alacrity in rec fying the problem. The inquiry further revealed that there was no li man to regulate the entry of people into the li . Worst s ll, the mandatory li inspec on and cer fica on was overdue. The inquiry revela ons provided enough ammuni on to the media to target the Gandharva management. The management realized late that they could have easily avoided the nega ve publicity by being proac ve on the maintenance front. As an accident is easily etched in the minds of people, Gandharva is likely to su er a great loss in its reputa on and goodwill among the visitors for a long me.

INTRODUCTION Noise, crowd and chaos fail to deter shoppers from shopping in their favourite marketplaces. Similarly, the ambience and facilities at a mall figure among key factors that influence people who generally go for satisfying decisions instead of optimum decisions. Because of these two factors, the facilities management plays a key role in the shaping of a mall as well as the experience it provides for the people who visit it for shopping. The facility management activity begins at the mall designing and development stage itself. “We shape our buildings; therea er, they shape us,” said Winston Churchill in 1943. About 60 years on, today a topic of great interest for the property and facility management industry is how much the building environment shapes the success or failure of a mall venture. A well-planned and laid-out mall environment will include aspects that bring ease in the facility management activity without making it intrusive to the people visiting the malls. The facilities management is a continuous process and also an integral part of the mall management .The advent of technology has made the facilities management even more important as state-of-the-art systems, used in managing a mall, need to be maintained in a useful operational condition to ensure their optimum and profitable utilization. Security is key area of concern in the present world order and also a focus of the facilities management in the malls. The malls are seen as so targets of disruptive elements and terrorists for deriving maximum impact from their nefarious acts. Therefore the malls use equipment for surveillance, access control and physical security to prevent intrusion and a acks. In case of any untoward incidents, provision for shoppers’ evacuation and reducing the impact are key aspects that must be considered during the formulation of the mall building plan. It is o en argued that the definition of product varies from place to place, time to time and segment to segment. Maybe a shopper visiting a shopping mall looks something more than products and brands. This could be viewed in typical marketing parlance as di erent levels of a product/service. Core benefit: Shopping of goods and services under a single roof and also enjoying the experience of shopping in the best of the facilities and comfort

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Basic product/service: An assortment of stores to carry out sales Expected product: A certain level of comfort and support that is considered an inseparable part of a shopping mall in contrast to a common marketplace which caters to all tastes and flavours during shopping The above factors associated with the shopping in a mall make it necessary for the mall manager to try to create an ecosystem in which the shoppers feel comfortable during their trip to the mall. For this to happen, they need to provide an array of services and facilities in the mall for the shoppers.

FACILITIES OFFERED

IN A

MALL

Managing facilities in a mall is a challenging and thankless job. All the activities related to the facilities maintenance need to be carried out without a ecting the routine activities. The facilities management in a shopping mall includes planning, operation and maintenance of infrastructure required to extend suitable services and utilities to the tenants as well as customers. The facilities management in a mall broadly deals with the provision of services and facilities in the following areas (Figure 8.1): • • • • • •

Utilities Health and Hygiene Security and Safety Parking Amtience Buliding Management Systems

Figure 8.1 Facilities management in a mall

Utilities Utilities consist of basic amenities like water, electricity and lighting, sewage and communications. These essential and critical services need to be available at all times. A well-planned mall building will have provision to ensure the required availability, proper maintenance and upkeep of these essential services.

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Water The provision of water for general use in wash rooms, toilets and cleaning activities is critical for maintaining clean and hygienic conditions in the mall. To ensure the required availability of water, regular monitoring of water resources is called for. For this a water management system is put in place, an important task of which is to indicate the water levels in storage tanks. Usually, the malls depend on ground water sources and supply from municipal /external agencies. Water is essentially required for the following categories of services/facilities in a mall: 1. 2. 3. 4. 5. 6.

Washrooms Kitchen/pantry services Drinking water in water dispensers Internal and external housekeeping activities Fire hydrant systems Chilling plants for HVAC systems For each service category, ideally, water should be supplied through separate pipelines. Dry and wet areas need to be segregated in washrooms and pantry areas to ensure maintenance of healthy and hygienic conditions. External bo led plants usually cater to the requirement of drinking water and they need to be checked and replenished at regular intervals. A separate wet area for housekeeping activities along with storage for tools and tackles, used in cleaning activities, is usually maintained in all malls. This helps in segregating the cleaning activity and keeping it invisible to the shoppers. The malls need to install fire hydrant systems as an essential firefighting measure. The installation of a fire hydrant system is also mandatory for obtaining a fire safety certificate for operation of a mall. A fire hydrant system typically consists of a set of pumps and a pipe network running across the building, with outlets for connecting hose reels. The pipe network of the fire hydrant system requires water maintained at a high pressure, and the set of pumps facilitate automatic continuous supply of pressurized water at all times. The hydrant system must be designed to carry water to all reaches of the mall building to tackle fire. The storage capacity of the hydrant system is calculated depending on the area to be covered by it in case of a fire outbreak. One or more filtration plants are also installed in a mall for providing clean water for drinking and cooking (in food courts and eating joints). . The water hydrant system and filtration plants need to be maintained in optimum running conditions at all times. The main maintenance problems are water leakages due to rusting of pipes and diverting water meant for fire hydrant system to other uses like cleaning, in washrooms, etc., leaving inadequate supply or pressure of water in the fire hydrant system. Water conservation through rainwater harvesting is another mandatory requirement for the malls and big buildings in many cities. A separate water tank needs to be maintained for rainwater harvesting. The water tank roof has to be made waterproof, and rainwater water outlets and drains are to be cleared on a regular basis to prevent water stagnation that may lead to water leakage.

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Drainage and sewage systems connected to the mall water facilities are to be kept free from blockage and spillage. Otherwise, because of high usage of these critical systems due to high footfall in a mall will lead to health and hygiene problems, reflecting poorly on the mall reputation. A routine maintenance schedule and strainers at each floor will help in isolating blockages and clearing of debris.

Electricity and Lighting Malls are power-hungry infrastructures. They are highly dependent on uninterrupted power availability round the clock for their smooth functioning. Their state-of-the-art infrastructure is useless without uninterrupted power supply. Monitoring of electricity consumption and load distribution is a key aspect to be considered while planning the electrical distribution system for a mall. Monitoring electricity usage is a critical area of the electricity facility management due to the large number of business outlets, with each outlet requiring a separate metering unit. Apart from lighting for business outlets, signages and neon boards are another major source of electricity consumption in a mall. A mall’s power requirement is met by the power supply from electricity boards, diesel generators and UPS systems. High-order maintenance of substations, busbars, LT and HT panels, UPS systems and diesel generators is a critical activity of the electricity management system. Trained technicians who can react quickly and appropriately to sudden problems are required to restore power supply in case of any failure. . Appropriate distribution of load for lighting and high-voltage equipment like drives, pumps, Heating Ventilation and Air-Conditioning (HVAC) systems, elevators, li s, hydraulic li s for cars in automatic parking lots with necessary protection is essential for ensuring Minimal Mean Time Between Failures (MTBF) and Mean Time to Repair (MTTR) of critical systems. Most of accidental fires at mall buildings break out due to electric short circuiting. Faulty circuit breakers and sub-standard electrical appliances and fi ings are the main cause of fire accidents. Since the wiring is concealed, the risk is high for such accidents. It is essential to ensure that standard and authorized light fi ings and equipments are used by the mall management and business outlets. Therefore strict monitoring of power supply related parameters and adherence to standards and good practices must be enforced to prevent any accidents. Safety and protection features to prevent any short circuit and protect equipment and fixtures from voltage surge can be incorporated at the design and installation phase itself. Fire alarm systems form part of these protection features. On sensing fire-like conditions, fire alarm systems get activated, tripping electrical mains and stopping elevators/li s automatically. Diesel generators are used for backup, and considering the heavy load usually two DG sets are installed operated alternatively to overcome redundancy. Routine maintenance of the DG sets is required to ensure uninterrupted power supply at all times. The sites for storing diesel and other inflammable materials are to be kept away from the main building and proper fire safety measures followed to prevent any fire accident due to these inflammable materials.

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Emergency lights operated on UPS or ba eries are usually fixed at entry/exit paths, staircases and other locations to ensure lighting of these areas during emergencies or sudden blackouts.

Health and Hygiene A healthy environment and hygiene are maintained in the mall by keeping its premises and surroundings clean. This is a continuous activity, and due to the usage of the mall utilities by a large number of people, it requires monitoring and a ending on a regular basis. The mall areas are usually divided into di erent parts for assigning cleanliness tasks. An activity plan is prepared to carry out routine housekeeping activities in each area according to a schedule. The implementation of the activity plan is monitored by a check list and activity charts. The cleanliness tasks need to be carried out without causing any problems to the mall visitors and occupants.

Housekeeping Services The housekeeping function deals with the maintenance and cleaning di erent areas and facilities within the mall. It is important to ensure cleanliness of common areas and basic utilities. Unkempt common areas that spoil the aesthetics of the mall building may repulse the mall occupants and visitors and also pose serious health hazards to them. The housekeeping function is handled with an aim to ensure the health of the mall occupants and visitors by creating hygienic conditions. To handle this function e ciently, the mall’s housekeeping section formulates operational guidelines to provide high-quality services and develops systems and procedures to implement these guidelines. The housekeeping section continuously evaluates the outcome of its actions against the stakeholders’ expectations and Key Performance Indicators (KPIs) to make suitable improvements. This housekeeping function includes maintenance and cleaning of areas like atrium, corridors, lobbies, stairs, terrace, washrooms, landscaping in and around the building, parking areas and areas relating to drainage and sanitation. It also includes mechanical areas and equipment. Key issues involved in this cleaning exercise are frequency and scheduling of cleaning/mopping operations, providing specific schedules for specific areas, and mode of cleaning and materials to be used for cleaning of specific areas and surfaces. Specific cleanliness actions involved in housekeeping include sweeping, dusting, mopping and polishing; removing stains, smudges and streaks; removing cobwebs; spraying disinfectants; checking and replacing consumables; pest control and documentation relating to all these actions. It is the responsibility of the housekeeping sta to observe and communicate damages and defects (such as breakages, fused bulbs, damaged fire-sprinklers and smoke detectors) to the concerned section so that remedial action is taken immediately. They are also supposed to report immediately to their supervisor if find anything le by a visitor.

Guidelines for effective Housekeeping (i) The whole mall may be divided into areas or zones. Portions/items included in a

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single zone should be homogeneous to the extent possible so that its maintenance and cleaning could be delegated to a single person/team. (ii) It is important to note down the characteristics of each area in terms of size, footfall density, daily and weekly footfall frequency and materials used in construction. Frequency/intensity of cleaning and agents used for cleaning depend on these things. (iii) Detailed guidelines should be prepared for housekeeping work in each zone. These should include specific guidelines for specific areas and also list the tools and equipment required for the housekeeping of that area. (iv) For carrying out the housekeeping work systematically, it is important to create a personnel hierarchy naming the supervisors and other housekeeping sta for specific areas. (v) The housekeeping sta should be briefed daily on issues demanding immediate a ention. (vi) The housekeeping manager should inspect the work while taking round of the premises and note down his/her observation in a register. Deviations, if any, should be shared with housekeeping supervisors to elicit their response. (vii) While preparing a checklist of cleaning tasks and schedules, it must be ensured that the housekeeping sta finds it easy to read, comprehend and fill. (viii) If the housekeeping sta observes any defect/damage, there should be a set procedure for bringing it to the notice of the concerned departments. Instead of verbal transmission of information about the damage, there should be a proforma to be filled and sent to the respective department for appropriate action. (ix) There should be a store containing all tools, equipment and materials related to housekeeping. It should be under the control of a person/position. Any receipt or issuance out of this store should be duly recorded in a register or proforma. The stock position of di erent items in the store should be maintained following the principles of inventory management. (x) Conformance to guidelines should be strictly checked. It must be ensured that the housekeeping sta follows the set procedure/sequence of actions while carrying out his/her work. The tendency to adopt short-cuts might endanger the sta , other people around or the premises. These risks should be drilled into the minds of the housekeeping sta during their initial training and also reinforced from time to time. (xi) It must be ensured that all housekeeping sta members wear the prescribed uniform. It must be checked whether the uniform is washed and pressed. The sta should maintain a high level of personal hygiene while carrying out housekeeping work. (xii) The housekeeping sta should be advised to be courteous if they get to interact with the mall occupants and shoppers. In case of any problem with these people, the sta should report the ma er to the supervisor and not enter into an argument them.

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Security Services A mall accommodates a large number of people at a given point of time, and this large gathering might lead to safety and security issues. Threat to the security of people in the mall might come from many sources. Some of these sources are listed below: (i) Uncontrolled crowd (stampede) (ii) Rowdy shoppers. (iii) Criminal activities (iv) Acts of terrorism (v) Accidents inside the mall.

Security people at the entrance of a mall

Uncontrolled Crowd The large number of people entering the mall should be guided, properly directed and controlled so as to avoid a stampede. During the mall designing itself, provisions are made in the form of open spaces, huge atriums and divergent corridors so that the crowd gets distributed immediately a er entering the mall. However, despite these provisions, certain situations see a huge, sudden influx of shoppers leading to crowd formation at particular places. It happens during festive occasions and special events and on visits of celebrities. Evening hours and weekends also a ract higher footfalls. The areas prone to problems in such situations are the points of convergence, corridors, li s and stairs. It is

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advisable to have multiple and separate entry and exit routes on the days of unexpectedly large crowds. Reasonable restrictions can be also imposed on the visitor mobility by demarcating rows or lanes (using queue managers or otherwise). (i) The rate of visitor ingress can be reduced by permi ing the visitor entry though a row and by instructing the security sta to take more time in frisking the visitors. While adopting these measures, it has to be ensured that the environment outside the mall entrance is comfortable and engaging so that people can tolerate delay in entry. It is advisable to depute trained volunteers inside the mall to keep an eye on the customer flow. These volunteers should be connected with the security supervisor through a walkie-talkie so that they may convey to him/her a sudden change in the visitor flow and seek directions if required. The live interaction with the volunteers helps the security supervisor get a complete picture of the customer tra c inside the mall at any point of time.

Rowdy Shoppers Every shopper entering the mall may not behave according to the acceptable norms of behaviour at public places. There are situations when people refuse to cooperate while undergoing mandatory frisking at the mall entrance. Mall rats are another group who might indulge in socially unacceptable actions and behaviours inside the mall. Because of the rowdy shoppers’ impulsive behaviour, abrupt fights may erupt inside the mall. Key to handling these situations is keeping a close watch on the visitors inside the mall. It could be done by the security sta or by using technology such as close circuit TV cameras. Sometimes, the very feeling that they are being observed keeps rowdy shoppers under control. In cases of extreme misbehaviour, the security sta may intervene physically and remove the involved parties from the scene as early as possible. They should neither indulge in fight or arguments with the rowdy elements nor let them create a scene for a long duration inside the mall. Criminal Activities Generally, serious shoppers in a mall belong to the a uent sections of society who transact in and carry valuables. They unwi ingly tempt persons with criminal intent to enter the mall in the guise of shoppers and execute their evil designs. In such cases, it is the responsibility of the mall management to ensure the security of materials and life of shoppers. The management can take steps to debar persons with criminal intent from entering the mall. However, it is di cult to single out criminals at the point of mall entry, as a criminal intent cannot be observed by looking at one’s face. Even if the security personnel are convinced about the evil intention of a person, they cannot block the person’s entry because that would result in unnecessary loud protest by that person, drawing other shoppers’ a ention. However, the security sta should be thoroughly trained to take note of certain observable parameters. If they consider a person to be of doubtful credentials or appearance, the person may be frisked thoroughly and consciously—even to the extent of making him/her realize that he/she has been identified. It might put the person on defensive.

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The other measure to check criminal activities is to keep a strict vigil on the activities of shoppers inside the mall. For this, the entire mall should be divided into zones of varying tra c density. There could be certain areas that are more prone to criminal activities, like basement parking, areas around washrooms, dead ends and clusters of closed stores at higher levels. It is important to maintain a high level of vigil at such places. Technology can be used to make vigilance more stringent at these places. The security personnel placed at such places may be armed with small firearms or batons so as to face the criminals e ectively if needed. Another requirement is to connect these security personnel with major points of ingress and egress with the help of walkie-talkie or cell phones. It will help in ensuring that culprits do not escape a er commi ing the crime.

Acts of Terrorism Terrorism is a global phenomenon and all the countries in the world are prone to becoming targets of terrorist violence. However, the situation in India is particularly serious as the country in the past had seen numerous terrorist acts. The a acks carried out in three top Mumbai hotels on November 26, 2009 reveal that terrorists want to inflict maximum casualties and spread panic. Shopping malls are highly prone to su er from the death and destruction by terrorist violence, as in malls a large number of people gather during limited hours of the day. Eliminating the risk of terrorist violence requires much more elaborate arrangements in terms of manpower and technology. Apart from basic frisking, tools like metal detectors, explosive detectors and electronic gates/tunnels are used for routine security checks. However, the management may supplement these tools with body scanners (which could pose a serious cultural challenge) and x-ray machines for scanning bags and purses. On special occasions or in response to a specific threat, the mall management may get in touch with local administration and police for extra measures like sni er dogs. While adopting these practices, it must be ensured that preventive measures are applied covertly, as an over-enthusiastic approach to security measures application might create a panic in the minds of shoppers and repulse them. Still, a certain level of activism is required to send a message to terrorists that this mall is not suitable for carrying out their evil designs. Accidents Inside the Mall Accidents do happen inside the mall even in the absence of miscreants, rowdies, criminals and terrorists. Common among these accidents are parts of construction or fitments falling o , slipping on the floor, toppling over the railings, ge ing stuck inside li s and accidents on escalators. These accidents occur partly due to the negligence of the mall management team and partly due to the laxity on the part of shoppers. The negligence of the mall management is reflected in the form of inappropriate design and materials used in the mall construction, oversight of minor errors that escalate into major issues, lack of supervision by trained personnel and the inability to display guidelines and instructions for shoppers. It is natural for shoppers to show laxity while using the facilities inside a mall, as they may not be adept at using similar facilities at home. Specific interventions on the part of the mall management include a thorough check of the strength and durability of vital components like railings, ensuring no gaps inside railings, prominently

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displaying instructions to shoppers not to lean on the railings, deploying security sta at higher levels to enforce these instructions and deploying a li man inside each li . If a large proportion of shoppers come from a background or age-group that is not adept at using modern facilities like escalators, it is necessary to deploy sta to help them out if they need it.

Parking Services First impression is the last impression. If this statement is valid for shopping malls then parking holds the key to a mall’s image, as it is the first point of interaction between the shopper and the mall. Hence due a ention should be given to the parking facility. In an era of rapidly rising car ownerships and terrible tra c jams, a good parking facility can vastly improve a mall’s reputation. In fact, a good parking facility can even improve the profile of shoppers visiting a mall, as people with refined tastes and good profile might prefer driving a couple of kilometres more to reach a mall that o ers hassle-free parking. This way it also enhances the catchment area of the mall. Key issues involved in managing the parking facility of a mall are described below:

Location and Type The most common practice is to provide parking space in the basement of the mall building, as it gets easily integrated with the mall. However, shopping malls keep provision of surface parking as well. In some special cases, shopping malls even have parking at higher levels. For example, Spencer Plaza, Chennai has parking space on the fourth floor, whereas Crossroads, Mumbai (now SOBO Central) has roof-top parking. Underground parking could be single, double or triple basement, depending on requirement. Size It refers to the capacity of the parking space in terms of the number of vehicles that can be accommodated at a time. It is a function of the size of the store, size and a ributes of the catchment population and expected footfalls. The parking space capacity also depends on whether there is any on-street or public parking space available close to the mall. The availability of ample open space around the mall building that can be used as surface parking also reduces the parking requirement. The nature of mall tenants, especially anchor tenants, also a ects the parking requirement. For example, anchors like multiplexes hold shoppers for a longer time. Consequently, the parking space is blocked for a longer duration necessitating provision of higher capacity in basement parking. If most of the tenants are high-end, a higher proportion of shoppers is likely to arrive in cars, which is a fit case for having more parking space. The regulatory requirement of having the parking space in a certain proportion to the retail space also a ects the parking size. Parking Control It refers to the systems and procedures used in shopping malls to control, manage and regulate the movement and parking of vehicles inside the shopping mall. It includes

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identifying a path for vehicles from the entry point of the mall campus to the parking entry point. It must be ensured that this path does not interfere with the pedestrian tra c entering the mall. Barriers and speed-breakers may be erected along the way to make vehicles enter the mall at an appropriate speed. The parking facility may use mechanical and/or electronic devices to regulate the movement of vehicles and record their entry. For collecting parking charges, any of the following three arrangements could be opted for: (a) Free entry and pay on exit (b) Free entry and pay before exit (c) Pay on entry and free exit The first two arrangements ensure seamless entry of vehicles, preventing vehicle queues in front of the parking entry. The third option minimizes the risk associated with payment collection. A good parking management system comprises a reporting structure, defined roles and responsibilities and guidelines for meeting eventualities, like a vehicle ge ing damaged inside the parking area or a shopper losing the parking ticket.

Parking Standards Parking services o ered by shopping malls are judged on the basis of the following parameters: (a) Way finding: It should be easy for a driver to reach the parking entry, locate the parking lot and remember it when he/she returns. To facilitate easy way finding, underground parking lots should have decent illumination, signages of adequate size (preferably glow signs) at appropriate locations, graphics for easy understanding by all types of shoppers, digital display screens informing parking space status and personal assistance whenever required. (b) Safety: The parking space should be designed and managed in such a manner that there is no conflict between vehicular and pedestrian tra c. This is necessary for movement inside as well as outside the parking lot. Generally barricades and walkways are used to put in place such an arrangement. The gradient of the slope and the length of ramps should also facilitate safe entry, exit and manoeuvring of vehicles. (c) Security: The parking lot should be safe for people who use it. To ensure this, the parking lot should be properly illuminated. It is be er to have the parking design as simple and open as possible. Protrusions and edges should be avoided. Surveillance, both manual and technology-based, should be beefed up. (d) Comfort: The parking lot should o er comfort to the users in terms of its location, capacity, connectivity and control options. The shoppers should not waste much time in locating or reaching the parking space. They should not be compelled to wait for long during entry or exit, as all this adds to their discomfort. Angularities of parking bays, the number and location of columns and pillars inside the parking lot and adequate reservoir space are other requirements for making the shoppers

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feel easy. (Reservoir space is the space, 20–30 feet, just at the entrance of the parking where vehicles can queue up.) (e) Space utilization: Being a commercial project, every square inch of the mall space should be put to productive use. The same holds true for the parking space. Di erent categories of people use the parking space. Among them are shoppers, tenants, employees (of the mall management as well as tenants) and suppliers of tenants. Each group has its distinct parking requirements in terms of location, duration and services. The parking space should be sensibly allocated among di erent users so that each group is able to derive maximum benefit from it.

Services in the Parking Area Parking lots are meant to park vehicles but to make it happen conveniently, a number of services should be added to the core facility of parking. Some of these services are as follows: (a) Occupancy status and circulation pa ern: Automated system for car parking and multi-tier parking systems with hydraulic jacks are used in modern parking systems. These systems are also integrated with digital occupancy status indicators. It is be er if the level-wise occupancy status is displayed on digital screens at the parking entry. As there will be multiple exit/entry points, it is necessary to have signages and floor-wise circulation pa ern and parking plans with proper identification for the customers to lead them to the correct parking slot. (b) Entry into the mall: In a mall where anchors like supermarkets occupy part of the basement space, there is direct entry from the parking lot to the supermarket. This helps the shoppers take the trolleys carrying the purchased stu directly to their cars. However, due care must be taken to ensure that there is no collision between the trolleys and the incoming/outgoing cars. Almost all malls connect the basement parking with the mall’s operational area through li s. However, the location, number, carrying capacity and speed of these li s should be carefully planned. Escape routes and floor plan are to be displayed to enable people to exit the basement in case of emergency. (c) Ventilation: Ventilation can become a serious issue for underground parking lots in most parts of India during certain period of the year and people may start feeling su ocated. There is a limit to which air circulation could happen naturally. Therefore it becomes mandatory to use artificial means to ventilate the stale basement air. (d) Water-proofing and drainage: The waterproofing of the roofs and walls of the basement parking lot is necessary to prevent them from becoming damp. Provision for a good drainage system along with pumping facility should also be there in the basement parking. (e) Dustbins: Many a time shoppers consume eatables on the way to the parking and throw the food packaging in a dark corner of the parking resulting in garbage accumulation there. It is advisable to place a few dustbins at key locations in the parking to facilitate proper collection and disposal of garbage accumulating in the parking.

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Building Management System A modern Building Management System (BMS) is a complete information delivery system that monitors and controls a variety of systems and functions at an optimal level of e ciency. The systems design of the BMS consists of the following components.

Fire Management Services Though civic and fire service regulators have imposed lots of conditions and safety norms on multi-story buildings like shopping malls to make them fire-safe, still the possibility of fire accidents cannot be ruled out completely. Some materials (such as wood, plastics, textiles, chemicals and paints) used in mall construction may act as catalysts to turn small sparks into a conflagration. A mall accommodates a large number of people and electric/ mechanical gadgets. Any of these could provide a spark required to start a small fire that may be abe ed by the atmospheric oxygen to develop into an inferno. The fire can cause serious damage to the mall and its occupants and customers. Thus it becomes important for shopping malls to have a comprehensive fire management system. A good fire management system should have at least the following components: (a) Fire detection system: This system comprises of tools and technology for timely detection and reporting (fire alarm) of a fire outbreak inside the shopping mall. A typical fire detection system would include any of these detectors—photo-electric type, ionization type or heat detection type. It would catch specific signals (smoke or sudden rise in heat) from the mall environment and raise an alarm. In some cases, the fire detection system is coupled with an automatic firefighting system, say sprinklers. (b) Firefighting system: Fire extinguishers constitute the most elementary type of firefighting system. Fire extinguishers could be based on water, carbon-dioxide, powder, foam, vapourising liquid or wet chemicals. According to fire safety norms, it is mandatory to provide fire extinguishers at strategic locations in a mall. However, most of the malls rely on the sophisticated sprinkling system to fight fires. A sprinkling system comprises a network of overhead pipes a ached to a source of water supply (a water pumping system) and a number of sprinkling nodes spread all over the area to be protected from fire. This system is generally tagged on to a fire detection system and gets activated as soon the alarm rings. Fire hoses at di erent locations within the mall are another option for localised control of fire. These hoses are a ached to valves that carry water at high pressure. (c) Planning and training system: The above two components of the fire management in a mall need to be planned in advance. This planning starts with an assessment of the sources of fire inside the mall. A structure for the fire management system outlining reporting relationships is created within the mall management. It creates management positions and defines responsibilities associated with each position. Then a decision is taken on the appropriate mix of tool and techniques needed

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for fire detection and fighting. Protocols related to procurement, maintenance and upkeep of equipment are also developed. The concerned sta members are trained to use the firefighting equipment and deal with sudden outbreaks of fire. Guidelines are also framed to manage the crowd of visitors and occupants in the mall during a fire crisis. Conducting regular mock firefighting drills is also an integral part of fire planning.

Escalators and Elevators (Lifts) Escalators and elevators form a critical component of the BMS. Generally, separate elevators for passenger and goods are available. Escalators and elevators have to be in perfect running condition round the clock to enable the customers and occupants reach any part of a huge modern mall with ease. Their proper maintenance is utmost necessary to save the users from becoming victims of accidents caused by faulty escalators and elevators. The security and housekeeping sta is to be trained in the emergency procedures for evacuation of passengers in case of failure of elevators/escalators. Emergency procedures should also be displayed prominently in elevators. The mechanism to stop the elevator movement when it is overloaded must remain functional always to prevent accidents or elevator malfunctioning. Elevators must have proper ventilation systems.

Escalators at Select City Walk, Saket

Monitoring Systems CCTV and access control systems are used for monitoring people inside the mall for proper crowd management and also as a security measure. These systems are usually

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placed at the exit/entry points for monitoring the movement of people and vehicles by senior security sta stationed the central control room of the mall. These systems help in controlling the crowd, monitoring unwanted activities and ge ing alerts on rogue elements inside the mall. Public address systems are installed for sounding alerts, and alert messages may also be displayed on digital boards. Automatic door opening systems are installed to minimize dust accumulation and ensure the e ectiveness of climate control equipments in maintaining ambient temperatures inside the mall.

Signages, Ansal Plaza, Delhi

Ambience The mall ambience and outlook is a major a raction for customers, resulting in increased footfalls. The malls decorated according to the themes of occasions like festivals or special sales act as a great pull for the customers, especially in the catchment area. Proper use of signages and boards and increasing the visibility of advertisement hoardings are necessary to impart a decent a ractive look to the mall. However, it has to be ensured that signages and hoardings do not obstruct easy movement of people. Besides, these should be fixed at the places that can bear their load. Otherwise, their fall may lead to accidents. For creation of natural ambience inside the mall, plants and vegetation may be used. However, to grow plants, proper ventilation and water should be available inside the mall. Outside the mall, fountains and garden give it a natural, eye-pleasing ambience.

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SUMMARY Facili es play a definite role in defining the shopping experience o ered by a shopping mall. These assume significance for mall revenue genera on, as shoppers consider experience as a vital component or deliverable of a shopping trip. It is important to plan and visualize all the facili es during the mall designing stage itself. The facili es management in a mall broadly deals with the provision of services and facili es in the following areas: u li es, housekeeping, security services, parking services and crea on of ambience. A comprehensive Building Management System (BMS) ensures a coordinated e ort for providing these services and facili es. The level of support o ered in terms of facili es by a mall depends on customer expecta ons, stringency of law and a ordability of the mall management.

REVIEW QUESTIONS 1. ‘In India, the mall management is considered synonymous with the facili es management.’ Comment. 2. What are the vital components of the facili es management func on for a shopping mall? 3. Do people visit shopping malls to consume products/services or to consume the experience? 4. Which are the di erent u li es that a shopping mall should o er to its customers? How do good shopping malls plan and manage their u li es? 5. What is meant by ‘housekeeping’ in context of a shopping mall? What are the health and hygiene concerns of shopping malls? 6. What are the di erent security threats inside shopping malls? How do mall managers a empt to minimize these threats? 7. If one believes in the adage ‘first impression is the last impression’, one must manage parking facili es inside the mall with due care. Comment. 8. Suggest a few guidelines to be followed while managing the housekeeping func on inside a mall. 9. What is the Building Management System (BMS)? Discuss the vital components of a shopping mall BMS? 10. How does e cient facili es management make a shopping mall superior?

PRACTICE EXERCISES 1. Survey a few shopping malls in your locality and note down the u li es o ered by them to the customers. Which of these malls o ers the widest variety of u li es? Which of the facili es are common to all the malls and which ones are most uncommon? 2. Examine the deployment of security personnel in a few nearby shopping malls? Are there any areas where you feel that these malls could have deployed security personnel? 3. Visit a few shopping malls and make observa ons about deficiencies in their facili es management. Iden fy the areas with maximum deficiencies.

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SUGGESTED READINGS 1. Aaker, D.A. (1992), Strategic Market Management, 3rd ed., John Wiley & Sons Inc., New York, NY 2. Abra , R.; Fourie, J.L.C. and Pi , L.F. (1985), ‘Tenant mix: the key to a successful shopping centre’, The Quarterly Review of Marke ng, Vol. 10, No. 3, pp. 19–26 3. Alexander, A.A. and Muhlebach, R.F. (1992), Shopping Center Management, Ins tute of Real Estate Management, Chicago, IL 4. Barron, K. (1998), ‘Be a careful shopper’, Forbes, Vol. 16, No. 6, pp. 60–62 5. Bartels, R. (1968), ‘The general theory of marke ng’, Journal of Marke ng, Vol. 32, pp. 29–33 6. Bass, F.M.; Tigert, D.J. and Lonsdale, R.T. (1968), ‘Market segmenta on: group versus individual behavior’, Journal of Marke ng Research, Vol. 5, August, pp. 264–270 7. Berry, L.L. (1995), ‘Stores with a future’, Retailing Issues Le er, Vol. 7, No. 2, pp. 1–4 8. Brown, S. (1992), ‘Tenant mix, tenant placement and shopper behavior in a planned shopping centre’, The Service Industries Journal, Vol. 12, July, pp. 384–403 9. Calantone, H.J. and Sawyer, A.G. (1978), ‘The stability of benefit segments’, Journal of Marke ng Research, Vol. 15, August, pp. 395–404 10. Carn, N.G.; Rabianski, J.S. and Vernon, J.D. (1995), ‘Structural trends impac ng retail business’, Economic Development Review, Vol. 13, No. 2, pp. 10–12 11. Cox, Jr. W.E. and Cooke, E.F. (1970), ‘Other dimensions involved in shopping center preference’, Journal of Marke ng, Vol. 34, October, pp. 12–17 12. Day, G.S. and Wensley, R. (1983), ‘Marke ng theory with a strategic orienta on’, Journal of Marke ng, Vol. 47, Fall, pp. 79–89 13. Dillman, D.A. (1978), Mail and Telephone Surveys: The Total Design Method, John Wiley & Sons, New York, NY 14. Edelman, D.C. and Silverstein, M. (1993), ‘Up close and personal’, Journal of Business Strategy, Vol. 14, No. 4, pp. 23–31 15. Fickes, M. (1998), ‘Expanding the limits of the regional mall’, Shopping Center World, Vol. 27, No. 2, pp. 62–67 16. Green, P.E. (1977), ‘A new approach to market segmenta on’, Business Horizons, Vol. 20, February, pp. 61–73 17. Haley, R.I. (1968), ‘Benefit segmenta on: a decision-oriented research tool’, Journal of Marke ng, Vol. 32, July, pp. 30–35 18. Hines, M.A. (1988), Shopping Center Development and Investment, 2nd ed., John Wiley & Sons, Inc., New York, NY 19. Hunt, S.D. (1992), ‘Marke ng is ...’, Journal of the Academy of Marke ng Science, Vol. 20, No. 4, pp. 301–311 20. Ingene, C.A. and Lusch, R.F. (1980), ‘Market selec on decisions for department stores’, Journal of Retailing, Vol. 56, No. 3, pp. 21–40

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21. Jain, S.C. (1993), Market Planning and Strategy, 4th ed., South-Western Publishing Co., Cincinna , OH 22. Kohli, A.K. and Jaworski, B.J. (1990), ‘Market orienta on: the construct, research proposi ons, and managerial implica ons’, Journal of Marke ng, Vol. 54, pp. 1–18 23. Kotler, P. (1972), ‘A generic concept of marke ng’, Journal of Marke ng, Vol. 36, pp. 46– 54 24. Mar n, M. (1985), The ICSC Guide to Opera ng Shopping Centers the Smart Way: Ideas From Industry Experts, Interna onal Council of Shopping Centers, New York, NY 25. Narver, J.C. and Slater, S.F. (1990), ‘The e ect of a market orienta on on business profitability’, Journal of Marke ng, Vol. 54, pp. 20–35 26. Okoruwa, A.A.; Terza, J.V. and Nourse, H.O. (1988), ‘Es ma ng patroniza on shares for urban retail centers: an extension of the Poisson gravity model’, Journal of Urban Economics, Vol. 24, pp. 241–259 27. Pel er, J.W. and Schribrowsky, J.A. (1992), ‘The use of need-based segmenta on for developing segment-specific direct marke ng strategies’, Journal of Direct Marke ng, Vol. 6, No. 3, pp. 44–53 28. Roy, A. (1994), ‘Correlates of mall visit frequency’, Journal of Retailing, Vol. 70, No. 2, pp. 139–161 29. Schi man, L.G. and Kanuk, L.L. (2000), Consumer Behavior, 7th ed., Pren ce Hall, Upper Saddle River, NJ 30. Sheth, J.N.; Gardner, F. and Garrell (1988), Marke ng Theory: Evolu on and Evalua on, John Wiley & Sons, New York, NY 31. Tash, C.B. (1993), ‘Price tag is complex for recovery of malls as ins tu onal investments’, Pension World, Vol. 29, No. 3, pp. 14, 16 32. Telsey, D.L. (1996), ‘Specialty retailing poised for reinven on’, ICSC Research Quarterly, Vol. 3, Spring, pp. 17–19 33. Yankelovich, D. (1964), ‘New criteria for market segmenta on’, Harvard Business Review, March–April, pp. 405–412 34. Zinn, L.; Power, C.; Siler, J.F.; DeGeorge, G. and Zellner, W. (1990), ‘Retailing: who will survive’, Business Week, November 26, pp. 134–144

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CASE

Accidental deaths in shopping malls Shopping malls are supposed to be the places for fun and frolic. However, some unfortunate incidents have also occurred in or around malls in the recent past. The latest was the murder of a boy named Shobit Rastogi on 5 May 2011, who had gone to a Vasant Kunj Mall but was stabbed while walking on the way to his home. The path connec ng the mall to the nearby residen al locali es was lonely and unguarded. In Shobhit’s case, the murder did not take place inside the mall. However, there are instances where the unfortunate incident happened inside the mall and also due to the mall. In January 2011 a 20-year-old BBA student died a er falling from the 6th floor of Centre Stage Mall in Noida. According to the Noida police, the student himself leaped to his death a er he had broken up with his girlfriend. O cial sources said the student had come with a girl to watch a movie. A shoe print at the spot from which Adhiv had jumped suggested that he was talking to someone while climbing the railing to jump to his death. The shoe print proves that he was walking backwards onto the railing. In the past, one falling incident also occurred at Garuda Mall Bangalore where a child slid through the railings and fell into the atrium. The mall took preven ve steps subsequently and fi ed the atrium with a net.

CHAPTER

9

Regulatory framework for Shopping Malls

LEARNING OBJECTIVES This chapter will enable the readers to • Become familiar with di erent regulatory requirements for developing and managing a shopping mall • Get acquainted with the philosophy behind these regula ons • Understand the nuances of these laws • Know about the pi alls while complying with such laws and regula ons

MALL KICKS ENVIRONMENTAL ROW XYZ Developers is a leading real estate and mall-development company based in north India. It is a professional and successful mall developer with a chain of shopping malls do ng major ci es in north India. The company happened to lay its hands on a property very close to Yamuna Enclave, a posh locality along the banks of river Yamuna. The project started with huge fanfare but soon became a newspaper headline. Some NGOs and ci zen groups approached the media with complaints that the project is an encroachment on river bed and is an environmental viola on. The company took it lightly, as it had all the clearances required for construc on of the building. The environmental clearance was, however, missing since the property was situated beyond a major road bordering the river. Soon the ma er reached the administra ve authori es and subsequently to courts. Ci zen groups argued that keeping in view the proximity and distance es mates, the plot comes in the river bed area. The company argued that since the property is across a major tra c artery (a state highway), it is wrong to classify its loca on as river bed. The court granted interim relief to the ci zen groups by ordering a stay on the construc on ac vity ll the pronouncement of judgment.

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The incomplete skeleton of XYZ Mall overlooking the river and is wai ng for the day when its fate would be decided by the court.

INTRODUCTION Mall development is a very tedious business, as it involves ge ing approvals from a multitude of authorities. Every state in India has its own set of regulations that govern the planning, development and operations of mall business. There are over 20 major licences and permissions required even before breaking the ground of the proposed mall. This makes the legal framework governing mall management in India complex. According to the chronology of mall-development activities, legal and regulatory compliances for a shopping mall can be classified into the following categories: • • • •

Compliances during the planning stage Compliances during the development stage Compliances during the launching stage Compliances during the operational life

Compliances During the Planning Stage A er commissioning a feasibility study based on market research, the mall developer gets a clear idea about the need, location, size and tentative tenant-mix of the proposed shopping mall. Then the developer proceeds to give a formal shape to the concept as visualized by the feasibility study. In this direction, the two main activities of this stage are: (a) Plot acquisition (b) Developing business plan/proposal

Plot Acquisition Regarding acquisition of plot, the developer needs to have information about the following important aspects: (i) The dimensions of the plot should be correctly stated. These should be checked in terms of the number of roads/streets/lanes bordering it and their respective widths. (ii) The nature of the property should be checked. It should be chekcked whether it is agricultural, residential, commercial or mixed-use. If it is not a commercial property, additional formalities for change in land usage should be met. It should be seen whether construction of a commercial entity like shopping mall is permi ed at that location. If it is permi ed, then it should be checked who should take this permission. The seller may take this responsibility, but the developer can also volunteer to take this permission if significant concessions are o ered in land price. (iii) The title of the land should be clear and unencumbered. The buyer should check for past sale/registration, litigation and hypothecation.

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(iv) The buyer should see if there are trees or other environmental assets on the plot that need to be uprooted or cut for building the mall. Permission from the local municipal body is required to do so, and a nominal fee is charged for the same. Check whether the law requires re-plantation of the same or similar tree elsewhere, as doing this would also require some formalities and documentation. (v) The plot should be checked for any existing structure on it. If a structure is there, then it should be checked whether it can be used or is to be demolished. (vi) It should be checked whether the property is unoccupied or has some tenants. The presence of tenants/occupants can adversely a ect the deal if tenancy laws are pro-tenant. (vii) If the property occupants are slum dwellers, the government policy towards removal/rehabilitation of slum dwellers should be considered. In cities like Mumbai, local development authorities have stringent rules for this. For instance, in Maharashtra, MHADA (Maharashtra Housing and Area Development Authority) Act mandates compulsory permission from MHADA before constructing a mall in a slum area. Also people living on the slum site, where the mall would be built, have to be rehabilitated at a new location within 3 square km of their present place of residence. If this is not possible, then the most apt location has to chosen to rehabilitate them. (viii) The buyer should find out whether existing and proposed land use of adjacent properties supplement or infringe mall operations. (ix) The buyer should know about registration formalities and fees payable. It should be found out how much is the required stamp duty and what is the di erence between the government-declared minimum price for the plot and the actual deal price. It should be checked if the buyer wishes to pay stamp duty on the government price, which is generally lower, or the market price. Ge ing registration done at the market price proves beneficial if something goes terribly wrong and damages/ refund is to be claimed from the seller. In this case, complications of bridging the gap between the government price and the market price and accounting for it are also eliminated. This stage generally ends with the property registration in the name of the buyer (developer in this case) and establishing occupation, which is generally reflected in the form of a boundary wall or fencing.

Developing Business Plan/Proposal In this stage, the abstract concept of the proposed mall is put on paper along with relevant numbers and estimates. This stage requires services of specialists like architects and chartered accountants. The design of the mall should take care of all the rules and regulations and norms prescribed by the local municipal body (such as BMC in Mumbai and MCD/NDMC in Delhi) and various other regulatory bodies. A detailed report, including investment and revenue projections, is also prepared. Financial details given in the report are in line with the requirements of financial institutions like banks.

Regulatory framework for Shopping Malls 185

This stage ends with architectural drawings and estimates submi ed to the local municipal authorities along with required pro forma and requisite fee. A more ornate version of the architectural plan is used for making the marketing brochure that may be prepared simultaneously or subsequently. The financial plan (business plan) is submi ed to financing institutions along with specified documents for availing of loan. The mall developer should also check for the floor space index (FSI) permissible at that location. (The ratio of the built-up area to the total area of the plot is called the floor space index.) Detailed architectural drawings and estimates would be based on the permissible FSI.

Compliances During the Development Stage As mentioned earlier, a number of licences and permissions are required before the developer starts construction on the basis of the approved construction plan. Some of the required licences and permissions are as follows:

Environment Impact Assessment Report If the built-up area of the mall is above the threshold level notified by the State government or the plot lies in the environmentally-sensitive zone (such as river bed, mountain ridge and forest area), an environment impact assessment report is to be submi ed to the Ministry of Environment and Forestry stating that all the environmental norms for water, air and noise pollution will be duly adhered to while constructing the mall. Permission from the Fire Brigade Various fire safety rules are required to be followed while constructing the mall. These relate to aspects such as the number and location of emergency fire exits and availability and accessibility of safety equipment. The fire brigade a er inspecting the fire safety measures provided in the mall will permit the mall to start operations. Permission from the State Electricity Board This permission is required to certify that the state electricity board would be in a position to provide a valid connection to the mall to fulfil its power requirement as specified in the project report. This permission is sought by filling an application in the prescribed format with the electricity board. The application is accompanied by the details of the building plan, tentative electric consumption and requisite fee. Permission from the Local Municipal Body The mall construction activity would require handling large quantities of construction material (such as iron, sand, cement, bricks and gravel stone). Permission must be taken from the local municipal body for handling these materials. Permission for water and sewage connection should also be taken from the municipal authority. A parking licence for developing a parking area in the mall is also issued by the municipal authority. The parking area norms vary from place to place. For instance, in Mumbai, the BMC has a norm of one car parking facility for every 1000 sq area of the mall.

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Permission for the Multiplex If the developer plans to have a multiplex theatre in the mall, a No Objection Certificate (NOC) must be obtained from the neighbours. A 90-day notice has to be put up on the mall site to enable the neighbours file objections, if any, regarding se ing up of a multiplex. The neighbours’ NOC, along with reports from the police, fire department, electricity board and public works department, is submi ed to the local administration for ge ing a licence for movie exhibition. The licence is issued for a specified period (one–three years) and is subject to cancellation if there is any violation of stipulated guidelines. It must be renewed when it is due for expiry. Permission for the Food Court To construct a food court in the mall, a food licence is to be obtained from the local authority along with kitchen licence. Food courts are generally constructed on higher levels. Many state governments provide a higher FSI for food courts and multiplexes. Hence it must be checked with the local government or municipal body.

Insurance of the Mall and Construction Labour Insuring people working on mall site is a main concern at this stage. Generally, mall construction is outsourced to a contractor and all the construction workers are on its payrolls. Insurance in such cases ought to be the responsibility of contractor. However, providing this insurance by the mall development company is significant on two counts. First, it cannot escape its responsibility in case of any construction-related accident, as it is the principal employer in the eyes of law. Second, in case of any accident, it is the shopping mall and the mall developer who a ract criticism and negative publicity. The mall developer should also ensure proper training of construction workers and must adhere to safety norms for construction workers, like wearing of helmet, as specified by the local authorities. Insurance of the mall structure is also done by mall developer. Normally, a single insurance company is hired for insurance of the whole project. Because insuring di erent things under the mall project with di erent insurance companies might create complications while seeking claims in case of any mishap. There are many loopholes in insurance regulations, so it becomes di cult to judge which insurance company to approach for which claim if many companies are involved in insuring the mall project. It is necessary to apply for all the above-listed permissions at the time of construction, as ge ing the regulators’ nod takes time, ranging from three months to one year, and in exceptional cases more than one year. Also, while inspecting the under-construction mall for granting the sought permissions, the regulators may point out something that requires suitable adjustments/changes during the construction stage itself. Then it would be easy to incorporate the desired changes in the incomplete mall construction.

Compliances During the Launching Stage Though the mall is technically complete a er construction and mechanical and electrical

Regulatory framework for Shopping Malls 187

work is over, the mall cannot commence its operations before certain formalities are completed. Some of these formalities are listed below:

Occupation Certificate (OC) Before allowing the tenants to set shops in the mall, the mall developer should obtain the Occupation Certificate (OC) from the local municipal authorities. The Occupation Certificate states that the mall is ready for occupation or starting business by the tenants. Assessment of Property Tax A er completion of the mall construction, municipal o cials visit the mall to assess the property tax applicable to it. This assessment is done in the year of completion of the mall construction, and the same assessment is applicable to the mall every subsequent year unless there is change in the law governing the property tax. Registration of Retailers Marketing of the mall retail space happens simultaneously with the construction activity. A er signing the lease agreements, the mall developer o ers standard, bare retail space (vanilla shell) to the tenants so that they may carry out fit-outs as per their requirements. However, every retailer must get itself registered under the Shops and Commercial Establishments Act of the respective state government before commencing retail operations. The outlets dealing in food are required to get separate food licence from the municipal bodies, whereas the ones intending to sell alcoholic beverages must get relevant licence from the local excise department. Though the task of ge ing these licences is to be handled by the respective retailers, in exceptional cases the mall developer get it done on its own but the licensed stores carry a higher price tag.

Compliances During Operational Life Once the mall starts operating, a di erent set of legal and regulatory requirements come into force. Most of these requirements relate to complying with the rules and norms specified by di erent regulatory authorities, maintenance of requisite records and timely reporting of requisite information in the specified pro forma. Most of these compliances are of routine nature and follow a certain time-frame. The mall management also needs to ensure that legal provisions are met regarding outsourced activities and functions, as it owes the responsibility of being the principal employer. It must be noted that the compliances to be made by the mall management are di erent from the ones that each retailer is supposed to comply with in its individual capacity. Some of the vital laws and norms that require adherence by the mall management and retailers are discussed below.

Laws Relating to Mall Operations Operations of retail stores and shops are governed by the shops and commercial establishments acts of respective state governments. These acts have been enacted to regulate the working conditions of people employed in di erent categories of establishments such as shops, commercial establishments, residential hotels, restaurants,

188 Mall Management

eating houses, theatres and other places of public amusement or entertainment. These acts mandate compulsory registration, specify norms and benchmarks; impose penalties; and provide for an administrative set-up to monitor the implementation of these provisions. Details of a model Shops and Establishments Act are discussed later in the chapter.

Labour Laws The Government of India and respective state governments enact laws pertaining to di erent facets of employment in industrial and commercial establishments and set minimum standards for essential requirements to be met by employers. These standards pertain to minimum wage payable to each category of employees, frequency and mode of payment, age of employment, compensation payable in case of accidents, social welfare norms and special provisions for ladies. Some important acts governing these areas are discussed in detail later in the chapter. Insurance Insurance is a vital provision for both men and material employed in shopping malls. Core issues involved in insurance are: selection of the insurance provider, negotiating service level and terms and conditions of insurance (including premium and claims), schedule of payment and documentation related to taking insurance and its renewal, launching claims, claim se lement and related follow-up. Insurance policies and procedures are governed by stipulations formulated by the Ministry of Finance, the concerned insurance company and the regulator (IRDA in this case). More details are given later on. Renewal and Certification Some essential facilities like li s and firefighting system are given clearance/certification by the concerned authority for a specified time, and these require periodic inspection and renewal/certification. Mall managers are supposed to keep these facilities in good condition, maintain adequate records about their maintenance, carry out their scheduled inspections and other necessary follow-ups when due by following prescribed formalities. Taxation and Return Filing The mall developer has to pay a number of taxes from time to time during the operational life of the mall. Major taxes include service tax and entertainment tax in case of food courts, multiplexes, disco, family entertainment centre (FEC), etc. and income tax as per the Income Tax Act. More details are given later on. Environmental Laws Several environmental policy statements have been formulated in the last few decades as part of the Government’s approach to integrate environmental concerns with developmental planning. Provisions of many environmental laws also apply to the mall when it starts operating. These laws mandate mall developers and managers to comply with specified restrictions and file periodic reports about the compliance.

Regulatory framework for Shopping Malls 189

Municipal Issues A er ge ing permission from the municipal authorities to avail of basic services like water and sewage connections and electricity (from state electricity boards), it is mandatory for the mall management to follow the specified norms and prevent abuse of these services. Apart from conformity to the specified norms, mall managers need to follow the schedule of payment for use and maintenance of these services as directed by the concerned authorities. Some of the Acts and compliances mentioned above are discussed in detail in the following sections.

SHOPS

AND

ESTABLISHMENTS ACT

The Shops and Establishments Act is applicable to shops, retail stores and other commercial establishments like residential hotels, restaurants and theatres. This act is a social piece of legislation enacted to safeguard the interests of those working in the unorganized sector by ensuring that their employers provide comfortable working conditions. Among other things, this law regulates the working hours of employees, the number of days the establishment should remain closed in a year, weekly o for the employees and how much overtime work employees are permi ed to do. Every state has its own Shops and Establishments Act, which is amended from time to time to meet the changing requirements for good working conditions. The Shops and Establishments Act also defines the jurisdiction of its application and presents an administrative framework for the supervision of its implementation through the Commissioner of Labour. Most of the states have a Shops and Establishments Department, which has a Chief Inspector assisted by deputies and support sta . A model Shops and Establishments Act has following components:

Registration and Renewal Registration of shop is mandatory under this Act. Some acts (e.g. the Punjab Shops and Commercial Establishments Act, 1958) specifically mentions that registration is must even if the shop does not employ any employee and is managed by owners themselves. The Act specifies a pro forma that is to be filled and the required fee for registration of a shop. Generally, the Act specifies di erent categories of shops/establishments according to the nature of their work and/or the number of employees. Registration fee varies for di erent categories. Failure to get registered under the Act invites penalty. A er completing the registration formalities, a registration certificate is issued within a specified number of days. Initial registration is for a limited period (say 1–3 years) and requires renewal a er expiry. The renewal application is to be made as per another pro forma suggested in the Act along with the specified fee. The registration is again granted for a limited time period. Some states like Haryana have streamlined the registration process by taking it to the online platform. The Act also specifies pro forma and the required fee if the retailer wants to incorporate changes in the information provided during initial registration/renewal.

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Scope and Coverage The Shops and Commercial Establishments Act is enacted by the state legislature and is applicable to the entire state, if not specified otherwise. It is applicable to all shops and commercial establishments irrespective of the number of people employed and whether they are employed with or without wages. The only exception is the members of the employer’s family. The state governments can exempt, either permanently or for a specified period, any category of establishments from all or any provisions of this Act.

Major Provisions The Shops and Commercial Establishments Act generally has provisions covering the following issues: • Compulsory registration of a shop/establishment within a specified number of days of commencement of work by it • Communication of closure of the establishment within a specified number of days from the closing of the establishment • Hours of work per day and week. • Guidelines for spread-over, rest interval, opening and closing hours, closed days, national and religious holidays and overtime work • Rules for employment of children, young persons and women • Rules for annual leave, maternity leave, sickness and casual leave • Rules for employment and termination of service • Maintenance of registers and records and display of notices • Obligations of employers • Obligations of employees

Administration of the Act The Shops and Commercial Establishments Act provides for the administrative mechanism to supervise and monitor its implementation. It includes authorities designated to carry out specific tasks, procedures and documentation for inspection, mechanism for imposing penalty proceedings and mechanism for addressing grievances. Some important obligations of employer are: maintaining a muster roll, notifying the list of closed days and holidays at the beginning of each year to inspector (shops and establishments) and providing identity card to employees. Major breaches of the provisions of the rule are of the nature of procedural lapses, for example, not maintaining the prescribed register of employment, leave register, visit book, lime washing register, not providing leave book to the employees or not making suitable entries therein, not producing requisite record register and notices for inspection on demand and not displaying the name board in prescribed script.

ENVIRONMENTAL REGULATIONS

FOR

SHOPPING MALLS

With a view to integrate environmental concerns with developmental planning, the Government of India has formulated several policies over the last few decades. The following are some of these policies:

Regulatory framework for Shopping Malls 191

• National Forest Policy, 1988 • National Conservation Strategy and Policy Statement on Environment and Development, 1992 • Policy Statement on Abatement of Pollution, 1992 • National Environment Policy (NEP), 2004 This National Environment Policy has been drawn up as a response to the government’s commitment to a clean environment, mandated in the Constitution in Articles 48 A and 51 A (g), strengthened by judicial interpretation of Article 21. The policy is still in dra form and addresses environmental concerns relating to all developmental activities. The acts, rules and notifications applicable to the environmental aspects of the construction and operational phases of a shopping mall are summarized in Table 9.1 and described in the following sections. Table 9.1 Environmental legislations applicable to malls

Legislation The Environment (Protection) Act, 1986 with Rules and EIA Notification, 1994 (as amended).

The Water (Prevention and Control of Pollution) Act, 1974 with Rules.

The Water Cess Act, 1977 The Centre/State Ground water Regulations The Air (Prevention and Control of Pollution) Act, 1981 with Rules.

Areas/Activities Covered • Overall environment protection • Compliance with environmental (air, water, noise) standards issued under EPR • Preparation of Environment Impact Assessment (EIA)/ Environment Management Plan (EMP) report • Obtaining environmental clearance from the Ministry of Environment and Forests (MoEF) • Taking part in Environmental Public Hearing (EPH) • Protection of water quality • Discharge of sewage from the mall • Obtaining Consent to Establish (NOC) for establishing and Consent to Operate (CTO) for activities causing water pollution from Delhi Pollution Control Commi ee (DPCC) in case of Delhi • Paying water cess to the local government body for sourcing of domestic water. • Conforming to restrictions on drawing of ground water • Arranging ground water recharge through rainwater harvesting schemes (as applicable) • Protection of air quality • No-Objection Certificate (NOC) for establishing and Consent to Operate (CTO) for activities causing air pollution from DG sets from DPCC • Compliance with the National Air Quality Standard

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The Noise Pollution (Regulation and Control) Rules, 2000 The Municipal Solid Waste (Management & Handling) Rules, 2000

• Compliance with noise standards in accordance with the land use of the area • Management (collection, handling, intermediate storage) of domestic waste

In India, projects with the potential to cause significant environmental impact require Environmental Clearance (EC), which can be received only a er an impact assessment study has been done. The EC process is mandated by the EIA notification dated 27th January 1994 and is administered by the State-level government regulatory bodies (such as the State Pollution Control Board and the Environment Department) and the Ministry of Environment and Forests at the Central Government level.

Environmental Issues Shopping malls rake up a number of issues about their impact on the environment and urban living spaces. Some of these issues are discussed below:

Urban Planning and Usage The planned urban development is encouraged by the Central and State governments. These governments have promulgated the urban town planning acts with provisions for proper zoning of land into residential, commercial and industrial areas; control on slums and urban sprawl; design and development of civic amenities (such as sewerage and waste disposal) and development of Master Plans for important urban areas in States and Centre-administered territories. Water Usage and Water Pollution The use of water resources and the discharge of polluted water (sewerage) are primarily regulated by the Water Cess Act, 1977 and the Water (Prevention and Control of Pollution) Act, 1974. The Water (Prevention and Control of Pollution) Act, 1974, The Water Cess Act, 1977 including Rules 1978 and 1991 provides for levy and collection of cess on water consumer by authorities and persons running certain industries. The cess thus collected is used to generate resources for prevention and control of water pollution. It also contains specifications on a xing of meters, furnishing of tax returns, assessment of cess, interest payable for delay in payment of cess and penalties for non-payment of cess within the specified time. The new shopping malls come under the jurisdiction of these acts, as they source water from the water supply schemes of the local authority. The Water (Prevention and Control of Pollution), Act, 1974 including Rules, 1975 (as amended up to 1988) provides for the prevention and control of water pollution and maintaining or restoring good water quality for any establishment. The Act assigns functions and powers to the CPCB and DPCC for prevention and control of water pollution and all related ma ers.

Regulatory framework for Shopping Malls 193

The Environment (Protection) Rules under the EPA also lay down specific standards for quality of water e uents to be discharged into di erent types of water bodies (such as sewers, surface water bodies like lakes and rivers, and marine discharge). Additionally, the potable water supplied for the mall during the operations phase should also conform to the National Drinking Water Standard IS: 10500 The Central Ground Water Board (CGWB), a statutory authority set up by the Central Government, has restricted the drilling of tube wells and bore wells in certain water-scarce areas in the country. Since the Board does not permit extraction of ground water resources from the mall project area, all commercial developments in the area should plan their water usage from sources other than ground water.

Air Quality The Air (Prevention and Control of Pollution) Act, 1981, including Rules 1982 and 1983, was enacted to prevent, control and reduce air and noise pollution. According to Section 21 of the Act, no person shall establish or operate any activity that can cause air pollution without obtaining Consent to Establish (CTE) as per the Air Act. The Act also lays down national ENT air quality standards for common pollutants like suspended particulate ma er (SPM), sulphur dioxide (SO2), oxides of nitrogen (NOx), carbon monoxide (CO) and lead (Pb) with the intent of managing air quality for di erent categories of areas (residential, industrial and sensitive). The Extended Producer Responsibility (EPR) also specifies source emission standards determined on the basis of the impact of pollutants on human health, vegetation and property. It may be noted that normally the CTE with respect to the Air and Water Act is provided in the form of a No Objection Certificate (NOC) to the project proponent when the project falls under the 32 categories of activities covered by the EIA notification. The NOC is generally provided a er the submission of the EIA report and holding of the public hearing.

Noise Pollution With the objective of regulating the noise level in the environment, the Central Government notified the Noise Pollution (Regulation and Control) Rules, 1989 and amended in the year 2000, under the EPA. The EPR also lays down equipment-specific noise emission standards for DG sets. Specific standards for control of noise from DG sets and measures to be taken for reduction of noise by using acoustic enclosures, acoustic treatment of rooms or exhaust mu er have also been specified through the Environment (Protection) Second Amendment Rules, 2002 notified through notification GSR 371 (E) on May 17, 2002. Solid and Other Waste Management During the construction and operational phases of the mall, collection and handling of domestic solid waste should be done as per the provisions of the Municipal Solid Waste Rules, 2000. The goal of the solid waste management at the mall should be to encourage the four R’s—reduce, reuse, recycle, and recover.

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The Rules require the mall to classify wastes into categories, manage them as per the prescribed guidelines and obtain prior authorization from the state PCC for handling, treatment, storage and disposal of wastes. The shopping mall has the potential to generate waste other than solid waste during its construction and operational phases, and such waste generation should be properly monitored and managed. The following kinds of waste may be generated during the construction phase of the mall: • Spent oil and lubricants from construction equipments • Spent oil and lubricants from DG sets • Paint residues during the painting of the building During the mall’s operational phase, management of solid waste should focus on the segregation/sorting and storage at waste source and collection of waste. Separate bins should be maintained for various categories of wastes like biodegradable, nonbiodegradable and paper/plastics. This will result in lesser reliance on landfilling. Regular awareness meetings should be conducted to involve the mall tenants and employees to ensure proper segregation, storage, collection, treatment and disposal of waste.

Environmental Monitoring The purpose of environmental monitoring is to evaluate the e ectiveness of the implementation of the Environmental Management Plan (EMP). In this exercise, important environmental parameters within the shopping mall are periodically monitored so that adverse a ects could be detected and timely action taken. A suggested environmental monitoring programme for a mall based on the predicted impacts is given in Table 9.2 Table 9.2: Suggested monitoring programme for a Mall

S. No. Type

Location

1

Stack emission monitoring

Stack of any SO2, NOx, SPM, CO one operating DG set

Ground water

Project site

2

3

Parameter

Period and Frequency Quarterly during

Drinking water

the operational phase Pre-monsoon and

(potability

parameters as per IS

post-monsoon.

testing) Treated sewage STP

10500 Parameters for

As per vendor

water quality

horticulture use— BOD, specifications pH, S.S, Coli forms

Regulatory framework for Shopping Malls 195

Record Keeping and Reporting Compliance with environment and pollution control laws requires maintaining a record of all actions and decisions related to pollution control. Apart from it, record keeping and reporting of performance is important for ensuring that the mall operations remain sustainable. Thus, the records have regulatory, monitoring and operational significance. Typical record keeping requirements for a shopping mall site are summarized in Table 9.3. Table 9.3: Record-keeping requirements for a shopping mall site

Parameter Solid waste handling and disposal

Particulars • Daily quantity of waste generated and sent for disposal Sewage treatment • Daily quantity of raw and treated sewage • Quantity and point of usage of treated waste water • Treated waste water quality Regulatory Licences (Environmental) • Environmental permits / consents from DPCC / MOEF • Copy of waste manifests as per requirement Monitoring and survey • Records of all monitoring carried out as per the finalized monitoring protocol. Other • Log book of compliance • Employee environmental, health and safety records • Equipment inspection and calibration records, where applicable • Vehicle maintenance and inspection records

Environment Audits and Corrective Action Plans To assess whether the implemented EMP is adequate, the mall management commi ee should conduct periodic environmental audits. These audits should be followed by Corrective Action Plans (CAP) to tackle various issues identified during the audits.

INSURANCE

FOR

SHOPPING MALLS

The IRDA Act has established the Insurance Regulatory and Development Authority (“IRDA” or “Authority”) as a statutory regulator to regulate and promote the insurance industry in India and to protect the interests of holders of insurance policies. The IRDA Act also carried out a series of amendments to the Act of 1938 and conferred the powers of the Controller of Insurance on the IRDA. The Tari Advisory Commi ee (“Advisory Commi ee”) is a body corporate that controls and regulates the rates, advantages, terms and conditions o ered by insurers

196 Mall Management

in the general insurance business. The Advisory Commi ee has the authority to require any insurer to supply such information or statements necessary for discharge of its functions.

Types of Insurance Policies Di erent types insurance policies are available to cover losses su ered from the operations related to the construction of a building. Some particular forms and inclusions or exclusions are more common to either residential or commercial construction projects. Important types of insurance policies that shopping malls need to subscribe to are discussed as follows:

Property Insurance ‘Course of Construction’ is a specifically designed form of property insurance. It provides fire insurance, including extended coverage for risks such as wind storm and optional coverage for events such as floods and earthquakes, for losses that might arise as a result of the operations related to building construction. It can also prescribe exclusions that specifically relate to those operations. Most builders’ risk policies are issued based on the ‘broad form’ coverage. During construction, this form provides ‘all-risk’ coverage for fire and vandalism as well as ‘in transit’ coverage. If flood or earthquake coverage is desired, these must be added by endorsement for a specific premium.

Liability Insurance ‘General Liability’ and ‘Comprehensive General Liability’ (CGL) are the two most common forms of liability insurance. Most builders purchase a CGL policy that includes coverage for any bodily injury or property damage occurring from their products, operations and completed operations. CGL policies are so broad that they can include coverage for other related exposures for the insured operations, including coverage for the owners and contractors, personal injury, medical payments, broad form property damage and coverage of ‘Contingent Employers Liability’ (also called ‘Stop Gap’ insurance). Environment Impairment Liability (EIL) It is a form of liability insurance that is becoming more common. It provides coverage for the ‘pollution liability’ imposed on the contractor/owner due to any pollution of the environment that occurs as a result of the construction operations. Examples include seepage of chemicals produced or used during the construction operations into an adjacent underground area or body of water such as lake, pond or stream; and, release of chemicals into the air as a result of a major fire at the construction site. The EIL policy normally provides coverage for ‘sudden and accidental’ pollution including onsite thirdparty bodily injury and property damage as well as o -site third-party bodily injury, property damage and cleanup costs arising from pollution conditions on, or emanating from, the covered construction site.

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‘Wrap-up Liability’ It is intended for large construction projects to provide general liability coverage for the general contractor plus all sub-contractors under one policy for a specific project. Examples of additional risks of losses for which insured may want to consider coverage are listed below: • Business interruption—The loss of revenue/income as a result of delay in completing the project due to a loss caused by a covered peril. This is o en added to the property policy by endorsement. • Crime—Also referred to as “3-D”, it stands for loss of money due to ‘disappearance, destruction and dishonesty’. • Delay penalty—The penalty levied due to delay in meeting the project deadlines; coverage for this is called a “Surety” policy. • Fraud or deceit—The loss due to fraudulent induction of an insured to part with covered property. • Contract penalty—The penalty for non-completion of the contract assessed against the insured. However, an insured’s inability to complete the contract according to its terms must be the direct result of a loss by a covered peril. • Testing —The loss to a building caused by a covered peril that results from testing of materials, machinery, or equipment that will become a permanent part of the building or structure (including start-up, performance, stress, pressure or overload testing). • Property in transit—The damage to or loss of materials/machinery used in construction that during the project might be in transit or in storage o -site. • So costs—Additional expenses incurred by an insured when construction is delayed by a loss caused by a covered peril, for example, additional a orney’s or accountant’s fees, additional interest payments on construction loans, additional architectural or engineering fees and additional insurance premiums.

LABOUR LAWS CONCERNING SHOPPING MALLS Labour regulations for India’s retail sector fall under the jurisdiction of state governments and are contained in the Shops and Establishments Act (SEA). The SEA is a state legislation and contains various laws relating to working conditions of employees. The main provisions of the Act include the following: • Compulsory registration of shop/establishment within thirty days of commencement of work • Minimum wages • Regulation of hours of work per day and week • Guidelines for spread-over • Rest interval

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• • • • • • • • • • • •

Opening and closing hours Closed days National and religious holidays Overtime work Rules for employment of children, young persons and women Rules for annual leave Maternity leave Sickness and casual leave Rules for employment and termination of service Obligations of employers Obligations of employees Communications of closure of the establishment within 15 days from the closing of the establishment However, according to a World Bank study, the enforcement of labour law in Indian retail is very poor. This is mainly because there is no separate regulatory body for the retail sector. Also, there is a wide di erence between the unwri en employment laws in the organized as well as unorganized retail. Traditionally, retail in India has been a source of employment for relatively lowincome groups seeking livelihood with minimal education or skill. Retail can absorb this category of labour since it requires relatively less skills. Hence it absorbs a huge section of Indian population who cannot seek employment elsewhere in the economy. However, with the emergence of the organized retailing, the nature of employment has completely changed in retail. The employee status in corporate retail chains also matches with that of other corporate sector employees. Hence the skill expectations and performance levels are also much higher from these retail employees. This sector looks for skilled labour. The demands from the prospective employees are much higher. With this comes the need to extend benefits and protection similar to those given to industrial workers. In fact, the shops and establishments acts clearly mandate that certain acts applicable to industrial workers should also be applicable to workers in retail stores. These acts are listed below: 1. 2. 3. 4. 5. 6.

The Minimum Wages Act, 1948 The Payment of Wages Act. 1936 The Workmen’s Compensation Act, 1923 The Industrial Employment (Standing Orders) Act, 1946 The Maternity Benefit Act, 1961 The Child Labour (Prohibition and Regulation) Act, 1986 Employers are expected to abide by relevant instructions contained in these acts as applicable to the employees working in retail stores and shops. For instance, the wage

Regulatory framework for Shopping Malls 199

of an employee working in a shop cannot be less than the minimum wage notified by the respective State government from time to time. Inability to meet these requirements tantamounts to violating the respective act and may a ract penalty under the said act as well as the Shops and Commercial Establishments Act.

SUMMARY Just like any other business, shopping malls operate within the sharp boundaries of the regulatory environment. It is important for them to abide by the regula ons as it impacts the lives of key stake-holders like investors, employees, shoppers, neighbours and the community at large. Shopping malls need to follow relevant regula ons at each stage of their life cycle—be it planning, development, launch or opera ons. Important departments/ o ces that regulate di erent aspects of mall development include district administra on, local municipal authority, electricity board, health and sanita on department and pollu on control board. Important laws influencing the development and working of these malls include the Shops and Establishment Act, the Payment of Wages Act, the Minimum Wages Act, the Workmen’s Compensa on Act, the Child labour (Prohibi on & Regula on) Act and the Environment (Protec on) Act etc. These laws are to be followed by the mall as well as by individual tenants.

REVIEW QUESTIONS 1. Comment on the complexity of regulatory environment faced by the shopping malls in India. 2. Development of shopping malls in India requires significant ground-work in terms of compliance with rules. Explain. 3. List out and discuss vital clearances and licences that shopping malls require from local municipal authori es. 4. What precau ons should be taken while selec ng and acquiring a plot for developing a shopping mall? 5. What are the di erent threats to security in shopping malls? How do authori es try to mi gate these through mandatory adherence to rules/cer fica ons/approvals? 6. What are the di erent types of insurance applicable to shopping malls? Discuss various issues that deserve a en on while insuring malls? 7. Environmental issues and concerns exist well before the mall comes into existence and con nue ll its en re life. Explain. 8. Discuss in detail the model Shops and Commercial Establishments Act. How does it control employee exploita on in retail stores? 9. Build a case for or against mandatory environmental clearance before the development of shopping malls in India. 10. List out and discuss important renewals and re-cer fica ons that are to be done on a periodic basis during the opera onal life of a shopping mall.

200 Mall Management

PRACTICE EXERCISES 1. Examine the Shops and Establishments Act applicable in your city/state. Iden fy the major obliga ons of the employer under the act. Which provision of the said act seems odd and requires immediate improvement? 2. Visit a shopping mall of your choice. Examine various u li es and safety equipment. Check their dates of expiry/renewal. Also find out the relevant authority for cer fica on/ renewal. 3. Find out the Floor Space Index (FSI) applicable to shopping malls in your city. Study as many shopping malls as possible in your city and see whether all of them have same ver cal expansion while u lizing FSI. If not, how did each mall u lize its FSI while maintaining its dis nc veness?

SUGGESTED READINGS 1. Association of Certified Fraud Examiners (2010), The 2010 Report to the Nations on Occupational Fraud and Abuse, available at http://www.acfe.com/rttn/2010conclusions.asp 2. Bazerman, M.H.; Curhan, J.R.; Moore, D.A. and Valley, K.L. (2000), ‘Nego a on’, Annual Review of Psychology, 51, 279–314 3. Black, B. (2010), ‘Murdock on the Financial Reform Act’, Securi es Law Prof Blog, 29 August 2010, available at h p://lawprofessors.typepad.com/securi es /2010/08/ murdock-onthe-financial-reform-act.html 4. Boyarski, J.B.; Fishman, R.M.; Jopsephberg, K. and Linn, J. (2002), ‘World trade organiza on welcoming Taiwan as a member’, Intellectual Property & Technology Law Journal, 14(2), pp. 35–37 5. Brooks, L.J. and Dunn, P. (2010), Business & Professional Ethics for Directors, Execu ves & Accountants, 5th Ed., Mason, Ohio: South-Western Cengage Learning 6. Covington and Burling LLP (2010), ‘Enhanced protec on for whistleblowers against employer retalia on’, 29 July 2010, available at h p://www.cov.com/files/Publica on/ 7ed821ae-f749-485a-9554-a06fde78bdc8/Presentation/PublicationAttachment/ e7ed9251-9fa6-46ac-b963-a1ed93390779/Dodd-Frank%20Act%20-%20Enhanced%20Pr otec on%20for%20Whistleblowers%20Against%20 Employer%20Retalia on.pdf 7. Dennis, B. and Cuadra, A. (2010), ‘Reinven ng financial regula on’, The Washington Post, 21 May 2010, available at h p://www.washingtonpost.com/wp-dyn/content/ graphic/2010/05/20/GR2010052004992.html 8. Deriva vesStrategy.com (1997), ‘The world according to Brooksley Born’, Deriva ves Strategy.com, May 1997, available at h p://www.deriva vesstrategy.com/magazine/ archive/1997/0597qa.asp 9. Dodd-Frank Wall Street Reform and Consumer Protec on Act (2010),. Pub. L. 111–203, 111th Congr., 2d Sess., July 21, 2010, available at h p://docs.house.gov/rules/finserv/111_ hr4173_finsrvcr.pdf

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10. Ellsworth, L.P. and Porapaiboon, K.V. (2009), ‘Credit ra ng agencies in the spotlight: a new casualty of the mortgage meltdown’, Business Law Today, 18:4, March/April 2009, available at h p://www.abanet.org/buslaw/blt/2009-03-04/ellsworth.shtml 11. Flynn, J. (2010), ‘Financial reform act creates new bureaucracy, Colorado Springs, The Gaze e, gaze e.com, 23 July 2010, available at h p://www.gaze e.com/ar cles/act101940-reform-financial.html 12. ‘Five ways to tame the financial market monster’, Spiegel Online, 22 June 2010, available at h p://www.spiegel.de/interna onal/world/0,1518,druck-702200,00.html 13. FICCI Indian Retail Report 14. Garriga, C.; Gavin, W.T. and Schlangenhauf, D. (2006), ‘Recent trends in homeownership’, Federal Reserve Bank of St. Louis Review, September/October 2006, pp. 397–411, available at h p://research.stlouisfed.org/publica ons/review/06/09/Garriga.pdf . Interna onal Journal of Business and Social Science, Vol. 2, No. 13 [Special Issue—July 2011] 15. Goldfarb, Z.A. (2010), ‘SEC won’t pursue Moody’s fraud case’, The Washington Post, 1 September 2010 16. Jane C. Ginsburg (2003), ‘The concept of authorship in compara ve copyright law’, 52 DePaulL. rev. 1063, 1091–1092 17. Jones, H. and Askew, R. (2010), ‘Factbox—Comparing EU and U.S. financial reform’, Reuters, 21 May 2010, available at h p://blogs.reuters.com/financial-regulatory- forum 2010/05/21/factbox-comparing-eu-and-u-s-financial-reform/ 18. Retailer Associa on of India report 19. Richard A. Epstein (2010), ‘The disintegra on of intellectual property?, a classical liberal response to a premature obituary’, 62 STAN. L. REV., 455, 456, 520–521 20. Landes, William M. and Posner, Richard A. (2003), The Economic Structure Of Intellectual Property Law, 4 21. Shopping Center Associa on India Report.

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CASE 1

Dispute over right to inspect the mall Garuda Mall, a landmark in its own right in the heart of Bangalore, witnessed a strange chaos in January 2011. On a Saturday when the mall was bustling with customers, a team of Brihut Bangalore Mahanagar PalikA (BBMP), the local municipal authority, came to inspect the mall. There were heated arguments between BBMP’s Market Standing Commi ee members and the mall authori es over the commi ee’s decision to inspect the premises. Mr. M.G. Uday Garuda, Managing Director, Garuda Group, alleged that the commi ee members were demanding a bribe, though his documents were in place. “I have paid rent to BBMP as per the agreement. There are no viola ons or devia ons in the building construc on,’’ Uday said. The BBMP commi ee members, however, refuted the allega ons and said they had the right to inspect the premises at any me. The Chairman of the Standing Commi ee, S.H. Padmaraj, said that there were a number of complaints against the mall. “There are allega ons that the building bye-laws had been flouted and the mall was built on a storm water drain. It is BBMP’s land and we have not been ge ng any revenue from it. We have every right to inspect the mall. Why are they not showing us any documents? There is no transparency,” he said. The situa on became ugly when Mr. Garuda allegedly stopped the commi ee members from inspec ng the place. The members said they had to cut short their inspec on and leave the place when Uday Garuda brought in his men. “Suddenly, there were rowdies who came towards us and threatened us to leave. There were three women corporators with us and it was very in mida ng. We had no security. They also used foul language against us,” Padmaraj alleged. Source: ‘BBMP o cials, Garuda clash over mall inspec on’, TNN, h p://ar cles. mesofindia. india mes.com, accessed on 30 January 2011

Regulatory framework for Shopping Malls 203

CASE 2

Demolition of mall built on encroached land The district administra on of Bhopal demolished a por on of a shopping mall named Minal Mall on May 6–7, 2011, which occupied the government land at Minal Residency. The no ce was also sent to 60 house owners for illegal occupa on of the government land. The mall owner constructed a food court, film city, shopping mall, parking area and row-houses on 146 acres of land. This land was acquired by the government from the farmers. The demoli on of a por on of the Minal Mall, the largest-ever an -encroachment drive in Bhopal to free government land, began following the High Court’s order. According to a report prepared by the district administra on, Minal Mall builder Raj Homes had encroached upon 108.47 acre of the 141.22 acre land owned by the Industries Department. Illegally raised columns of the six-storey mall were brought down using dynamite at about 2.50 pm while a second sec on of the building was razed to ground on 6 May 2011 at 4.21 pm. The remaining unauthorized part of the building will be done away with using JCB machines. The por on that was dynamited and pulled down by the district administra on was built and beau fied at a cost of more than Rs 73 crore. The por on of the mall that was razed to ground comprised 2,250 sq metres of construc on across the six floors. According to the collector’s guidelines, the area is worth Rs 32, 500 per sq metre. Addi onal District Magistrate (ADM) Rajnish Shrivastava said the city corpora on and police have been asked to calculate the money spent on the demoli on. This amount will be realized from the mall’s builder, he added. However, Raj Homes said that the mall was built a er o cial approval. Raj Homes’ director Sandeep Mehta said, “The mall has been raised a er o cial approval from the Nazul Department and the city corpora on. We have all the papers.” Sources: ‘A por on of a Minal mall is demolished in Bhopal, MP”, www.metromas .com, accessed on 10 May 2011 “Bhopal: Rs 73 crore Minal Mall demolished in Rs 15 lakh”, Dainik Bhaskar, h p://daily. bhaskar.com, accessed on 10 May 2011

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ANNEXURE I Summary of Main provisions under the Delhi Shops and Establishment Act Sl. No. Provision 1 Set up of CIS Section

Section/Rule Section 36/17

2

Registration of Shops and Establishments

Section 5

3 4

Closed Day Opening and Closing hours

Section 16 Section 15

5

Appointment le ers Working hours Compulsory rest Spread over of working hours including rest Restriction on working of women/young persons Earned/ privileged leave Accumulation of earned leave Casual/sick leave

Section 34

One day in a week No shop or commercial establishment be opened earlier than such hour or closed later than as may be prescribed, i.e. 9.00 am and 7.00 pm in winter, 9.30 am to 7.30 pm in summer, and 8.00 am to 6.00 pm for establishments. On appointment/joining of the job

Section 8 Section 10

48 hours a week or 9 hours a day Half an hour a er 5 hours of work

Section 11

12 hours in shops and 10-1/2 hours in an establishment

Section 14

In summer 9.00 pm to 7.00 am and in winter 8.00 pm to 9.00 am

Section 22

15 days

Section 22

45 days

Section 22

12 days

6 7 8

9

10

11 12

Remarks This section is headed by DLC (CIS), Chief Inspector of Shops and Labour Inspector (Shops). The Labour Inspectors are posted in all Districts, each district is headed by DLC/ALC/LO Not required because kept in abeyance w.e.f. 23.11.89

Regulatory framework for Shopping Malls 205

13

14

15 16

17 18 19

Intimation in writing for availing of earned leave Availing of casual/sick leave Payment of wages Wages for holidays of a piece-rated employee Payment of wages Cleanliness

Rule 10

15 days in advance

Rule 10

As soon as possible

Section 19

7th of the following month

Employment of children (12 years and below)

Section 12

A piece-rated employee is also entitled to the average of the wages received by him during the previous month. Section 19(4)

The wages are to be paid in cash.

Section 25

The premises of every establishment shall be kept clean. No child shall be allowed to work whether as an employee or otherwise in any establishment.

Source:http://www.delhi.gov.in/wps/wcm/connect/doit_labour/Labour/Home/Shops+and+ Establishments+Inspectorate/

ANNEXURE II Standards for effluent discharge Sl. No. Parameter 1 2

Ph Suspended solids

3

Biochemical Oxygen Demand (BOD) at 27°C Hexavalent Chromium (Cr6+) Total Chromium (Cr) Oil and grease Temperature

4 5 6 7

Inland surface Public sewer water 5.5–9.0 5.5–9.0 100 600

Water for irrigation 5.5–9.0 200

30

350

100

0.1

2.0

2.0 2.0 10 20 Not to exceed 50 deg. C of the receiving body

10

206 Mall Management

8 9 10 11 12 13 14 15 16 17 18

25

Cyanides (CN) Ammonical Nitrogen (N) Cadmium (Cd) Nickel (Ni) Zinc (Zn) Copper (Cu) Lead (Pb) Iron (Fe) Total Residual Chlorine Total Nitrogen Chemical Oxygen Demand (COD) Arsenic (As) Mercury (Hg) Selenium (Se) Fluoride (F) Sulphides (S) Phenolic compounds (phenols) Particle size of suspended

26 27

solids Free Ammonia (NH3) Dissolved Phosphate (P)

28

Radioactive materials

19 20 21 22 23 24

0.2 50 2.0 3 5.0 3.0 0.1 3 1.0 100 250

2.0 50 1.0 3 15 3.0 1.0 3

0.2

0.2 0.01 0.05 2 2 1

0.2 0.01 0.05 15

0.2

5

Pass 850 micron Sieve 5.0 5 10 6

10 6

10 8

10 6

10 6

10 7

29

Beta Emi ers (UC/ml) max Bio-assay test

90% survival of fish a er 96 hours in 100% e uent

90% survival of fish a er 96 hours in 100%e uent

90% survival of fish a er 96 hours in 100% e uent

30

Vanadium (V)

0.2

0.2

Alpha Emi ers (UC/ml) max

Regulatory framework for Shopping Malls 207

ANNEXURE III Drinking water quality standards as per BIS 10500, 1991 S . Parameter No 1 Colour (Hz units) 2 Turbidity (NTU) 3 Ph 4 Total Hardness (CaCo3) 5 Iron 6 Chloride 7 Alkalinity 8 Boron 9 Dissolved solids 10 Calcium 11 Sulphate 12 Nitrate 13 Fluoride 14 Phenolic compounds 15 Pesticides 16 Lead 17 Zinc 18 Chromium (hexavalent)

Desirable Limit (mg/I) 5 5 6.5–8.5 300 0.3 250 200 1 500 75 200 45 1 0.001 Absent 0.05 5 0.05

ANNEXURE IV Form for Submission of Information for Environmental Assessment and Environmental Screening of the Development proposal 1. Name and address of the person proposing development. 2. Particulars of the proposed development a) Brief description. b) Justification or need for the proposed development. c) Objective. d) Size and magnitude. e) Cost. f) Present status. g) Time schedule for completion of development.

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3. Employment a) During development stage. b) During operational stage. 4. Location of the proposed development a) Revenue Survey No./Hissa No. b) Name of the village/tehsil/district. (7×12 extract and the village map showing the location essential) 5. Land Area a) Existing (in the case of expansion). b) Proposed. 6. Physical Se ing a) Natural and man-made features (map essential). b) Topography indicating gradient aspect and altitude (map essential). c) Soil type and texture (map optional). d) Flood-prone areas of the site (map essential). 7. Land Uses a) Existing land use of the site. (Area statement and map at larger scale essential) b) Existing land use covering an area of 10 km radius around the site. (Map at smaller scale essential). c) Proposed development. (Area statement and map at larger scale essential). d) Proposed development showing proposed accesses, land uses of the surrounding area. (Map at smaller scale essential). 8. Ecologically-sensitive Areas a) Proximity to a National Park or Wildlife Sanctuary, nature reserves, mangrove forests and reserved, protected or other forests, biosphere reserve, swamp and wetlands (indicate distance from the site and identify on the map). b) Does the development involve any forest land? c) Proposals for compensatory a orestation plan. d) Does the proposed development involve reclamation of wetlands? e) Is the site situated within the catchment area of a water reservoir? f) Is the site situated within the existing or potential command area of an irrigation project? 9. Air a) Ambient area quality data at the site (for SO2, NO2, SPM).

Regulatory framework for Shopping Malls 209

10.

11.

12.

13.

14.

b) Major air pollution sources within 10 km radius around the site. c) Nature and concentration of likely emissions from the proposed development. d) Pollution abatement measures proposed. Water a) Total daily water requirement. b) Source of water supply with details of competing users. c) If the ground water is used at source, details of its quality and quantity available and present extraction. d) Quantity of waste water expected. e) Method of treatment and disposal of waste water proposed. f) Present quality of water in receiving bodies. Solid Waste a) Nature and quantity of solid waste expected. b) Nature and quantity of any toxic and hazardous waste. c) Method of collection, transport and disposal of solid waste proposed. Noise and Vibrations a) Ambient noise level. b) Noise and vibration levels expected during the development phase and therea er. c) Source of noise and vibrations. d) Noise and vibration abatement measures proposed. Risk and Disaster a) Does the development involve any hazardous process? b) Does the development involve any storage or transportation to and from the site of any toxic or hazardous material? c) Assessment of risk for (a) and (b) above d) Details of the Disaster Management Plan. Rehabilitation a) Does the proposed development involve rehabilitation of local population? b) Details of the rehabilitation plan, if any.

CHAPTER

10 Handling Anchor Tenants

LEARNING OBJECTIVES This chapter will enable the readers to • Understand the significance of anchor tenants in shopping malls • Get an idea of di erent anchor op ons available in retail space • Know about specific features of each tenant in rela on with the shopping mall • Understand the key issues that must be taken care of while dealing the anchors

MALL IN A DILEMMA OVER ANCHOR’S PROBLEM Everything was not so smooth and easy-going for developers of Magnolia Mall in Jabalpur. It was the first mall that came up in the city, and it had its posi ves as well as nega ves. There was no compe on, at least for the ini al couple of years. But the town being small with conserva ve outlook, many brands were not convinced about the ability of Magnolia to a ract foo all, especially when the mall is situated on the city outskirts. However, the developers knew that the mall would be an instant success provided it starts with a good occupancy rate. They approached ‘Mahabazaar’, India's largest chain of hypermarkets. Mahabazaar agreed to occupy the anchor space on a fixed rental plus CAM charges. The hypermarket presence induced great enthusiasm among other brands, and the mall started opera ons with 80 per cent occupancy. However, problems started cropping up again. Mahabazaar was given the retail space on the ground, first and second floors. Customers were supposed to exit the Mahabazaar store with loaded trolleys and use a set of common li s to reach their vehicles parked in the basement parking. It was not considered to be a big issue, as li s were only 25 metres away from the store exit and had ample space for a couple of trolleys. But as the foo alls increased

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with Magnolia’s rising popularity, it became di cult for the shoppers to cross those 25 metres and find space in the already loaded li s coming to and from the basement parking. Problems were also faced by Mahabazaar in moving replenishments from their storage space in the upper basement to the store. As a solu on, Mahabazaar requested for installing dedicated customer and service li s inside their store. Mul ple issues came up while discussing the installa on of dedicated li s. These included capital investment, maintenance and opera ng cost of li s, liability in case of accident and enhancement of rentals in case the developer bore all these costs. The Magnolia management is faced with a dilemma, as Mahabazaar has op ons in the form of new malls that are coming up nearby. If it leaves the mall, what would be the response of ancillary tenants? Would Magnolia be able to arrest the decline if it sets in?

INTRODUCTION Shopping malls represent an ecosystem that extends the rational benefit of ge ing all solutions under one roof in a controlled and pleasant environment. Therefore selection of tenants for a shopping mall should be done to achieve this objective. The variety in the tenant-mix influences the shoppers’ preference for a mall and their frequency of shopping trips. Apart from selling core products from popular platforms, the tenant-mix of a mall should also satisfy the unmet demand for goods and services within the catchment area. The aim is to persuade shoppers to stay longer in the mall, increasing the chances that they will spend. To make it happen, mall developers accommodate a variety of tenants like specialty stores, vanilla stores, kiosks and carts. However, the appeal of these tenants is generally constrained due to the size of their store, product range, variety and brand strength. Hence, it is inappropriate to assume that these small stores would be able to a ract footfalls on their own. In fact, most of these tenants prefer a mall location over a high street location because they believe that the shopping mall would have decent footfalls on its own, and they could cash in on a part of those footfalls. Expecting these tenants to generate footfalls would be like pu ing the cart before the horse. For generating footfalls in a mall, developers target anchor tenants. Generally, anchors are the first ones to be signed as tenants. They occupy large spaces at prominent locations at preferential rates. It is akin to the treatment given to initial and bulk buyers in any other trade. Anchors also invest heavily in terms of capital and marketing expenditure that helps in generating tra c for the mall, justifying their preferential rental rates. Moreover, whatever is lost (if it is correct to say so!) in terms of reduced rentals is recovered adequately by charging a higher rental from vanilla tenants who come only due to the presence of a specific anchor store. In most cases, smaller (vanilla) tenants enquire about the number, location and status of anchor tenants in a mall before making a decision to opt for retail space in that mall. The presence of strong anchors improves the realization made from renting out space to kiosks, carts, stalls, promotional displays and events.

DEFINITION

OF

ANCHOR STORE

Also known as anchor tenants, draw tenants or key tenants, anchor stores are the largest occupiers of space in shopping malls. In practice, these are the first ones to occupy

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space. Hence they catalyze subsequent tenancy of the mall and also improve its rate of occupancy. As they are supposed to draw shoppers, anchor stores are generally placed at strategic locations. Here ‘strategic’ does not mean prime as at times anchors are placed at ‘not-so-prime’ locations to channelize customer tra c towards that side. Examples include extreme ends, wing locations and upper floors. However, a empt is made to allot such spaces to anchor tenants that they are visible to the people passing by. An anchor’s size alone cannot be the magnet to a ract shoppers. Rather, it should have some USP that is valued by the mall’s target clientele. In some cases, anchors are so popular that the mall is known due to their presence. Since anchor tenants greatly help a mall draw customers as well as other tenants, they negotiate for special privileges. The first and the foremost is rentals. Anchor tenants pay rentals that are considerably lower than what vanilla stores pay. In some cases, malls also adopt a pure revenue sharing model instead of charging rentals from anchors. Benefits extended to anchors include special infrastructural support in terms of ramps, escalators, service li s and dedicated entry/exit points. Anchors like hypermarkets and supermarkets are generally given direct access to the mall parking so that shoppers may take loaded trolleys directly to their parked vehicles. If anchors occupy space deep inside the mall (with no access to peripheral display), they may be given display space on the façade, profile or elsewhere on the periphery. Anchor stores sign lease agreements for considerable large periods of time. Such agreements make sense to the mall as they assure occupancy of space for a longer period of time. To the anchors also, these agreements give a guarantee that they can harvest the fruits of business development at the mall for a longer time period. Moreover, anchors need to invest significantly for making the vanilla shell worthy of use for their specific format. A large part of this investment is a sunk cost, hence anchors would like to use it for longer duration. Some mall researchers define anchor tenants in terms of the absolute size of their stores. This approach makes sense if the shopping malls and retail formats are of standard or similar dimensions. However, it is not realistic in a country like India where mall projects range from 2,00,000 square feet to 20,00,000 square feet. The retail formats tend to adjust themselves into malls depending upon the size of the mall and business potential of the catchment. However, while defining an anchor store, the following parameters should certainly be observed: (a) Size of the anchor(s) in relation to the ancillary tenant (b) Proportion of the gross leasable area (GLA) of the mall occupied by the anchor tenant(s). It is not uncommon to have more than one anchor in shopping malls these days. It is partly because mall projects are ge ing larger and larger and partly because the evolved Indian customer looks for a larger variety of needs that can be fulfilled by anchor tenants.

POPULAR ANCHOR TENANTS

IN THE

INDIAN MALLS

Generally, shopping malls have the following stores as anchors: department stores, hypermarkets and supermarkets, multiplexes, food courts, fast-food joints and specialty

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stores. The nature of and requirements for these anchors are discussed in the following sections.

Department Stores Department stores are the pioneering anchor stores in shopping malls across the globe. In the world’s first modern mall, South Dale Centre (1956), two of the anchor tenants (Dayton’s & Donaldson’s) were department stores. The same holds true for India where department stores like Shopper’s Stop, Pantaloons and Westside were the early popular choices for anchor space. They still hold this position but share it with other anchors like multiplexes and hypermarkets. Department stores are large stores that are part of a retail chain and carry a wide range of products and services. A department store is organized into separate departments with each department representing one product/service category. Ideally, the department store should carry a broad range including apparels, furniture, cosmetics, appliances and home furnishings with no product/service line dominating the store. In practice, department stores have a dominance of apparels, cosmetics, toiletries, fashion accessories and home accessories. That is why these are o en called Life Style Retail (LSR). Important home-grown department stores in India include players like Ebony (DS Group), Shoppers Stop (K Raheja Group), Pantaloons (Future Group), Westside (Tata Retail Enterprise), Lifestyle (Landmark Group), Globus (R Raheja Group) and Reliance Trends (Reliance Retail). International players like Marks & Spencer also have their presence in India.

Shoppers Stop in Forum Mall, Kolkata

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Requirements for Department Stores Department stores sell merchandise that is medium- to high-priced with a high value-tovolume ratio. These stores a ract customers of a relatively younger and a uent profile. Being lifestyle formats, location, displays and ambience are quite significant for these stores. Department stores require large, continuous space without pillars in between. It is to ensure an unhindered view and feeling of openness inside the store. Preferred location for a department store is on the ground floor. However, since a disproportionate share of the ground floor plate cannot be allocated to a single tenant, the space on the first and second floors exactly above the department store’s ground floor space is also given to it. It goes well for a department store, as some of its departments can be located on the higher levels. However, this arrangement requires dedicated li s and escalators (not ramps) for vertical circulation within the department store. Preferred dimensions are either square or rectangular with the smaller arm being the depth. It gives the store a longer store front that can be used for displaying lifestyle products that rely heavily on visual merchandising and displays. For the same reason department stores should be situated on the frontal periphery of the mall with extroverted display windows to display latest arrivals to a ract the customers. However, the mall developer might persuade the department store to occupy space at the back end or only at a higher level if more suitable anchors are available for the prime location. All the stores housed in a mall have their entry only from inside. However, some department stores ask for at least one dedicated entry point on the periphery so that customers who wish to enter the store directly may do so. In this case, the developer negotiates to ensure that the same point is not used for exit as it might defeat the purpose of having an anchor. In most cases, department stores insist on exclusivity, meaning no other department store would be accommodated in the mall as long as they are there. However, the developer might push for accommodating another department store at a higher level. An exception to this can be large shopping malls with a huge plate area where two department stores can be accommodated at the same location (say, ground floor). In this case, both the stores are located far apart (at extreme ends) and are serviced by di erent entry gates of the mall. For example, Great India Place Mall in Noida has both Shoppers Stop and Pantaloons as anchor tenants. If there is a single department store, shoppers entering the mall from the distant entry may not visit the department store situated at the other extreme due to the distance.

Hypermarkets and Supermarkets Hypermarkets and supermarkets were not popular options for anchor space during the initial years of mall development in India. Hypermarkets as a concept came to India only in the year 1998 when the Future group opened India’s first hypermarket named “Big Bazar” in Kolkata. The concept gained acceptance a er Future Group came up with its Big Bazaar chain of hypermarkets across India. However, this is not the case with supermarkets, as India did have supermarkets even before the advent of malls. The country’s first chain of supermarkets, Nilgiris, came into existence in the year 1905. But the Indian supermarkets operated primarily from the crowded, in-the-heart-of-the-city locations though situation has changed over the last 6-7 years regarding the location

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of large retail formats. Today, a hypermarket is the first choice for anchor space in any mall. Hypermarkets are beneficial for malls as they bring high footfalls with a very high conversion ratio.

Hypermarket anchor at EDM, Kaushambi

As compared to hypermarkets, supermarkets represent a smaller and more focused format that carries merchandise comprising food, grocery and daily need items. These are low-value, low-margin and high-turnover items. Typical supermarket product lines include dry items (FMCG and , grocery), wet items (fruits and vegetables) and appliances. Prominent supermarkets operating at national level are Food Bazaar (Future group), Spencer’s (RPG Group) and Reliance Fresh (Reliance Retail), whereas Nilgiris, Varkeys and Margin Free Market are regional players in this format. Hypermarkets are much larger in size and scope as compared to supermarkets. Apart from stocking food, grocery and daily needs, hypermarkets also sell apparels, electronics, furniture, home furnishings, music and even jewellery in some cases. Major hypermarkets operating in India include Big Bazaar (Future Group), Spencer’s Hyper (RPG group), Easyday (BhartiWalmart), Vishal Mega Mart (Vishal Retail) and Hypercity (K Raheja Group).

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Supermarket anchor on top floor at Garuda mall, Bangalore

Requirements for Hypermarkets and Supermarkets Hypermarkets and supermarkets deal in items having a high volume-to-value ratio. For easy handling and delivery of such goods, these formats are generally located at the ground level. Manoeuvring of trolleys is also convenient at the ground level. In many cases, these formats start from the upper basement and extend to the ground and first floors. This way the store is easily integrated with unloading facilities for replenishments, whereas the shoppers can push their loaded trolleys directly to their vehicles. In such

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cases, the hyper/supermarket has direct entry/exit options to the parking space in the upper basement. However, there are exceptions where these formats have been placed at a higher level. For example, Sahara Mall in Gurgaon has Big Bazaar at a higher level. In such cases it is mandatory to have dedicated service li s to handle stock replenishments and huge customer li s so that customers can reach the hyper/supermarket comfortably. Inside the hyper/supermarket store, ramps are needed if the store is spread over multiple floors. It helps customers in moving trolleys from one floor to the other. If mechanization is to be adopted, travellators (not escalators) are a be er option than li s. Though irregularly-shaped retail space may work for these formats, it is be er if the space is regular and does not have visual obstructions like pillars. It should also have the required width near tentative exit points so that adequate number of check-out counters and customer help-desk can be placed. The flooring for these formats should be durable and rugged and the ceiling is generally kept bare and at a higher level. These formats do not induce customers through display windows and hence may be located deep inside the mall with no exposure to periphery. However, they do need space on the mall façade or profile to carry hoardings displaying store name.

Multiplexes Though movie exhibition business is more than a century old in India (starting with Lumiere brothers in 1896), the exhibition landscape was completely dominated by conventional single-screen cinema halls till a decade back. The first multiplex in India, PVR Anupam in Saket (New Delhi), opened in the year 1997. Around the same time pioneering malls Ansal plaza, Delhi and Crossroads, Mumbai came into existence. Since the concept of multiplex was new and there were few takers for it at that time (the viewer indi erence continued till next 5-6 years), none of the initial malls had a multiplex as anchor. However, later with soaring income levels, the cine-goers expressed a distinct desire for ambience, comfort and leisure and they started patronizing multiplexes. The demand for multiplexes started in metropolitan cities and then percolated to the lower level urban agglomerates. This is also the case with the concept of shopping malls. Hence multiplexes and shopping malls are an ideal ‘made for each other’ combination. Multiplexes are a useful way of utilizing retail space at levels higher than the second floor, as conventional retailing and shopping do not go beyond the second floor. Major multiplexes operating in India are Priya Village Roadshows, i.e., PVR (owned by Ajai B li), Big Cinemas (Reliance ADAG), Fun Cinemas (Essel group), INOX (INOX group) and Fame multiplex (Shringar Cinemas). In big cities, local authorities permit a higher FSI, but in most cases it is of no use, as shoppers do not show enthusiasm in moving to the second or third floor for shopping. However, developers do construct retail stores at these levels hoping against the hope that tenants and shoppers would come. When it does not happen, the additional construction cost pulls down the developer’s return on investment (ROI). Now, multiplexes have emerged as a viable option to put to productive uses the additional space available at higher levels. Since a typical Hindi movie lasts three hours, the viewers do not mind travelling up to the second or third floor for an engagement of such a long duration.

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PVR Cinemas at Forum Mall, Bangalore

Requirements for Multiplexes Multiplexes do not require typical ‘store and corridor’ space. They require space for exhibition halls, ticket booking counter (box-o ce), canteen space, wash rooms, kids zone and waiting area. Each area may have a di erent design configuration. These specific infrastructure provisions should be accommodated in the mall design at the drawing board stage itself. For instance, the size of a continuous multiplex hall and spacing between the columns should be decided as per the hall capacity. The ceiling of the hall is at a considerably higher level as compared to that of a normal retail store. The flooring for a multiplex hall is also di erent, as it is inclined. In most cases, multiplexes request for additional space for a box o ce on the ground floor at the external periphery of the mall so that people may buy tickets (for future shows) without taking the pains to go to the higher floor. More requirements are posed by the multiplex in the form of additional parking space. Multiplexes’ parking needs are di erent from those of conventional retail stores. For conventional stores, vehicles are parked for the duration of a shopping trip that ranges from half an hour to a couple of hours. Hence the same parking space is utilized by more people. However, in the case of a multiplex, the parking space is blocked by a vehicle for nearly four hours. It increases the parking requirement considerably. There are also issues regarding connectivity of the multiplex with the lower floors and parking with the help of escalators and li s.

Food Courts The food court in a shopping mall means a common facility comprising a collection of diverse ready-to-serve food counters with shared seating facility. Food courts are meant to serve fast food really fast. Though food courts may be located anywhere, the common practice is to place them on a higher level adjacent to multiplexes. By doing so, the mall ends up utilizing the retail space that is otherwise unsuitable for conventional retailing. Since eating food is an appealing and time-consuming activity for Indian consumers, they do not mind travelling up to a higher level, especially when they get a variety of

Handling Anchor Tenants 219

o ers at a reasonable price as compared to full-meal restaurants. Their combination with multiplexes makes sense, as watching movies is a family outing, and it is natural for the family to satisfy its taste-buds a er spending nearly three hours in the multiplex. Food courts also provide a decent place to spend time if the viewers reach the multiplex a few minutes before the opening of the show. Many people argue that food courts do not qualify as anchor tenants if one goes by the strict definition of anchor in terms of size and identity (all counters are owned by di erent operators). Nonetheless, the food court is a fit case for designating as anchor if one considers its ability to a ract footfalls and impart an identity and USP to a mall, which is true in case of smaller, not-so-successful and undi erentiated malls.

Requirements for Food Fourts A food court comprises a number of counters adjacent to each other. Each counter has a frontage (serving area) and back space (kitchen). Each unit is provided with water, electricity and basic infrastructure for a kitchen. Theoretically speaking, the mall management team might run the food court on its own (that is, manage all the counters themselves) or rent them out to di erent tenants. However, running a food court would prove to be a costly distraction for the mall management team. The common practice is to award the contract for running the food court to a specialist. The specialist might operate all the counters or sub-let them to other tenants. Food courts are generally run on revenue-sharing basis. There are two modes of revenue collection and sharing. The first mode provides for direct collection of money from customers by individual counters (as is the case with normal stores). The original lessee (the specialist) has access to the billing done by individual counters. Revenue sharing is done on a weekly or fortnightly basis. This system su ers from some drawbacks. Numerous transactions on each counter result in wastage of time and e orts. There could be instances where some counters try to sell items without billing. To overcome these drawbacks, there is provision for a centralized collection of money. Customers are required to buy pre-charged coupons that they redeem at di erent counters. Money is thus collected by the original lessee that he shares with individual tenants on a weekly or fortnightly basis. To fulfil the requirements of a food court, the developer needs to provide retail counters, kitchen, seating arrangement, crockery (in some cases), maintenance and upkeep of the facility and so ware/hardware support in case of the centralized collection.

Fast-food Joints Fast-food joints, also known as quick-service restaurants, refer to stores that o er a limited and pre-decided menu to their customers in really quick time. For serving quickly, food is generally pre-cooked or semi-cooked, kept hot and assembled or packaged and served as and when the customer places an order. Some Quick Service Restaurants (QSRs) o er only the takeaway option, whereas others provide seating space as well. Fast-food joints operate on the basis of standard cuisine, standard recipes and reasonable prices. These a ract a broad range of customers, from kids to the elderly, in groups as well as individuals. One of the major fast-food joints operating in India is McDonald’s, which is India’s biggest brand in QSR space. In India, McDonald’s has two master franchisees—

220 Mall Management

Hard Castle Restaurants Pvt. Ltd., which holds the franchise for southern and western parts of India and Connaught Plaza Restaurants Pvt. Ltd., which manages operations in northern and eastern parts of India. Pizza Hut and KFC brands are owned by Yum Brands Inc of USA, a sister concern of Pepsi. In India, it operates through multiple franchisees. Subway is among the latest fast-food joints in India. It is the largest singlebrand restaurant chain in the world. In India, it operates through its master franchisee Lite Bite Foods owned by Mr. Amit Burman of Dabur. Dominos is India’s largest chain of pizza stores with over 300 outlets across India. Its Indian operations are handled by its master franchisee Jubilant Food Works Ltd. Fast-food stores are generally not considered anchor stores. However, a player like McDonald’s or Pizza Hut in a tiny mall in a small town has the potential to draw footfalls. It also happens in cases where the mall developer fails to a ract any genuine anchor and consequently the fast-food joint ends up being the largest and the most prominent brand in the mall.

Requirements for Fast-food Joints Though the actual size of a fast-food joint depends on the size of the mall and expected footfalls, these joints generally occupy space in the range of 2000-2500 square feet. They usually occupy corner positions so that prospective customers can see them from a distance outside the mall. The corner location (having more than one side open) also enables customers to have a look outside while seating inside the fast-food joint. But in some cases, the mall management persuades the tenant to occupy a place deep inside the mall by o ering extra incentives. It happens in cases where a stronger fast-food brand is already occupying the frontal position, and the other joint is needed to channelize the customer tra c towards the inner, unvisited parts of the mall. A empt is made not to accommodate more than one fast-food joints on a single floor. If it is to be done, it is ensured that the ones selected are positioned as far apart as possible. In the case of large malls, fast-food joints are strategically placed at each floor so as to take care of the food and beverages needs of customers anywhere in the mall.

Specialty Stores Specialty stores sell a narrow range of complementary products. The assortment carried by them is fairly deep, and these stores are considered a sort of specialists in the product category they deal in. Specialty stores generally extend a high level of customer service though the actual intensity of service depends on the positioning and targeting of the store. Some of these like Bata operate in the mass segment, whereas others like Louis Vui on target the high-end segment. Specialty stores represent a diverse range of products like footwear (Adidas), Apparels (Koutons), Electronics (Sony World), furniture (Gautier), Books (Crossword) and watches (Titan). Just like fast-food joints, specialty stores are not genuine anchors for a mall and are meant to occupy space as ancillary tenants. But in special cases, they end up being the anchors. Cases where a specialty store has been deliberately included as an anchor include Pacific Mall, Sahibabad where ‘Rituwears’ has been placed as an anchor. Electronic retailing stores like ‘Croma’ and ‘Next’ are anchors in many shopping malls.

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SUMMARY Anchors or anchor tenants are the largest occupiers of retail space in a shopping mall. They are significant for a mall because they impart image to it and also generate foo alls. Smaller tenants take advantage of the spillover e ect of the tra c generated by the anchor tenants. In return, anchors seek favourable terms and condi ons in the lease agreement. Some of the favours include lesser rental, preferen al loca on, dedicated infrastructure and promo onal support. Some of the major anchor tenants for Indian shopping malls include hypermarkets, supermarkets, mul plexes, department stores, food courts, food joints and specialty stores. Selec on of anchor tenants is a very cri cal issue because they are the lifeblood of a shopping mall. It is important to handle anchor tenants carefully to fully exploit their poten al in the interest of the mall and other tenants.

REVIEW QUESTIONS 1. Who comes first in a new mall: anchor tenants or ancillary tenants? Why is it so? 2. How do mall developers recover the loss in revenue incurred by o ering significantly lower rentals to anchor tenants? 3. Why is it important to take care of the requirements anchor tenants at the design planning stage of the mall? 4. How do anchor tenants help in u lizing higher floor space index (FSI) provided by the local development authori es? 5. How do hypermarkets and supermarkets add value to the mall as an anchor? What are the infrastructure requirements specific to these formats that should be provided in shopping malls? 6. “It is important for mul plexes to take retail space on a very long term lease, especially when all the tenant improvement is done by the mul plex itself.” Comment. 7. In recent mes, shopping malls have been accommoda ng mul ple anchor tenants many of whom belong to the same retail format. Why is it so? Do you think the trend can sustain itself? 8. Can a food court in a mall be termed as an anchor tenant? Give arguments for and against the proposi on. 9. Are department stores ideal anchors for all types of catchment areas and shopping malls? Explain. 10. Under what circumstances do shopping malls accommodate fast food stores and specialty stores as anchor tenants?

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PRACTICE EXERCISES 1. Visit two–three shopping malls in a city. Examine their anchor tenants in terms of their size, loca on, dedicated facili es and foo alls that they draw? Do you feel there is any anomaly in any of these parameters? Why is it so? What could be the possible remedy for that? 2. Imagine a neighbourhood mall measuring not more than 3 lakh square feet of gross leasable area (GLA). Should this mall accommodate more than one anchor? What would be ideal stores to occupy anchor space? Comment on the size and loca on of these anchors. 3. Visit a few malls in any city. Prepare a list of anchor stores. Also prepare a list of stores drawing maximum foo alls? Do the two lists completely overlap? If not, iden fy the ancillary stores drawing more foo alls than the anchor stores. Why is it so?

SUGGESTED READINGS 1. Achabal, D.; Gorr, W.L. and Mahajan, V. (1982), ‘MULTILOC: a mul ple store loca on decision model’, Journal of Retailing, 58(2), pp. 5–25 2. Adamchak, D.J.; Bloomquist, L.E.; Bausman, K. and Qureshi, R. (1999), ‘Consequences of popula on change for retail/wholesale sector employment in the metropolitan great plains: 1950–1996’, Rural Sociology, 64(1), pp. 92–112 3. Anderson, C.H. and Kaminsky, M. (1985), ‘The out shopper problem: a group approach for small retailers’, Entrepreneurship: Theory and Prac ce, 9(3), pp. 34–45 4. Benjamin, J.D.; Boyle, G.W. and Sirmans, C.F. (1992), ‘Retail leasing: the determinants of shopping center rents’, Real Estate Economics, 1990, 18(3), pp. 302–312. 5. ‘Price discrimina on in shopping center leases’, Journal of Urban Economics, 1992, 32(3), pp. 299–317 6. Braid, R.M. (1998), ‘Spa al price compe on when stores are not certain to have what consumers want’, Regional Science and Urban Economics, 28(2), pp. 143–161 7. Bresnahan, T.F. and Reiss, P.C. (1991), ‘Entry and compe on in concentrated markets’, The Journal of Poli cal Economy, 99(5), pp. 977–1009 8. Brown, M.G. (1999), ‘Design and value: spa al form and the economic failure of a mall’, Journal of Real Estate Research, 7(1/2), pp. 189–226 9. Brown, S. (1989); ‘Retail loca on theory: the legacy of harold hotelling’, Journal of Retailing, 65(4), pp. 450–470 10. ‘Tenant mix, tenant placement, and shopper behavior in a planned shopping centre’, The Services Industries Journal, 1992, 12 (3), pp. 384–403 11. Cassill, N.L.; Williamson, N.C.; McEnally, M. and Thomas, J. (1994), ‘Department store cross shoppers’, Journal of Applied Business Research, 10(4), pp. 88–96 12. Chowdhury, J.; Reardon, J. and Srivastava, R. (1998), ‘Alterna ve modes of measuring store image: an empirical assessment of structured versus unstructured measures’, Journal of Marke ng Theory and Prac ce, 6(2), pp. 72–84 13. Christaller, W. (1966), Central Places in Southern Germany, Translated by C.W. Baskin, Englewood Cli s, NJ: Pren ce Hall, Inc. 14. Claycombe, R.J. (1998), ‘Cournot retail chains’, Journal of Regional Science, 38(3), pp. 481–494

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15. Colwell, P.F. and Munneke, H. J. (1998), ‘Percentage leases and the advantages of regional malls’, Journal of Real Estate Research, 15(3), pp. 239–252 16. Crask, M. (1979), ‘A simula on model of patronage behavior within shopping centers’, Decision Sciences, 10(1), pp. 1–15 17. D’Aspremont, C., Gabszewicz, J.J. and Thisse, J.F. (1979), ‘On hotelling’s Stability in Compe on’, Econometrica, 47(5), pp. 1145–1150 18. Eppli, M.J. and Benjamin, J.D. (1994), ‘The evolu on of shopping center research: a review and analysis’, Journal of Real Estate Research, 9(1), pp. 5–32 19. Ferber, R. (1958), ‘Varia ons in retail sales between ci es’, Journal of Marke ng, 1958, 22, pp. 295–303 20. Finn, A. and Louviere J.J. (1996), ‘Shopping center image, considera on, and choice: anchor store contribu on’, Journal of Business Research, 35(3), pp. 241–251 21. Fisher, J.D. and Kinnard, W.N. (1990), ‘The business value component of opera ng proper es: the example of shopping malls’, Journal of Property Tax Management, 2(1), pp. 19–27 22. Gabszewicz, J.J. and Garella, P.G. (1987), ‘Price search and spa al compe on’, European Economic Review, 31, pp. 827–842 23. Ghosh, A. and Craig, C.S. (1983), ‘Formula ng a retail loca on strategy in a changing environment’, Journal of Marke ng, 47(3), pp. 56–68 24. Hardin III, W.G. and Wolverton, M.L. (2000), ‘Neighborhood center image and rents’, Working Paper, Mississippi State University 25. Hu , D.L. (1963), ‘A probabilis c analysis of shopping center trade areas’, Land Economics, 39(1), pp. 81–90 26. Karvel, G.R. and Patchin, P.J. (1992), ‘The business value of super-regional shopping centers and malls’, The Appraisal Journal, 60(4), pp. 453–462 27. Kirkup, M. and Rafiq, M. (1994), ‘Managing tenant mix in new shopping centers’, Interna onal Journal of Retail and Distribu on Management, 22(6), pp. 29–37 28. Mayo, E.J.; Jarvis, L.P. and Xander, J.A. (1988), ‘Beyond the gravity model’, Academy of Marke ng Science Journal, 16(3/4), pp. 23–29 29. Miller, H.J. (1993), ‘Consumer search and retail analysis’, Journal of Retailing, 69(2), pp. 160–192 30. Nakanishi, M. and Cooper, L.G. (1958), ‘Parameter es ma on for a mul plica ve compe ve interac on model: least’, The Selec on of Retail Loca ons, NY: Dodge 31. Pashigian, B.P. and Gould, E.D. (1998), ‘Internalizing externali es: the pricing of space in shopping malls’, Journal of Law and Economics, 41(1), pp. 115–142 32. Ramsland, M.O.. and Kinnard, W.N. (1999), ‘Quan fying business enterprise value for malls’, The Appraisal Journal, 67(2), pp. 157–167 33. Simons, R.A. (1992), ‘Site a ributes in retail leasing: an analysis of a fast-food restaurant market’, The Appraisal Journal, 60(4), 521–531 34. West, D.S. (1992), ‘An empirical analysis of retail chains and shopping center similarity’, The Journal of Industrial Economics, 40(6), pp. 201–221 35. Wolinsky, A. (1983), ‘Retail trade concentra on due to consumers’ imperfect informa on’, The Rand Journal of Economics, 14(1), pp. 275–282

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CASE

Food courts emerging as anchors Food courts are playing an increasingly important role in the success of shopping malls. It is observed that as many as 80 per cent visitors to a mall visit a food court as compared to about 65 per cent who visit a hypermarket and 50–55 per cent who visit a department store. On a weekend a ernoon in Inorbit Mall, Mumbai, you may have to wait for as long as three hours if you want to eat at any of the restaurants. In the common food court area, customers may have to stand guard over a table to make sure they get it next. Keeping this in view, Inorbit Malls (India) Pvt. Ltd plans to nearly double the size of food courts from the current 6 per cent of mall space in the next few malls it is developing. And Inorbit is not an excep on. Almost all mall developers are giving food courts prime a en on, as they typically get more visitors there than into any single store in the mall. According to an es mate by real estate consul ng company Jones Lang LaSalle, Meghraj food courts are emerging as one of the anchor tenants. In retail industry parlance, anchor tenants are those stores that have the largest space, visitors and revenues in the mall. Kshi j Investment Advisory Co. Ltd, which is developing 11 malls across er-II ci es, has set up the first food and beverage division for a mall developer to strengthen its food courts. DLF Retail Developers Ltd, the retail arm of Delhi property developer DLF Ltd, has an interna onal food and beverage company on board to consult on crea ng be er quality food courts. “Food courts are one of the largest syndicated spaces that a mall developer has to manage and ge ng it right is important for them,” says Ashish Kapur, managing director of Moods Hospitality Pvt. Ltd, which runs a Chinese restaurant chain called Yo China at several malls. Mall developers were earlier selling space to stores, but now they lease it out, run food courts and promote them. All these could drive visitors to stores and increase mall revenues. “Food courts can increase the me people spend at the mall and drive business to other stores in the mall,” says Girish Pande, chief opera ng o cer of E-City Property Management Services, which manages seven malls across India. Source: ‘Mall developers give food courts prime a en on to step up sales’, Saumya Roy, retrieved from h p://www.livemint.com/2007/12/17000734/Mall-developers-give-foodcour.html.

CHAPTER

11 Future of shopping malls

LEARNING OBJECTIVES This chapter will enable the readers to • Get an overview of the current status of the mall industry in India • Understand major challenges on the way to shopping malls maturing as a market. • Know about the life cycle stages of a shopping mall. • Get an idea of the various op ons available before mall developers and managers to handle the complica ons that shopping malls might face in future

LESSON FOR INDIA FROM THE USA The United States of America may be called the motherland of shopping malls. According to the Interna onal Council of Shopping Centres (ICSC), the country has over 1,00,000 shopping malls of all sizes (2009 data). However, everything is not hunky-dory in the US mall business. During recent years, a large number of retail chains posted losses and closed stores, leading to high vacancy rates in the US malls. This phenomenon has resulted in what many people call ‘dead malls’. The ‘dead malls’ have no surviving anchor, have very high vacancy rates and low customer foo all and look outdated and illmaintained. Most of these end up ge ng closed. But even if a mall is closed, its building s ll remains. The mall building and the real estate underneath represent a huge cost that the mall development incurred but could not encash. Clearly, these malls failed to judge the pulse of the shoppers and bore the brunt. Some of these dead buildings are being put to alterna ve uses, whereas others are being demolished for redevelopment, not necessarily as shopping malls. Countries like India are far behind the USA, as the number of malls in India is not even half per cent of what it is in the USA. Though India is at the ini al stage of mall development,

226 Mall Management

people are scep cal about the future of the mall business. Whatever happened in the US may eventually happen in India. Do we need to wait ll that stage or look at the US experience and get prepared beforehand to handle the situa on more sensibly?

INTRODUCTION India’s journey on the ‘Mall Road’ has just begun. According to consultancy firm C. B. Richard Ellis (CBRE), India had 190 shopping malls by the end of year 2010 and the number is expected to go up to 280 by 2011-12. This is nothing as compared to over 1,00,000 shopping malls in the USA. The comparison becomes more unequal if we calculate the availability of shopping malls and mall space on a per capita basis, as the US population base is far smaller than that of India. But the growth exhibited by India cannot be discounted, as it all happened in a just a decade’s time. If the growth is calculated in terms of three malls in 1998 to 280 malls in 2012, it is a really fast growth story. The growth has been catalysed by the changes happening at a much rapid pace across the globe in all segments and sectors of societies and economies. The malls in India are expected to follow the same routine as the US malls did but in a more compressed time-frame. The bad thing is that reaction time is significantly reduced in the face of such rapid changes, but the good thing is that one can have a fair idea of what is likely to happen. Thus it is important for the Indian mall developers to follow the global trends in mall development.

COMPARISON

OF

MALL DEVELOPMEN.T

IN THE

US

AND

INDIA

Though the archetype of modern shopping malls emerged in the 1920s in the USA (Country Club Plaza), it took over three decades for the first modern shopping mall (Southdale Shopping Centre) to take shape in 1956. In comparison, India shi ed from the archetype to the modern mall in a much more compressed time-frame. The Indian archetype, Spencer Plaza, came up in 1990, and the first modern Indian malls (Ansal Plaza, Delhi and Crossroads, Mumbai) were doing business by the end of the same decade. In the USA, the shopping mall concept gained immense popularity and saw unparalleled growth in the four decades a er the Southdale opening. By 1990, the shopping mall became an inseparable part of the American lifestyle and identity. The trend is comparable with India where shopping malls gained popularity between 1998 and 2008. What happened in the USA during four decades happened in India in just ten years. The US market saw the emergence of super regional centres (malls larger than 8,00,000 square feet) in the 1980s when mall development was at its peak. West Edmonton Mall started operations in the 1981, whereas Mall of America began business in 1992. Since then there has been a consistent growth in large malls. In the Indian context, initial malls were confined to five-six lakh square feet of retail space. The million square feet plus mall came up in India only during 2006-07 and that was the peak of mall development in India. Between 1989 and 1993, the US economy faced a severe savings and loan crisis that resulted in a sharp decline in the growth rate of shopping malls. It is comparable with what India faced during 2008-10 when the economic recession resulted in the shelving of a number of projects. The availability and cost of funds is a core issue in mall

Future of shopping malls 227

development, a business that requires huge capital investment. The USA resolved this issue by making a transition from several privately-held, family-run shopping centre development companies to publicly-traded real estate investment trusts (REITs). This is yet to happen in India. Another lesson that the US market learnt from downturn of the late 1980s was the need to be innovative and o er value. Consequently, the country saw emergence of ‘power centres’ and ‘factory outlets’. These formats are among the fastest expanding formats in mall business. However, India is far behind in utilizing these formats. All Indian malls are replicas of each other, with limited inclination towards innovation. The new mall formats that have been used in India are luxury malls and seamless malls. The US mall developers identified entertainment as a potent tool to a ract and hold shoppers, and since 1990s the US malls have been o ering a wide range of entertainment options. The Indian malls too rely on entertainment as a useful option, but the o er here is restricted to multiplexes, food courts and an occasional gaming zone. In terms of variety and scale of entertainment options, the Indian malls stand nowhere near their US counterparts. The advent of the Internet in the 1990s was another event that could a ect retailing and shopping. The impact was assumed to be so severe that the Time magazine in the year 1998 carried a cover story “Kiss Your Mall Good-Bye: Online Shopping is Cheaper”. However, US retailers responded smartly by adding online services to their brick-andmortar formats. The shopping malls also developed websites to share information about their location, connectivity, tenants and promotional activities and events. They converted the Internet threat into an opportunity. However, the Internet never appeared to be a real threat in India as its penetration in the country is abysmally low and Indian shoppers are more interaction- oriented. Still many good malls in India have developed their websites.

CHALLENGES

BEFORE

INDIAN SHOPPING MALLS

The shopping malls have a bright future in India, at least for the next decade or so. It is because India is still in the growth phase of mall development, whereas the market for malls in countries like the USA is already declining, as shown in Figure 11.1.

Figure 11.1: Mall life cycle stages in developing countries and the USA

228 Mall Management Source: Singh, Harvinder and Bose, S.K. (2008), ‘My American cousin: a comparison of Indian and us malls’, Journal of Asia-Pacific Business, Vol. 9(4)

However, it would be imprudent to think that the Indian shopping malls would continue to flourish in their natural course. As they climb up along their life-cycle curve, there will be more competition. There would be other forces in the environment as well, like customers and regulators. Internally, the mall development companies will have their strengths and weaknesses. In the coming decades, the Indian shopping malls are likely to face the following challenges: • Cloning of shopping malls • Clustering of malls • Consolidation of the industry • Changing financing and revenue models • Shi in the balance of power • Role of a regulator

Cloning of Shopping Malls India being a recently evolved market, both the developers and the customers do not have many benchmarks before them for development or evaluation. Worse still, a large number of developers are small builders with li le or no exposure to world-class construction and management. Consequently, they tend to ape the more successful operational malls. It results in a scenario in which all the malls end up being clones of each other. It would be a big challenge for the mall developers to come up with innovative concepts and mall formats that cannot be replicated. To make that happen, it is important to look beyond the architecture, and focus on the management, promotion and operations part.

Clustering of Malls In the absence of necessary scientific research, the developers are coming up with shopping malls in urban centres. Mushrooming of shopping malls in a single catchment area has resulted in cannibalization among shopping malls and truncated catchment areas. To remain sustainable and financially viable, the developers need to understand that a given catchment area can support only a limited square footage of mall space. If there is a genuine gap in the demand-supply of mall space in the catchment area, only then it makes sense to develop a shopping mall. The other rational decision is to make adequate provision of the market share for the unorganized retailers, as the mall store cannot grab the entire market in the catchment in a country like India.

Consolidation of the Industry The Indian mall development industry is highly fragmented with a large number of small players operating in the retail space. Anybody having a plot of land in the city or access to funds can aspire to be a mall developer. However, there are only a few players like DLF, Ansals, Unitech, Prestige group, Parsvanath and EWDPL who have the network and expertise required to run the mall business. Smaller players may find it di cult to

Future of shopping malls 229

manage, promote and operate malls on a long-term basis. Under competitive pressure many of these would leave the field by selling their assets to bigger players. Eventually, the industry would be le with a small number of large players. Each of these players would have the goodwill, expertise and resources to plan, develop, lease, manage and operate malls on a long-term basis. It is similar to what happened in the US shopping centre industry in the early 1990s.

Changing Financing and Rrevenue Models Another change that took place in the USA was the entry of real estate investment trusts (REITs). These trusts opened up a source of low-cost, long-term debt, ensuring the public ownership of shopping malls. Hence the management team of a shopping mall could plan on year-to-year basis instead of typical month-to-month or quarter-to-quarter basis. This gave them some elbow space to plan for a longer time horizon in the absence of pressure for immediate recovery. In India, the funding for shopping malls comes primarily from private sources that carry very high cost. There is pressure to pay returns in the short run. In many cases, the developers repay the loans raised from private sources by selling o retail units to individual investors. It results in a situation where the mall is owned piecemeal by scores or hundreds of investors. It creates a management quagmire. In the times to come, it is expected that the Indian malls will also have access to public funding. The Reserve Bank of India (RBI) is contemplating the launch of REITs in India that would ease considerable pressure from the developers.

Shift in the Balance of Power During initial stages of mall development, the demand for mall space is higher than its supply. In such cases, the developers call the shots by charging fixed rentals that are quite high. However, market corrections take place as supply improves, competition intensifies and economic instability comes into the picture. It results in a shi in the balance of power from the developers to the retailers. India has seen this phase during the economic recession of 2008-10. In the times to come, the tenants are likely to have a greater say with the revenue model changing from high fixed rental to low/moderate fixed rental plus revenue sharing to purely revenue sharing. In such cases, the mall developers need to explore alternative sources of revenue generation.

Role of a Regulator Real estate is one of the most opaque sectors of the Indian economy. Real estate transactions su er from evils like high stamp/registration duty and black money. In an a empt to weed out black money and bring transparency in real estate deals, the government is thinking about suitable legislations and a regulatory framework. Once a regulator for real estate is in place, it is expected to ease the situation as valuations would be realistic and financing options would be available. However, the regulator would expect parties to abide by specified rules and regulations. Moreover, appointing a regulator without having financing support in place may suddenly strangulate the fund supply for mall projects, at least in the short run.

230 Mall Management

LIFE CYCLE STAGES

OF

SHOPPING MALLS

The concept of life-cycle is very pertinent in the field of marketing. It has been successfully applied on products, brands, categories and stores. However, its application to shopping malls is unique. It is di cult to visualize the life cycle of shopping malls in the Indian context, as malls have been existing here only for 15 years or so, which is an insu cient time period for a large number of malls to complete their life cycle. Whatever mall failures we see are more due to inappropriate planning and strategizing than due to reaching the decline stage of the mall life cycle. For understanding this concept, it is necessary to have a look at the US scenario where shopping malls have been operating for nearly over 80 years. The life cycle concept provides a rational explanation for the decline and fall of shopping malls in a society and economy. According to Jame R. Lowry, there are four stages in the life cycle of a shopping mall: (a) (b) (c) (d)

Innovation or introduction Growth or accelerated development. Maturity Decline These stages are identified on the basis of the following parameters:

1. Market conditions: This parameter comprises observations regarding competition (who and how many), footfalls (number and break-up), growth rate of business and vacancy rates inside shopping malls. 2. Mall developer strategies: This parameter includes a mix of decisions taken by the mall developers relating to tenant-mix improvement, revenue model, leasing practices, facilities and infrastructure, advertising and promotions. 3. Tenant strategies: This parameter covers decisions taken by the tenants during di erent stages of the mall’s life cycle. These decisions relate to store size, layout, merchandise, advertising, promotion and discounts.

Introduction/Innovation Stage During this stage the concept of mall has a novelty value in the market. There are a small number of similar malls in the market. Customers show enthusiasm towards the new formats resulting in high footfalls and sales revenue. Many prospective competitors wait for trends to stabilize. As malls are long-term projects, the competitors who start constructing new malls do not a ect the demand-supply situation during this stage. Depending upon the maturity level and readiness of the market, the developer carries out advertising and promotion work. In ready and mature markets like metropolitan areas, the developer succeeds in eliciting good response from prospective tenants as well as customers. High, fixed rentals and CAM charges are a reality. In small towns, the developer needs to indulge in persuasive communication to convince tenants as well as customers. It is safe to build smaller malls in small towns in the initial phase, as

Future of shopping malls 231

there may not be many takers for the mall space. Exclusivity and experience is the main plank for customer communication rather than price promotion. Focus is on carrying out promotional activities outside the mall. Retailers also use extensive promotion. Initial merchandise is experimental and is expected to stabilize a er ge ing the customer response. However in smaller towns, price promotion may be used to induce footfalls.

Accelerated Development/Growth Stage This stage sees a rapid growth in the number of shopping malls in the city. Consequently, the trend is firmly entrenched and ignites the market. Footfalls and sales revenue move skywards. Looking at the customer response, more and more retailers rush to occupy space in the upcoming malls. Since the market is enthusiastic about malls, lease rentals escalate and so does the term of lease. It results in significantly high occupancy rates and a stabilized tenantmix. Customers become the best brand ambassadors through positive word-of-mouth and hence advertising and promotional expenditure is reduced. As a mall gets a li le older, the management is now busy with managing things of routine nature. The focus of promotion becomes more inward. A growth stage is generally positive for all. Stores experience greater footfalls, higher sales, increased ticket size and higher more sales per square feet of retail space. The need for promotion, especially price promotion, goes down. However, the exact trend depends on the product category. For instance, if the growth stage results in accommodation of a high number of stores directly competing with each other, it may necessitate price promotions and discounts.

Maturity Stage During this stage, there are a large number of similar malls in the market, may be more than what the market can digest. Due to intense competition, the shopping malls witness truncated catchment areas. Footfalls and sales start sliding down. Customers have more options and some of the new malls could give a serious competition to existing malls due to their superior infrastructure, modern facilities, relevant tenant-mix and updated brand profile. During the maturity stage, many tenants do not renew their lease contract and shi to the new shopping malls. Stopping this shi is a major task of mall developers in this stage. If it happens, finding suitable replacement becomes another activity added to the developer work-list. The tenants coming as replacements generally ask for more liberal terms and o er lower rentals. Infrastructure and facilities are dilapidated and need stringent monitoring and upkeep. The mall engages into aggressive promotion and events to arrest the slide. Many malls opt for renovation or face-li to make them look more appealing to the customers. For the tenants, the business must have stabilized by now in terms of merchandise and customer service. To face competition, they resort to aggressive price promotion along with promotion outside the shopping mall.

232 Mall Management

Decline Stage This stage is characterized by irreversible damage to the mall in terms of major parameters discussed above. There are a large number of similar shopping malls distorting the demand-supply situation. Infrastructure and facilities get time-worn, experience becomes stale, customers manage to find be er alternatives resulting in dwindling footfalls, sales revenue plummets, and tenants start exiting resulting in increased vacancy rates. The mall developer still tries to squeeze money out of the mall. He/she acts aggressively in terms of finding new tenants though it is not of much use. To cut cash outflow, the developer cuts down the promotional expenditure, realizing its futility. Another victim of cost-cu ing is the general maintenance and upkeep of the mall. In some cases, the developer tries to make the mall fit for some alternative use or try to sell it o . The tenants of a shopping mall that is in the decline stage try to pass time, as they wait for the lease agreement to expire. To reduce cash expenses, they cut down promotional expenditure and confine it only to sale and discounts. No a empt is made to improve infrastructure and equipment in the store. The store gradually narrows down its merchandise and may also opt for reduced retail space if the developer agrees.

Strategies for the Decline Stage Knowing well that a shopping mall has to pass through the stages of innovation, accelerated growth, maturity and decline, it is prudent for the mall developers to get ready with possible alternatives to counter any adverse outcome. Some of the options to cope with the decline are discussed below: (a) Cosmetic face-li ing: The easiest and the simplest method to apply to a dying mall is to invest some money in making its exteriors look a ractive and contemporary. It might be accompanied by the overhaul of internal facilities, especially the ones that are clearly visible. It is not a very popular or potent option, as it does not address the fundamental deficiency faced by the mall, that is, obsolescence. However, it is useful when the developer wants to make the mall look a ractive so that he/she may sell it to somebody. (b) Periodic rejuvenation: During the planning stage itself, the developer must understand the imminence of decline and opt for staggered leasing. Under the staggered leasing arrangement, di erent tenants of the mall are signed leases for di erent time durations so that a fixed percentage of vacancies are created each year. The marketing team may examine the market scenario and consumer preferences from time to time and find out suitable replacements so that the tenant-mix remains rejuvenated. (c) Phases redevelopment: Nobody can predict the pace, quantum and nature of change in future. It is quite possible that a new feature or facility, desired by consumers, cannot be accommodated in the physical structure that has been created in the past. Here a good example is multiplexes that cannot be provided in the malls developed before the advent of multiplexes. To accommodate such changes, the mall may adopt modular design (multiple phases). These phases may be developed in one go

Future of shopping malls 233

(d)

(e)

(f)

(g)

or in stages. However, di erent phases should be leased out in such a manner that one complete phase (block) may be vacated for redevelopment. That phase may be redeveloped to create infrastructure that meets contemporary expectations of consumers. Complete Redevelopment: The developer may decide to demolish the entire building and come up with a concept that reflects contemporary needs and tastes. The new structure need not carry any baggage of the past. But this option is costly, as it involves huge cost, time and interruption of business. It is not advisable in cases where the mall has developed an identity of its own. Repositioning of the mall: This option is suitable for shopping malls that were positioned for a specific segment of customers and accommodated a specific set of brands (generally the upper segment of society). As time progresses and the mall loses its prestige in the eyes of the original targeted segment, it may decide to target a segment placed at a lower level of the social hierarchy. Accordingly, the tenant-mix, marketing communication and physical appearance may be modified. Converting a luxury or upmarket mall to a power mall, value mall or a factory outlet mall is not a bad idea! Identifying alternative uses: If it is not possible to manage and run the mall profitably as a shopping hub, the developer should try to put the mall to alternative use, not necessarily shopping. For instance, it can be used for storage and warehousing (maybe for retail stores operating successfully from nearby stores). It may also be used for conducting classes and exhibitions and hosting social gathering and ceremonies. De-malling: The term de-malling originated in the US shopping mall industry. In de-mailing, the developer provides direct and convenient entrances to all the stores from outside. It is against the concept of conventional mall that is enclosed and ensures entry to all the stores strictly from inside.

SUMMARY Shopping malls are fast catching up people’s imagina on and fancy in India. The Indian journey on the ‘Mall Road’ has been pre y brisk. India is expected to undergo the same rou ne as the US malls did but in a more compressed me-frame. It poses serious challenges to the mall managers, as it is di cult to aim at future when things are moving so fast. The rapid journey has its own risks in the form of outcomes like undi eren ated malls, their clustering in select geographies and regions, and the pressure of consolida on. The cash flow posi on of retailers has been quite tough post-recession (2008 onwards) resul ng in a thrust for the revenue-sharing model. Despite being a late entrant in the mall business, India must realize that like any other product or concept, shopping malls also follow the typical life-cycle of introduc on, growth, maturity and decline. It is me the Indian mall developers realize this reality and start preparing suitable strategies to cope with the challenges of future.

234 Mall Management

REVIEW QUESTIONS 1. India has less than 200 opera onal malls, whereas the USA has more than 1,00,000. Does it mean that the Indian shopping malls do not need to worry? 2. What are the major di erences in the evolu on and development of shopping malls in India and the USA? 3. How are real estate investment trusts (REITs) expected to a ect the mall business in India? 4. What are the various challenges expected by the Indian shopping malls in future? 5. What is the likelihood of consolida on taking place in the mall development and management sector in India? How is it likely to a ect the performance of the Indian malls? 6. What is meant by the life cycle of shopping malls? What are di erent stages of the mall life cycle? 7. How would you di eren ate between the innova on stage and the accelerated growth stage of the mall life cycle? 8. What are the di erent op ons available before developers to manage adversi es associated with the declining stage of the mall life cycle? 9. How does intelligent thinking at the me of leasing help developers in handling the decline stage of the mall life cycle? 10. What is de-malling? How does it di er from cosme c face-li ing and phased redevelopment?

PRACTICE EXERCISES 1. Prepare a list of malls that are not doing well in your city. How many of these are actually in the decline stage? What steps can be taken to help these malls regain their customers? 2. Iden fy 3-4 malls of your choice. Find out the leasing schedule of these malls. What strategy would be most appropriate for them during the decline stage of their life cycle? 3. Examine Spencer Plaza, Chennai, Crossroads (Sobo Central), Mumbai and Ansal Plaza, Delhi in the light of the life cycle theory. Which among these are already in the decline stage? Comment on the actual or proposed strategies that may be adopted to cope with the decline phase (real or assumed) for each of these malls.

SUGGESTED READINGS 1. Anselmsson, J. (2006), ‘Sources of customer sa sfac on with shopping malls: a compara ve study of di erent customer segments’, The Interna onal Review of Retail, Distribu on and Consumer Research, 16(1), pp. 115–138 2. Armstrong, J.S. and Overton, T.S. (1977), Es ma ng non-response bias in mail surveys. Journal of Marke ng Research 14 (3), pp. 396–402 3. Backstrom, K. (2006), ‘Understanding recrea onal shopping’, Interna onal Review of Retail Distribu on and Consumer Research, 16(2), pp. 143–158

Future of shopping malls 235

4. Blois, K.; Mandhachitara, R. and Smith, T. (2001), ‘Retailing in Bangkok: an intriguing example of agglomera on’, Interna onal Journal of Retail and Distribu on Management, 29(10), pp. 472–479 5. Carter, C.C. and Vendell, K.D. (2005), ‘Store loca on in shopping centers: theory and es mates’, Journal of Real Estate Research, 25(3), pp. 237–265 6. Christensen, C.; Baumann, H.; Ruggles, R. and Sadtler, T. (2006), ‘Disrup ve innova on for social change’, Harvard Business Review, 84(12), pp. 94–101 7. Craig, A.M. and Turley, L.W. (2004), ‘Malls and consump on mo va on: an exploratory examina on of older genera on and young consumers’, Interna onal Journal of Retail and Distribu on Management’, 32(10), pp. 464–475 8. Cruickshank, B. and Baen, J.S. (1998), ‘Essay and observa ons of ecommerce and retail proper es’, Unpublished working paper, Demon, TX: University of North Texas 9. d’Astous, A. and Jacob, I. (2002), ‘Understanding consumer reac ons to premium-based promo onal o ers’, European Journal of Marke ng, 36(11), pp. 1270–1286 10. Demographia (2008), h p://www.demographia.com/db-mxcward.htm 11. Evers, D. (2002), ‘The rise (and fall) of na onal retail planning’, Tijdschri voor Economische en Sociale Geografie, Vol. 93, No. 1, pp. 107–113 12. Fraser, W.D. (1993), Principles of Property Investment and Pricing, 2nd ed., Macmillan, London 13. Guy, C. (2002), ‘Is retail planning policy e ec ve? The case of very large store development in the UK’, Planning Theory and Prac ce, Vol. 3, pp. 319–330 14. Menon, S. and Kahn, B. (2002), ‘Cross-category e ects of induced arousal and pleasure on the Internet shopping experience’, Journal of Retailing, 78(1), pp. 31–40 15. Miranda, M.; Konya, L. and Havira, I. (2005), ‘Shopper’s sa sfac on levels are not only the key to store loyalty’, Marke ng Intelligence and Planning, 23(2), pp. 220–232 16. REEF (1999), ‘Strategic outlook-on-line retailing and its poten al impact on shopping center sales’, Number 23, August 1999 17. Reifenberg (1997), ‘Why real estate industry should fear the future’, The Wall Street Journal, Southwest Edi on, September 3, B2 18. Shukla, T. (2007 ), ‘Experien al marke ng: the new paradigm’, Indian Journal of Marke ng, 12, pp. 10–12 19. Srivastava , R.K. and Srinivasan, Srini.R. (2008), ‘How experien al marke ng be used to builds—a case study of two specialty stores’, Innova ve Marke ng, 4(2), pp. 31–33 20. Srivastava , R.K.(2009), ‘Luxury brands: a mirage or reality in Indian retail’, Synergy, VII (1), pp. 21–27 21. Srinivasan, Srini. R. and Srivastava, R.K. (2008), ‘RFID applica on in retail’, Synergy, pp. 35–42 22. Wang, Y.S. (2003), The Influence of Western Fast Food Chain Stores Marke ng Mix and Service Quality Sa sfac on on Customer Sa sfac on, Na onal Chung Cheng University

236 Mall Management

CASE

Has the decline set in for the Indian malls? Malls came to India a decade back and immediately found an intense following. They drew a mad rush of shoppers. In cases like Crossroads, the first modern mall in India, the mall management found it di cult to handle the crowd. So it imposed a condi on that only those carrying either a mobile phone or a credit card (both novel es at that me!) would be allowed entry. But as mobile phones and credit cards ceased to be novel es for Indians, same is the case with shopping malls. The year 2008 saw 9.6 million square feet of mall space coming up in India, an 18 per cent increase over the previous year, but the economic slowdown pulled wind out of the sails for malls. Across the country, malls that did not cater to consumer needs are looking deserted as consumers are walking out of them. Malls that do not stand on sound, fundamental research are fast losing faith of the tenants as well. It is not only the vanilla stores that are walking out. There are instances where the anchor stores have terminated their lease agreements prematurely, leaving the mall nothing more than a skeleton. Such malls are plagued by problems like lack of professional management, mul ple floors, high vacancy rates, unviable loca on and poor commercializa on. These vices are not confined to only a few malls. Many prac oners believe that out of 200 odd malls opera ng in India at present, only a handful, may be a dozen, are actually successful. There may be a di erence of opinion on the absolute number of successful malls, but nobody denies the fact that most of the shopping malls in India are struggling to survive. During the heydays of mall business, there was a mad race among developers to develop shopping malls. This blind race exposed them to astronomical costs, unviable loca ons, head-on compe on and unrecep ve geographies. Consequently, many had to shut shop before they could even take o . Skeletons of unfinished projects are a tes mony to this. Others converted them into commercial spaces. A mul tude of reasons are cited for this state of a airs. Malls are a suitable pla orm to sell luxury brands. Luxury brands leave decent margins with the retailers that jus fy high investments. But luxury retailing did not take o that fast. On the contrary, Indians have shown a marked preference for value-for-money o ers through modern retail. Globally, such malls (discount malls) are situated outside the city, but the Indian consumer wants valuefor-money o ers at a convenient loca on and distance. Such loca ons are available at a premium, but margins are meagre. In a developing economy like India, the major propor on of income is spent on food and grocery items for which unorganized retailers are generally preferred. Preference for local kiranawala is stronger in smaller towns and ci es where malls have been developed by some of the more adventurous mall developers. Many people believe that the current phase is not the decline phase of the mall life-cycle. It is simply market correc on that would take supply and pricing to realis c levels. It may also result in consolida on of this fragmented market. Source: Bhupa, Malini and Vaish, Nandini, ‘Mall is not well’, India Today, 19 April 2010.

Appendix 1 Le er of intent This Le er of Intent (hereina er referred to as the LOI) is made and signed on --------- at ----------. Between ------------------, a company incorporated and validly exis ng under the provisions of the Companies Act, 1956 and having its registered o ce at ---------------------, (hereina er referred to as the ‘Lessor/Licensor’ which expression shall, unless it be repugnant to the context or meaning thereof, be deemed to include its executors and successors) ac ng through its Managing Director Mr. --------- Aged -- years S/o Mr. ---------, R/o -----------------------------. AND M/s .-------------------, a company incorporated and validity exis ng under the provisions of the Companies Act, 1956 and having its registered o ce at -------------- (hereina er referred to as ‘Lessee/ Licensee’ which expression shall mean and include, unless it be repugnant to the context or meaning thereof, its administrators, executors and successors) ac ng through its authorized signatory Mr.--------------, aged ---- years, S/o Mr. -------, duly authorized vide a orney/resolu on dated ---------.

Now the ------- and ----------------- agreed to the Terms & Condi ons of the LOI as men oned hereunder: Name of the Commercial Complex

----------------- Mall

Loca on

----------------------- (address of the building)

LEASE TERM

------ YEARS { ---- years +---- years + ----- years)

Nature of Lease Shop No. & Floor

RENTAL OR REVENUE SHARING WHICHEVER IS HIGHER Shop No.-------, ------ FLOOR

Area of Shop

---- SQFT SBA EQUIVALENT ------- SQFT CARPET

Retail Model Licensee

of

Lessee/

Descrip on of products/services to be sold/o ered

Monthly Rent/Licensee Fee/Compensa on Amount Payable by Lessee/Licensee

Rs.--- OR --% REVENUE SHARE ON SALE PER MONTH WHICHEVER IS HIGHER

Security Deposit Payable by Lessee/Licensee

Rs. ---------- (Rs. -------- ONLY) PAYABLE HEREUNDER b) Rs. -------- AT THE TIME OF LOI b) Rs. -------- AT THE TIME OF AGREEMENT

238 Mall Management

CAM Charges Payable by Lessee/Licensee

Rs ---- PER SQFT ON ON SBA

Escala on in Compensa on License Fee

--% EVERY YEAR

Monthly Amount/

CAM Charges Agreement

TO BE EXECUTED WITHIN -- DAYS FROM THE DATE OF AGREEMENT

Lock-in Period of Lease

------- YEARS

Rent-free (Fit-out ) Period

--- days

Date of Commencement of Mall

--TH ------------, ------

Electricity Load

AS PER REQUIREMENT

Air Condi oning Charges

AS PER MALL STANDARDS

Interiors by Lessor

NOT APPLICABLE

Signage

ON GLASS FAÇADE IN FRONT OF SHOP No. -------

Licences

LESSEE

Taxes

LESSEE

Property Taxes

LESSOR

Registra on Charges of Lease

50:50 BY LESSEE/LICENSEE

Insurance

INSIDE SHOP LESSEE

General

1. THE LESSEE/LICENSEE WILL NOT SUBLET, ASSIGN OR OTHERWISE PART WITH THE POSSESSION OF THE SHOP IN PART OR FULL. 2. THE LESSEE/LICENSEE SHALL USE THE SHOP FOR THE PURPOSE FOR WHICH HE/SHE AGREED TO TAKE ON LEASE

Right To Terminate Lease

-------- MONTHS ADVANCE NOTICE AFTER LOCK-IN

Termina on of LOI

IF THE LESSEE/LICENSEE TERMINATES THE LOI BEFORE TAKING POSSESSION OF THE SHOP OR EXECUTION OF LEASE/LEAVE AND LICENCE DEED THEN ------ MONTHS RENT/LICENCE FEE/MONTHLY COMPENSATION AMOUNT WOULD BE ADJUSTED FROM A SECURITY DEPOSIT.

Jurisdic on

--------------

Appendix 239

In witness whereof the par es to the LOI have appended their respec ve signatures onto this LOI on the day, month and year first men oned above in the presence of the following witnesses: Lessor/Licensor Licensee

Witnesses: 1. 2.

Lessee/

Appendix 2 TERM SHEET The par es hereto, a er sa sfying themselves and with full knowledge of all the laws, byelaws, rules, regula ons, no fica ons etc. which are applicable to the said Building and the Licensed Space, and subsequent nego a ons have agreed to enter into a Lease Agreement on the following terms and condi ons: TERM SHEET Property Name

---------------- Mall

City

-----------------------

Leased Space

Store No. --------- , First Floor Level PROPERTY SPECIFICATIONS

1

Name of the Owner, Developer and Contractor (Intended Lessor)

----------------------

1 A

Name and Address of the Intended Lessee

----------------------------

2

Property Address

----------------------

3

Plot Size Sq Mtr and Dimensions (length × width) in mtr/

------ Acres/ sq. metres,

Width of the Road in front of the Property

----------- m × --------- m, --------- feet

4

Lessor’s Address

5

Building Configura on

Ground + -- levels and -- Level Basement

6

Due Diligence

The Intended Lessee has independently on its own carried out due diligence to its en re sa sfac on rela ng to the right, tle and interest in the said Building and/or the Leased Space of the Intended Lessor, going through the ownership records, inspec on of the site and other related ma ers, to confirm the competence of the Intended Lessor to lease out the Space.

Appendix 241

It is hereby agreed and understood that upon signing of this Term Sheet, the Intended Lessee is deemed to have independently completed all due diligence and has taken legal opinion on its own and that it shall be responsible for any/all consequences thereof. 7

Total BUA

----- sq. feet/metres, including ----- levels of basement

8

Proposed Format

------------- (store name)

9

Total Super Area

----- sq. feet/metres

10

Total Covered Area

------ sq. feet/metres

11

E ciency

---% COMMERCIAL TERMS

1

Agreement period

-- yrs (-- + --)

2

Stamp duty & registra on fees

To be borne by the Intended Lessee

3

Property tax

To be borne by the Intended Lessor.

4

Business related taxes/ Service Tax/GST/ licences for signages (as and when applicable), VSAT Tower taxes and any other increase in any other tax known by whatever name

To be borne by the Intended Lessee

5

All deposits (present and future) for power, electricity, water and other u li es

To be borne by the Intended Lessor

6

Insurance (building + equipment provided by the Intended Lessor only )

To be borne by the Intended Lessor.

7

Possession for fit-out

Immediate

8

Store Opening Date

-------------------

9

Advance no ce for possession for fit-out

--------- days

10

Earnest Money Deposit (EMD)

Rs.__________paid vide cheque no. _______ ___ dated ________ drawn on ___________ __ Bank, submi ed at the me of signing of this Term Sheet.

242 Mall Management

11

Liability of the Par es

If no agreement is executed in terms hereof by the Par es within ---- days from the date of signing the Term Sheet, or within such extended period as mutually agreed between the Par es, the Par es shall have no claim and liability against each other.

12

Minimum Monthly Guarantee (MMG)or Revenue Share (RS) %

Rs. ---- per sq on super area, or ---% of net sales, whichever is higher

13

Interest-free Deposit

This Interest-free Security Deposit (IFSD) is equivalent to --- Month of Lease rental and it shall remain in such ra o during the term of the Lease. The Interest-free Security Deposit shall be refunded by the Lessor on expiry/ termina on of the agreement a er deduc on of any outstanding arrears.

14

Advance rental

--- Months MMG

15

Payment Schedule

---%– Term Sheet, ----%– Licence Agreement, Balance % – Possession

16

Lock-in Period

---- Months

17

Rental Commencement

-----------------

18

CAM

Rs. ----- per sq. feet.

19

Escala on

---% a er every --- years on last paid MMG

20

Power Supply (in kW)

Supply from a single point as received from the Electricity Provider with 100% power back-up facility. The Intended Lessee to pay demand charges on pro-rata basis in addi on to the charges charged by the Electricity Provider per month for consump on of electricity. Power back-up @ Rs.--- per unit consumed.

21

AHU and Duc ng

The Intended Lessor shall provide chilled water supply (high side) up to one point in the Leased Space, for air condi oning, for --- hours/day, on all days when the mall is open to public. The Intended Lessee shall install its Air Handling Unit (AHU)/Fan Coil Unit (FCU) and also Duc ng for the same, of approved make, within the Leased Space.

22

Agreed Electricity Load Requirement of the Intended Lessee

Lessee to advise

Security

Appendix 243

23

Renewal of Lease Period

It may be renewed upon the mutual consent of both the Par es on the terms as agreed by the Par es.

24

Merchandise Contribu on for Promo on.

Merchandise Contribu on for Promo on shall mean merchandise/voucher contribu ons from various lessees of the ---------- Mall for promo ng the mall among shoppers/ consumers from me to me. The period/ term for these contribu ons will be as agreed between the Lessee and the Lessor.

25

Termina on of the Lease Agreement by the Lessor/ Lessee

On rental default of ---- days and failure to pay within ---- days therea er. If the Intended Lessee fails to comply with any of the material terms and condi ons incorporated in the Lease Agreement and statutory compliance and further fails to rec fy the same. The Lessee can terminate the Lease Agreement a er the expiry of the Lock-in Period upon serving 3 months no ce without assigning any reason.

26

Business Timings

As per Mall opera on Statutory Regula ons.

27

Leaving/Losing the right to enter the Leased Space a er the expiry/revoca on/ termina on of the Lease Agreement

On termina on/expiry/revoca on of the Lease Agreement, the Lessee will forthwith clear all outstanding dues payable by the Lessee and lose its right to enter the Leased Space, and shall leave the Leased Space with all its merchandise, furniture, mannequins and movable fi ngs, etc., if any.

28

Delay in deposit

The Lessor shall refund the IFSD a er deduc on of dues within _______ days/months, since there would be a me lag in receiving the bills from various authori es, from the date of vaca ng the Leased Space by the Lessee. The Lessor shall also be en tled to adjust any outstanding arrears, as well as repair/ replacement cost of the damaged fi ngs and fixtures at the Leased Space, if any, from such IFSD. Delay in refunding the deposit by the Lessor therea er will en tle the Lessee to an interest @ ---- %.

refunding

the

mings, subject to

244 Mall Management

29

Area for signages on the external facade of the building, basement & compound of the complex, parking area

As per the Mall Management’s Signage Policy.

OTHER TERMS 1

Insurance of the Premises

Insurance of the en re property is the liability of the Intended Lessor. Insurance of the Leased Space and the property therein is the liability of the Intended Lessee.

2

Validity of Term Sheet

Subject to the Board Approval

3

Force Majeure

The Intended Lessor shall not be held responsible or liable for not performing any of its obliga ons or undertakings provided for in this Term Sheet if such performance is prevented, delayed or hindered by an act of God, fire, flood, explosion, war, strikes, insurrec ons, riots, terrorist acts, sabotage, government restric ons (including the denial or cancella on of any necessary licence), power failures, or damage or destruc on of any network facili es or servers, inability to procure or general shortage of energy, labour, equipments, facili es, material or supplies, failure of transporta on, strike, lock-outs, ac on of labour unions, pendency of li ga ons or any other cause (whether similar or dissimilar to the foregoing) not within the reasonable control of the Intended Lessor.

4

Arbitra on

All disputes and di erences arising between the Par es hereto rela ng to the Terms contained in this Term Sheet shall in the first instance be resolved amicably between the Par es. If the same s ll remain unresolved, it will be referred to arbitra on under the provisions of the Arbitra on and Concilia on Act, 1996 or any statutory amendments/modifica ons thereto for the me being in force. The arbitra on proceedings shall be held at an appropriate loca on in ------------- which shall be mutually decided by a Sole Arbitrator who shall be appointed by the Intended Lessor and whose decision shall be final and binding upon the Par es.

Appendix 245

The Intended Lessee hereby confirms that it shall have no objec on to this appointment even if the person so appointed, as the Arbitrator, is an employee or Advocate of the Intended Lessor or is otherwise connected to the Intended Lessor and the Intended Lessee confirms that notwithstanding any such rela onship/ connec on, the Intended Lessee shall have no doubts as to the independence or impar ality of the said Arbitrator. 5

Jurisdic on

Only the Courts at ----------- alone shall have jurisdic on to the exclusion of other courts to entertain and adjudicate upon the disputes rela ng hereto.

6

List of Annexures

Floor Plan – Leased Space

It is clarified that this Term Sheet contains only the indica ve commercial terms and does not create any rights or interest of the Intending Lessee over the Leased Space unless the Lease Agreement contains all the terms and condi ons governing the Lease as s pulated above is signed and executed between the par es.

For (Lessor)

For (Lessee)

Date:

Date:

ANNEXURE 1

Detailed Floor Plan

Appendix 3 LEASE AGREEMENT THIS LEASE AGREEMENT is made and executed at ____________ on this __________ day of ___________________. BETWEEN M/s -----, a Company incorporated under the Companies Act, 1956, having its registered o ce at ------------------, (PAN No.-----) through its duly authorized signatory Mr. -------------duly authorized in this regard vide board resolu on dated ---------, hereina er referred to as the “Lessor”, which expression shall, unless it is repugnant to the context, mean and include its legal representa ves, successors, nominees and assigns) of the ONE PART. AND M/s. -----------, a Company incorporated under the Companies Act, 1956, having its registered o ce at ------------- (PAN No. -------) through its duly authorized signatory Mr. ...................... ... duly authorized in this regard vide board resolu on dated ________________________, hereina er referred to as the “Lessee”), which expression shall, unless repugnant to the context, mean and include its legal representa ves, successors and permi ed assigns) of the OTHER PART. Whereas: 1. The Lessor is the absolute owner and is in peaceful possession of a freehold plot of land measuring ---- sq. metres approximately situated at -----------------, herein a er referred to as the “said Land”. 2. The Lessor is the Developer (“Developer”) and has conceived and constructed a mul storied commercial retail Mall on the said Land spread over mul ple levels/floors. The said mul storied commercial Mall is known by the name of “-------Mall” (hereina er referred to as the “said Mall/Building”), and the same has been constructed according to the approved Bye-Laws/Building Plans by the appropriate authori es. 3. The Lessee, having completely sa sfied itself with respect to the right, tle, interest, design, specifica ons of the said Mall and the premises to be leased, has approached the Lessor to take on lease a commercial space in the said Mall in bare shell condi on to carry on commercial/retail business. 4. The Par es are execu ng this Lease Deed to reduce in wri ng the terms and condi ons agreed in respect of lease of the above premises. NOW THIS LEASE DEED WITNESSES AS FOLLOWS: 1. DEMISE 1.1 The Lessor DEMISES unto the Lessee the Premises more par cularly described in Schedule 1 (the “Premises”) being a part of the Building known as “The -------Mall”. 2. TERM 2.1 TO HOLD the Premises unto the Lessee for the term specified in Schedule 1 (the “Term”) from the date specified in Schedule 1 (the “Rent Commencement Date”) and expiring on the date specified in Schedule 1 (the “Expiry Date”).

Appendix 247

3. LOCK-IN PERIOD 3.1 There shall be a lock-in period for the term specified in Schedule 1 (the “Lock-in Period”). In case of termina on of this Lease Deed by the Lessee for whatsoever reason, before the expiry of the Lock-in Period, the Lessee shall pay the rent and other payments payable under this Lease Deed for the remaining unexpired period of the said Lock-in Period. 3.2 That if the Lessee intends to vacate the Premises at any me a er the above Lockin Period, the Lessee shall give a wri en no ce in advance to the Lessor for a period as specified in Schedule 1 (the “No ce Period”) or pay matching rent in lieu thereof. 4. RENT 4.1 The Lessee shall pay for the Premises the rent (the “Rent”) as provided in Schedule 1. 4.2 The Rent shall be payable on the dates and in the manner prescribed below and in Schedule 1. The Rent along with Service Tax thereon at applicable rates payable by the Lessee to the Lessor under this Lease Deed shall be paid by the Lessee by way of Account Payee cheque in favour of the Lessor and shall be subject to deduc on of tax at source, as required under the Income Tax Act, 1961. The Lessee shall provide the TDS cer ficate in accordance with the provision of the Income Tax Act, 1961. In case of failure of the Lessee in providing TDS cer ficate/proof of deposit of TDS, the amount of tax, interest and penalty shall be treated as arrears of rent. 5. RENEWAL AND ESCALATION 5.1 The lease may be renewed for further terms as specified in Schedule 1 (the “Renewal Terms”) on the same terms and condi ons but subject to escala on in rent and other payments payable under this Lease Deed on the rates as specified in Schedule 1 (the “Escala on”) and the security deposit shall also be increased propor onately at the me of every escala on. The Lessee shall make a request for renewal in wri ng to the Lessor not earlier than nine (9) months and not later than the No ce Period as defined herein below, prior to the expiry of the Term, and the Lessor shall renew the tenancy for a further term, provided that there shall not at that me be any exis ng breach or non-observance of any of the covenants on the part of the Lessee herein contained. The Lease Deed for the renewed term must be signed by the Lessee not later than three (3) months prior to the date of expiry of the Term. This op on to renew shall lapse if the Lessee shall fail to sign the Lease Deed for the renewed term by the date s pulated above and the Lessor shall be free of all obliga ons whatsoever to grant to the Lessee any further term. Provided always that the Lessor may, if it deems fit, impose as a condi on of the renewal that the Lessee shall renovate the Premises prior to the commencement of the renewed term. 6. PAYMENT 6.1 If any monies payable by the Lessee to the Lessor under this Lease Deed or any part of such monies shall remain unpaid a er becoming payable (whether formally demanded or not), without prejudice to the Lessor’s right of re-entry as s pulated in this Deed, the Lessee shall be liable to pay interest at the rate of Eighteen per cent (18%) per annum on such outstanding monies calculated from the date such monies fall due for payment to the date of actual payment along with an administra ve

248 Mall Management

6.2

6.3

6.4 6.5

charge, if any, at the rate determined by the Lessor / Developer. The Lessor may recover such interest and/or administra ve charge as if they form part of the Rent in arrears and shall be paid to the Lessor on demand. The Lessee hereby irrevocably authorizes the Lessor to appor on and appropriate any payment made by the Lessee towards sa sfac on of any arrears or sums due from the Lessee to the Lessor on the date of payment, as the Lessor deems fit notwithstanding any instruc ons to the contrary herea er. The Lessee undertakes to pay the bills of Maintenance, Electricity, Air-condi oning charges etc. of the Premises without any reminders from the Lessor / Developer within 7 (seven) days of receipt of the bills. All payments shall be made by the Lessee through Account Payee cheque/ Demand Dra drawn in favour of the Lessor / Developer and shall be subject to realiza on. The payment of bill shall not be held up/delayed if there are any di erences or disputes as to its accuracy. Any di erence or disputes regarding accuracy of the bill may be subsequently se led and adjusted.

7. SECURITY DEPOSIT 7.1 To pay to the Lessor the sum specified in Schedule 1 (the “Security Deposit”) as security for the due observance and performance by the Lessee of all its covenants, condi ons, s pula ons and agreements on the part of the Lessee herein contained. The Security Deposit shall be retained by the Lessor throughout the Term free of any interest to the Lessee with power for the Lessor, without prejudice to any other right or remedy hereunder, to deduct therefrom the amount of any Rent, CAM Charge in arrears or interest thereon as provided herein or any other expense, charge or sum payable to the Lessor remaining unpaid or any loss or damage sustained by the Lessor and/or the Premises as a result of any breach, non-observance or nonperformance by the Lessee of any such covenants, condi ons, s pula ons and agreements, provided always that the Security Deposit shall not be deemed to be payment of Rent unless the Lessor exercises the Lessor’s rights herein. 7.2 In the event of any deduc on therefrom being lawfully made by the Lessor as aforesaid, the Lessee shall on demand by the Lessor forthwith further deposit a sum equivalent to the amount so deducted and in the further event of the rent being escalated at the me of renewal, the Lessee shall on demand by the Lessor forthwith further deposit an amount corresponding to the increase so that the Security Deposit shall at all mes be equal to the number of months’ rent as specified in Schedule 1. 7.3 Subject to adjustments/set o if any, whether arising under this Lease Deed or otherwise, the Security Deposit shall be refunded to the Lessee by the Lessor without interest at the expira on of the Term and the simultaneous delivery of vacant possession of the Premises to the Lessor. 8. OTHER CHARGES 8.1 The Lessee shall pay/ bear any Service Tax or any other tax, levy, cess, etc. of a similar nature which may be or become chargeable or imposed by the competent authori es in respect of any payment (whether Rent, CAM charges, LPG charges, HVAC charges, CAM charges for extended hours of services, signage charges, DG

Appendix 249

charges, parking charges, promo on charges, extraordinary charges or otherwise) made by the Lessee under or in consequence of this Lease Deed or any payment made by the Lessor for which the Lessee agrees to reimburse the Lessor under this Lease Deed. However, the Lessor shall be responsible for the payment of the presently applicable property tax in respect of the Premises. 8.2 The Lessee shall pay all charges in respect of the supply of electricity from Mains/DG sets and other u li es or services like Internet, cable etc. supplied to the Premises, whether by the Lessor or the Mall Management Agency (“Mall Management Agency”), if any appointed by the Lessor, or directly availed by the Lessee, and any taxes thereon. 8.3 No free or concessional car and two-wheeler parking shall be allowed to the Lessee in the basements or any other designated parking areas. The Lessee shall pay parking charges for its car(s)/two-wheeler(s) as per the rates to be decided by the Lessor/Developer/Mall Management Agency and as per the normal rates applicable to the visitors of the Mall. 8.4 WATER CHARGES: The cost of water consumed internally by the restaurants, wet shops and other premises etc. will be charged at the rates to be decided by the Lessor/Developer. In case, the water supply has to be augmented by a Tubewell / Water Tanker etc. the Lessor/Developer shall have the right to charge the Lessee such extra propor onate charges as the Lessor deemed expedient taking into considera on the amount spent by it on this account. 8.5 MALL PROMOTION CHARGES: In addi on to the CAM charges, the Lessee hereby agrees and binds itself to pay to the Lessor/Developer a sum @ Rs.------- (Rupee ----only) per sq. . per month of the Super Built-up Area of the Premises towards the Adver sing and Mall Promo on charges, being the Lessee’s contribu on towards all costs, expenses and outgoings incurred or to be incurred by the Lessor/Developer from me to me for the purpose of promo ng and adver sing the Mall and the trades and businesses carried on therein and for carrying out ac vi es which the Lessor/Developer may implement for and in respect of the Mall and all ancillary ac vi es connected therewith. The Mall Promo on charges may be adjusted (increased/decreased) in future at the sole op on of the Lessor. Upon being in mated, the Lessee agrees to pay the adjusted Mall Promo on charges without any demur. 8.6 The Lessee shall pay all administra ve charges, legal fees and other costs and disbursements incurred by the Lessor/Developer for or in connec on with demanding and enforcing payment of any monies due hereunder; or the observance and performance of any covenants, terms and condi ons herein contained. 9. COMMON AREA MAINTENANCE CHARGES 9.1 In considera on of the Lessor/Developer maintaining the infrastructure and providing the maintenance services, the Lessee hereby agrees and binds itself to pay the Lessor CAM charges, in advance by the ---- day of each English Calendar month, which shall be payable to the Lessor/Developer along with the service tax at applicable rates as prescribed in Schedule 1. The CAM charges shall be payable by the Lessee from the date of commencement of commercial opera on from the

250 Mall Management

Premises. The CAM charges shall be charged per sq. . of Super Built-up Area per month in respect of the said Premises for -- hours of opera on from -- AM to -- PM. These charges shall be calculated taking into considera on the prevailing prices of commodi es and services. The CAM charges may be adjusted (upward/downward) by the Lessor/Developer/Mall Management Agency in its sole op on and absolute discre on. Upon being in mated, the Lessee agrees to pay the adjusted CAM charges without any demur. Extra charges on pro-rata basis at actuals will be charged for opera ons for extra hours beyond Mall opera ng hours. The final reconcilia on of CAM Charges shall be done at year-end based on actual figures and the account would be se led within seven days thereof. The CAM Charges along with Service Tax thereon at applicable rates payable by the Lessee to the Lessor/Maintenance Agency under this Lease Deed shall be paid by the Lessee by way of Account Payee cheque in favour of the Lessor/Maintenance Agency and shall be subject to deduc on of tax at source, as required under the Income Tax Act, 1961. 9.2 The Lessee agrees to be bound by all the s pula ons contained in Annexure 2 hereto in rela on to Common Area Maintenance. 10. COMMON AREA MAINTENANCE SECURITY DEPOSIT 10.1 The Lessee has deposited a sum as specified in Schedule 1 with the Lessor/ Developer as an interest-free security deposit equivalent to such months es mated CAM charges as specified in Schedule 1 at the me of execu on of this Agreement. The said security deposit shall be refunded by the Lessor/Developer, without any interest, at the me of the expiry/termina on of this Agreement a er adjus ng arrears of CAM charges, electricity charges, damages to the said premises or to any por on of the Mall and any other dues, charges, liabili es or sums due or payable. In the event of the CAM charges being escalated, the Lessee shall on demand by the Lessor forthwith further deposit an amount corresponding to the increase so that the Common Area Maintenance Security Deposit shall at all mes be equal to the number of months’ CAM charges as specified in Schedule 1. 11. FIT-OUTS PERIOD 11.1 The Lessor shall permit, subject to the Lessee having fulfilled all its obliga ons under this lease deed, the Lessee’s entry into the Demised Premises for carrying out interior work /fit outs (hereina er referred to as “Fit Out Period”) like flooring, false ceiling, pain ng and other ac vi es by the Lessee for a rent-free period of --- days from the date of possession of the premises for fit outs, i.e. w.e.f. ---------. This possession shall be purely on permissive usage basis for the limited purpose of carrying out fit outs. A er --- days as the case may be, automa cally the rent for the premises will start. The Lessee further undertakes to take possession of the Demised Premises within --- days of the receipt of in ma on from the Lessor that the Demised Premises is ready for commencing fit outs, failing which the fit out period shall be deemed to have commenced. Therea er on the expiry of --- days of the fit outs period the lock-in period shall also be deemed to have commenced. Provided further in the event the Lessee meanwhile s ll does not take the possession of the Demised Premises, the Lessor may in its sole discre on terminate this lease deed and forfeit all amounts paid by the Lessee ll such me. Further in the event of such termina on, the Lessee shall be liable to pay as liquidated damages the en re

Appendix 251

rentals, CAM charges and all other charges for the lock-in period to the Lessor. The Lessee shall be liable to pay for all the ameni es/facili es provided to it during the fit outs period, including inter alia towards the usage of electricity and water. 11.2 The monthly rent shall become due and payable immediately on the comple on of the aforemen oned --- days rent-free fit outs period/commencement of commercial opera ons by the Lessee at the Premises, whichever is earlier, i.e. the date specified in Schedule 1 (the “Rent Commencement Date”). The start of commercial opera ons of the premises shall not be later than the comple on of the rent-free period. Provided further that in the event the Lessee does not commence its commercial opera ons on comple on of the tent-free fit outs period, the Lessor may in its sole discre on terminate this lease deed and forfeit all amounts paid by the Lessee ll such me. Further in the event of such termina on, the Lessee shall be liable to pay as liquidated damages the en re rentals, CAM charges and all other charges for the lock-in period to the Lessor. 12. LIMIT ON THE RESPONSIBILITY OF LESSOR / DEVELOPER 12.1 The Lessor/Developer makes it clear to the Lessee that the maintenance services may be outsourced to specialised agencies under separate agreements. The Lessor’s/Developer’s responsibility shall be limited only to the extent of supervision of these agencies and ensuring that the opera on and maintenance is in conformity with the said agreement. The Lessor shall replace an agency if its performance is not up to the standards. The Lessee confirms that the Lessor/Developer has no legal liability whatsoever arising from any act of omission, commission, negligence, and defaults of the aforesaid agencies in providing the services. The Lessor’s role and responsibility for providing electrical energy to the Lessee shall be limited to receiving the supply of energy from the State Electricity Board/Electricity Supply Company on behalf of the Mall in bulk and to distribute the same to the occupants. The Lessor/Developer is merely distribu ng electricity on behalf of the State Electricity Board/Electricity Supply Company and has no power or control on the quality/quan ty or any other specifica ons with respect to the electrical energy supplied and, therefore, it shall accept no responsibility whatsoever and shall not be liable for any ac on, damages whatsoever for any failure on the part of the State Electricity Board/Electricity Supply Company to supply electrical energy to the user. The Lessor/Developer, however, shall augment the supply with the help of standby generators provided in the said Mall. 12.2 The Lessor/Developer shall in no way be responsible or liable (legally, financially or otherwise) for any fire, electrical, pollu on, structural or any kind of hazard origina ng from the said premises or any other shop/outlet/restaurant in the said Mall. 12.3 The Lessor/Developer shall not be liable for any harm, loss, damage or physical injury which may be caused to the Lessee, its representa ves and property on account of breakdown of power or on account of any failure of the machinery or on account of any disrup on in services and management forming part of the infrastructure or if the same are beyond the control of the Lessor/Developer and these shall in no way confer the right upon the Lessee to adopt legal recourse against the Lessor/ Developer for the same.

252 Mall Management

12.4 To the fullest extent permi ed by applicable law, neither the Lessor nor their respec ve a liates shall be liable for any special, indirect, consequen al or incidental damages (including but not limited to the damages for loss of business profits, business interrup on, loss of business informa on and alike) arising out of this Deed, any documents referred to in this Deed or any addenda or amendment hereto. 13. RIGHTS OF LESSOR 13.1 The Lessee hereby agrees that the Lessor and/or its representa ves shall be en tled to enter and inspect the Lessee’s premises at any me. 13.2 All signages in the said Mall shall be chargeable at the rates to be decided by the Lessor/Developer. The Lessor/Developer shall have the sole discre on with regard to the loca on of Signage/Directory, the size of the Directory and also the pa ern and size of alphabets in which the names of all the occupants of the said Mall will be displayed by it. 13.3 During the --- months immediately preceding the determina on of the Term the Lessor shall bring other prospec ve lessees or their agents to view the Premises. 13.4 The Lessor reserves the right to use the logo of the Lessee in their publicity material, adver sements, brochures or any other material without any objec on from the Lessee and without payment of any charges for the Promo onal and Corporate campaigns for ------- Mall only. 14. INSURANCE 14.1 The Lessee shall not do or permit or su er to be done anything whereby the policy or policies of insurance on the Building or the Premises against loss or damage by fire or other risks may be rendered void or voidable or whereby the rate of premium thereon may be increased and to make good all damage su ered by the Lessor and to repay to the Lessor on demand all sums paid by the Lessor by way of increased premiums and all other expenses rela ng to the renewal of such policy or policies rendered necessary by a breach or non-observance of this covenant without prejudice to any other rights of the Lessor. 14.2 The Lessee shall at its expense insure and keep insured the Premises against any claims, losses, liabili es or other risks arising from public or any third par es under a Public Liability/Third Party Policy with an insurance company. 14.3 The Lessee shall insure and keep insured against all risks and damages to the furniture, fixtures and fi ngs of the Premises and all parts thereof, all equipment and other property of the Lessee at the Premises against damage by fire and such other risks at the cost and expenses of the Lessee, and to forward a copy of the policy to the Lessor upon request of the Lessor. 15. ASSIGNMENT, SUBLETTING, ETC. 15.1 The Lessee shall not assign, sublet, licence or in any way dispose of or part with the possession of the use of the Premises or any part thereof either by way of suble ng, sharing or other means whereby any company or person not a party to this Lease Deed obtains the use or possession of the Premises or any part thereof irrespec ve of whether or not any rental or other considera on is given for such use or possession, under any circumstances. For the purposes of this clause, a change in

Appendix 253

the partners of a firm shall be deemed an assignment and if the Lessee is a company, any change in the major shareholding, vo ng rights, control or management of the company shall be deemed an assignment of this Lease Deed. 16. LESSEE’S EMPLOYEES 16.1 No person engaged, hired or retained by the Lessee in any capacity whatsoever shall ever be deemed to be an employee of the Lessor or create any legally binding rela onship between such person and the Lessor/Developer. The Lessee shall meet all employee-related benefits, including wages, salaries, ESI, Provident Fund, etc. directly, within the me each such payment is due in accordance with their respec ve contracts and/or as required by the relevant law in force for the me being, and through its own resources without any recourse to the Lessor/Developer. 17. COMPLIANCE 17.1 The Lessee shall perform, observe and ensure that its agents, invitees and licensees perform and observe all rules and regula ons made from me to me by the Lessor/ Developer/Mall Management Agency for the maintenance, management, safety, care and cleanliness of the Building. Provided always that the Lessor/Developer shall not be liable to the Lessee in any way for the viola on of the rules and regula ons by any person including the other occupiers of the Building or the agents, invitees and licensees thereof. The Lessor/Developer/Mall Management Agency may make any changes in the rules and regula ons pertaining to the Building to which the Lessee shall not raise any objec on and strictly abide by and comply with the same. 17.2 The Lessee shall at all mes during the Term comply with promptly and at the Lessee’s expense, with all such requirements as may be imposed on the Lessee/ occupier of the Premises by any statute now or herea er in force and any bye-laws, orders, rules, regula ons, requirements and no ces thereunder of any Government, Municipal Authority, any other Authority, Department etc. and to indemnify and keep the Lessor/Developer/Mall Management Agency fully indemnified against all costs, claims, liabili es, fines or other expenses whatsoever which may fall upon the Lessor/Developer/Mall Management Agency by reason of any non-compliance thereof by the Lessee. 17.3 The Lessee shall bear and pay all du es, levies and/or taxes, including but not limited to VAT and Service Taxes, arising out of or payable for the sale or dealing with the specific products & services from the Premises and ensure that the Lessor/Developer is not made liable, financially or otherwise, in connec on with the same. 17.4 The Lessee agrees to be bound by all the s pula ons contained in Annexure 3 hereto in rela on to Leasing Condi ons. 18. INDEMNITY The Lessee shall be responsible for, and to keep the Lessor/Developer/Mall Management Agency fully indemnified against all damages, losses, costs, expenses, administra ve charges, ac ons, demands, proceedings, claims and liabili es made against or su ered or incurred by the Lessor/Developer/Mall Management Agency arising directly or indirectly out of: 18.1 Any act of omission or negligence of the Lessee, its agents, licensees and invitees at the Premises or any part of the Building;

254 Mall Management

18.2 Any breach or non-observance by the Lessee of the covenants, condi ons or other provisions of this Lease Deed; 18.3 Any escape from the Premises into other parts of the Building, except via proper ven la on facili es, of odours, fumes or noise etc.; 18.4 Any use, misuse, waste or abuse of water, gas or electricity or faulty fixtures or fi ngs; and/or 18.5 Without prejudice to the generality of the foregoing, any act of the Lessee or its agents, invitees and licensees causing the interrup on or cessa on of any of the maintenance services as may be provided by the Lessor/Developer/Mall Management Agency. 18.6 Enforcing payment of any monies due under this Lease Deed. 18.7 Any loss, injury, damages, fines, levies, charges or other damages su ered by the Lessor under any wri en law and the Fire Safety Regula ons arising out of or in connec on with the Lessee’s breach, non-observance or non-performance of fire safety norms. 19. CONFIDENTIALITY OF INFORMATION 19.1 The Lessee agrees and undertakes to keep confiden al and not to disclose to any third party any informa on in respect of, arising from or in connec on with the terms, condi ons and provisions of this Lease Deed and all correspondence and discussions between the Lessor and the Lessee in rela on to this Lease Deed unless the disclosure is required by law or made with the prior wri en consent of the Lessor/Developer or its authorised agent. 20. HOLDING OVER 20.1 That in case the Lessee fails to hand over the Demised Premises to the Lessor on the expiry of the period of lease or the extended period of lease, the Lessor shall be en tled to recover the possession of the Demised Premises and the Lessee shall also become liable to pay damages for its illegal occupa on calculated at the rate of 5 mes of the last paid rent per month for the succeeding year and this rate of damages shall keep on doubling on the expiry of every year ll the date the Lessee vacates the Demised Premises, which the par es hereto agree is a genuine es mate of damages. 21. TRANSFER/ASSIGNMENT BY LESSOR 21.1 The Lessee expressly acknowledges that if the Lessor at any me during the period of Lease Deed or extension thereof, sells, transfers, assigns or otherwise disposes of its rights in the Premises as whole or in part then in that event the Lessee shall a orn to such transfers and transferee on the same terms and condi ons as are contained herein without any objec on or condi on. However, a le er shall be issued by the prospec ve new Lessor in favour of the Lessee confirming that the terms herein agreed to shall be binding on the new Lessor and that the new Lessor assumes all rights and liabili es of the Lessor as if this Lease Deed had originally been executed with such new landlord as the Lessor and he will also acknowledge the security deposit paid by the Lessee to the Lessor, whose benefit shall be transferred to the new Lessor and all adjustments shall be in accordance with this Lease Deed. 22. FORCE MAJEURE 22.1 In the event of the Premises or any part thereof or the Building or any part thereof at

Appendix 255

any me during the Term being so damaged or destroyed by fire, act of God or other cause beyond the control of the Lessor, as to render the Premises unfit for use or access thereto impossible for a con nuous period of more than ----months (except where such damage or destruc on has been caused by the default or negligence of the Lessee or its agents, invitees or licensees) the rent etc. hereby covenanted to be paid or a fair propor on thereof according to the nature and extent of the damage sustained shall be suspended un l the Premises shall again be rendered fit for occupa on and use or un l access thereto may be obtained as the case may be. The Lessor shall be under no obliga on to provide any alterna ve premises ll the Premises are restored. 23. TERMINATION 23.1 The Lessor shall on the occurrence of any one or more of the following events be en tled to terminate this Deed a er providing the Lessee an opportunity to rec fy the default by giving a --- days no ce in wri ng: (a) if the Rent, CAM charges and/or other charges hereby reserved or payable or any part thereof or any sum payable under this Lease Deed shall at any me be unpaid a er becoming payable (whether any formal or legal demand therefore shall have been made or not); or (b) if the Lessee shall default in the due observance and performance of any undertakings, terms or covenants on its part to be performed and observed hereunder. Provided that in the event the Lessor is constrained to terminate the lease during the lock-in period as aforemen oned, the Lessee shall pay to the Lessor the lease rentals, the maintenance charges and all other charges for the en re unexpired dura on of the lock-in period. 23.2 The Lessor shall on the occurrence of any one or more of the following events be en tled to terminate this Deed forthwith: a) if the Lessee being an individual shall have a bankruptcy order made against him or being a company shall go into liquida on whether compulsory or voluntary (except for the purpose of amalgama on or reconstruc on of a solvent company), or shall be struck o the Register of Companies or if a receiver shall be appointed of its undertaking(s), property (ies) or assets or any part thereof; or 23.3 The Lessee shall on the comple on of the lock-in period be en tled to terminate this Deed by giving a -----months no ce in wri ng or rent and all other charges in lieu thereof to the Lessor. 24. LIEN ON LESSEE’s GOODS 24.1 In the event of non-payment of the rent, CAM charges and all other charges any me during the lease term or in case of termina on of this Deed during the lock-in period, the Lessor shall have an automa c lien and right of sale over all the stocks, goods and merchandise, equipments, furniture & fixtures, other movable proper es etc. of the Lessee in the Demised Premises, in addi on to its right to recover such dues/ payable rent, CAM charges and all other charges. 25. SERVICE OF NOTICE 25.1 All no ces required to be served by either of the Par es upon the other shall be deemed to have been duly sent and served if delivered personally and duly

256 Mall Management

acknowledged and/or sent by Registered AD post at the addresses given herein above in this Lease Deed. 26. GENERAL 26.1 That it is clearly understood and so agreed by and between the par es hereto that all the provisions contained herein and the obliga ons arising thereunder in respect of the said premises shall equally be applicable to and enforceable against any and all occupiers, Lessees, employees of the Lessees and/or subsequent purchasers of the said premises, as the said obliga ons go along with the said premises for all intents and purposes. 26.2 The Lessee hereby acknowledges that, prior to the execu on of this Lease Deed, the Lessee has carefully read and understood the terms and condi ons contained in this Lease Deed, has not been influenced into entering into this Lease Deed and that this Lease Deed contains all the representa ons or warran es made by or on behalf of the Lessor/Developer, prior to execu on hereof. 26.3 The Lessee shall follow the Fit Out Guidelines, Occupiers Design Guidelines, rules and regula ons and various guidelines issued by the Lessor/Developer/Mall Management Agency at all mes and as modified from me to me. 26.4 Notwithstanding anything herein contained, the Lessor shall not in any way be responsible or liable to the Lessee or its agents, invitees and licensees who may be permi ed to enter or use the Premises or the Building or any part thereof for accidents happening or injuries sustained whether resul ng in death or not, for loss of or damage to property, goods or cha els in the Premises or the Building or any part thereof howsoever caused and the Lessee shall keep the Lessor fully indemnified against the same. 26.5 That the open areas within the boundary of the plot where the said Mall has been constructed shall always remain the property of the Developer and may be used for landscaping, promo onal ac vi es etc. and the Lessee shall have no right, tle in the same. 26.6 No delay on the part of either party in exercising any right, power or privilege hereunder shall operate as a waiver thereof nor shall any waiver on the part of either party of any right, power or privilege hereunder operate as a waiver of any other right, power or privilege hereunder, nor shall any single or par al exercise of any right, power of privilege hereunder preclude any other or further exercise thereof or the exercise of any right, power or privilege hereunder. The rights and remedies herein provided are cumula ve and are not exclusive of any rights or remedies, which the par es may otherwise have at law or in equity. No condoning, excusing, overlooking, indulgence or forbearance by the Lessor/Developer of any breach of the Lessee’s obliga ons herein shall operate as a waiver of the Lessor’s/Developer’s rights or in any way a ect the Lessor’s/Developer’s rights hereunder in respect of any con nuing, or subsequent breach by the Lessee of his obliga ons herein and no waiver by the Lessor/Developer shall be inferred from or implied by anything done or omi ed by the Lessor/Developer. Any consent given by the Lessor/Developer shall operate as a consent only for the par cular ma er to which it relates and shall in no way operate as a waiver or release of any of the other provisions hereof,

Appendix 257

26.7

26.8

26.9

26.10

26.11

26.12

nor shall it be construed as dispensing with the necessity of obtaining the specific wri en consent of the Lessor in future, unless expressly so extended. In giving its consent in respect of any ma ers hereunder wherein the consent of the Lessor/Developer is required, the Lessor/Developer shall be at liberty to impose such condi ons as it deems fit. In the event any of the provisions of this Lease Deed shall be determined to be invalid, void, illegal or unenforceable, such provisions shall be deemed to be deleted from this Lease Deed and the remaining provisions of this Lease Deed shall con nue in full force and e ect. This Lease Deed is on a principal-to-principal basis and the Par es have entered into this Lease Deed as independent en es and not as co-venturers, partners, agents or employees of one another and nothing contained herein shall cons tute a partnership, joint venture, agency or employment between the Par es or be deemed to grant any authority to either Party to make any contract or agreement or to give any warranty or undertaking or representa on on behalf of the other or to create any obliga on expressed or implicit on behalf of the other. The Lessor/Developer shall not be obliged to charge a standard lease rent and the lease rents may be di erent for di erent areas of the Building based on the loca on, size of the space and/or other considera ons. The Lessee confirms that it shall not raise any ques on regarding or objec on to the mutually se led rent on the basis of comparison with the lease rent charged by the Lessor/Developer from other Lessees. The terms of this Lease Deed shall supersede all previous wri en or verbal representa ons, discussions which the par es may have had on the subject ma er contained herein. This Deed together with Annexure 1, 2 and 3 cons tute the en re arrangement between the par es.

27. STAMP DUTY 27.1 All costs, expenses, charges, legal or otherwise including stamp duty, registra on charges and other costs and charges, penal es connected with the execu on and registra on of this Lease Deed shall be borne by the Lessee. 28. ARBITRATION 28.1 Any dispute or di erence arising between the par es shall be resolved amicably at the first instance. Unresolved disputes, controversies, contests, disputes, if any, shall be submi ed to arbitra on. The arbitra on shall be conducted in accordance with the Provisions of the Arbitra on and Concilia on Act, 1996 along with the rules framed thereunder and any amendments thereto by a sole arbitrator appointed by the Lessor. The arbitra on shall be conducted in English. The decision/award of the arbitrator shall be final/conclusive and binding on the par es. The seat of arbitra on shall be at New Delhi. 29. JURISDICTION 29.1 That the Courts at ------------alone shall have jurisdic on in respect of all ma ers or disputes or di erences arising hereunder or in connec on with or in rela on to this Lease Deed.

Schedule 1 S. No.

PARTICULAR

Details

1.

Premises

:

Unit No. #: -------, Floor No. #: ------- Building Name: THE --------- MALL Address of Building: ---------- Super Built-up Area: --------- square feet As shown in the sketch plan a ached and edged in red for the purpose of iden fica on only.

2.

Term

:

--------years from the Rent Commencement Date

3.

Lease Commencement Date

:

-----------

4.

Rent Commencement Date

:

-------------

5.

Expiry Date

:

---------------

6.

Lock-in Period

:

------ Months from the Rent Commencement Date

7.

Renewal Terms

:

------ terms of ------- years ea ch.

8.

Escala on

:

-- % at the me of every renewal/a er -- Years on last paid (Minimum Guarantee) Rent

9.

No ce Period

:

-- days

10.

Security Deposit/ CAM Security Deposit

:

Security Deposit of Rs. ---------- (Rs. ----------Only) equivalent to --- Months (Minimum Guarantee) Rent payable as follows: On Signing of the MOU — Rs. -------- (Rs. -----only) has been paid. On taking possession for fit outs – Rs. ----shall be paid. AND CAM Security Deposit of Rs. ----- equivalent to -- months es mated CAM charges payable at the me of taking possession for fit outs: The security deposit and the CAM Deposit shall be propor onately escalated upon every escala on in rent/CAM charges.

11.

Interest-free security deposit for electricity

:

12.

Permi ed Use

:

[--------- (product category)] trading under the ------- brand name.

Appendix 259

13.

Main Product Line/ Service

:

--------------

14.

Lessee Hours

:

-- am to -- pm

15.

Rent

:

Minimum Guarantee Rent:

Opera ng

Rs. -- per square feet per month for ---- sq. . Super Built-up Area of the Premises amoun ng to Rs. -------- (Rs. ----only) per month. OR Revenue Sharing Rent: Revenue Sharing Rent @----% of Net Sales, whichever is higher. “Net Sales” in this context means Total Revenue generated from the premises [per month] less VAT and Sales Tax. The Lessee shall be required to provide to the Lessor the sales figure of every month by the ---th day of the succeeding month. Reconcilia on between Minimum Guarantee Rent and Revenue Sharing Rent shall be done every month and the account se led in five days thereof. The Lessee shall also be required to provide to the Lessor the sales figures for the year, duly cer fied by a Chartered Accountant, within ------- days from the year end on 31st March every year. The Lessor has the right to get the sales figures of the Lessee audited independently at any me at its own cost and the Lessee shall not object to the same and provide all necessary assistance in this regard. Rent shall be exclusive of Common Area Maintenance charges which shall be charged separately. 16.

CAM charges

:

To be paid on actuals which are presently tenta vely assessed@ Rs. ----- per sq. . on Super Area basis i.e. Rs. ------ (Rs. ------ Only) per month.

17.

Due Date for CAM Charges, Minimum Guarantee Rent Payment

:

Monthly in advance by the ---th day of each English calendar month

260 Mall Management

IN WITNESS WHEREOF the par es hereto have hereunto set their hands respec vely.

Signed by For and on behalf of the Lessor

Signed by For and on behalf of the Lessee

in the presence of:

Witnesses:

1.

2.

Appendix 261

Annexure 1 FLOOR PLAN IDENTIFYING DEMISED PREMISES

Annexure 2 OPERATIONS & MAINTENANCE—TERMS AND CONDITIONS 1. The “Common Facili es” are integrated and common to all the users of the said Mall. The Lessee hereby agrees and conveys its consent that the Lessor/Developer shall manage the said infrastructure for the said Mall and the Lessor/Developer shall provide its services for managing the same subject to the covenants and considera on as envisaged hereina er. 2. The Lessor/Developer and the Lessee hereby agree that the internal management of the premises being occupied by the Lessee will be looked a er completely by the Lessee only. However, the Lessee shall abide by such rules, regula ons and guidelines as framed by the Lessor/Developer/Mall Management Agency from me to me with a view to eliminate and/or minimize inconvenience and nuisance to the other occupants and/or users of the premises in the said Mall. 3. The Lessor shall provide the services as per the scope set out herein below: (a) Housekeeping of all common areas: Atrium, links, and walkways on all the floors and common passages, all staircases, terraces including u lity services, all open spaces in the complex, basements, common toilets, plant & equipment rooms. (b) Maintenance and cleaning of all ver cal areas: Glass façade all over the building, store façade, windowpanes on the exterior of the building and also in common areas. However glass panels and shop front’s glass panels are the Lessee’s responsibility. (c) Maintenance of: Drain, sewage system, water treatment plant etc., li s and escalators, common signage. (d) Landscaping: Cleaning and maintaining of gardens and other landscaped areas, manuring and disinfec ng, maintenance and provision of indoor plants in common areas. (e) Equipment Maintenance and opera on: The Lessor/Developer shall maintain and operate all the systems and services installed in the complex of the Mall (excluding the systems etc. owned by the Lessee) viz. generators, water treatment plants, firefigh ng and alarm systems, sewer treatment plants, li s, escalators, etc. If the maintenance services are outsourced, the Lessor/ Developer will be responsible for selec ng and coordina ng with such agency. (f) Security services of the areas outside the said premises. (g) Air-condi oning, mechanical ven la on and power back-up of the common areas including basements. (h) Electricity to the common areas including basements.

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(i) Pest control services for the common areas. (j) Insurance of machineries, equipments, assets etc. for management of the Mall. 4. AIR-CONDITIONING AND POWER BACK UP: The air-condi oning facili es in the said Mall shall be provided between ----- a.m. and ----- p.m. subject to Government regula ons. There is no provision of central hea ng system. If the aforesaid facili es of air-condi oning are required by the Lessee beyond the hours as stated hereinbefore then the same shall be provided upon a wri en request as per the prescribed format received in advance and upon payment of addi onal charges, as computed by the Lessor/Developer. If found not feasible, the Lessor/Developer may decline to provide extra air-condi oning service outside the normal hours. The Lessee shall pay the charges for power consump on including for the power back-up through generator sets/electricity consump on charges/water charges/air-condi oning based on actual meter reading as per the meters installed for the Lessee. The AHUs/FCUs for air-condi oning shall be installed by the Lessor/Developer but the cost and expenses for the same shall be paid and borne by the Lessee. The AHUs/FCUs shall be connected to the electricity sub-meter of the Lessee, whereas its daily opera on and maintenance shall be controlled by the Lessor/Developer and it would remain opera onal during normal opera ng hours of the Mall. The chiller water line up to the said premises shall be provided by the Lessor. The air-condi oning/cooling shall be provided at an average temperature of --- degrees Celsius ( + --- degree). The tonnage shall be @ -- TR/--- sq. . average for shops and @ -TR/--- sq. . average for restaurants. If the Lessee requires addi onal load beyond the load provisioned for, the same shall be provided to the Lessee upon payment of charges as reflected in the Lessee Input Form and as revised from me to me. The Lessor shall provide power back-up to the Mall for ligh ng, power and air-condi oning through generator sets. If the aforesaid facili es of power back-up are required by the Lessee beyond the hours as stated hereinbefore then the same shall be provided upon a wri en request as per the prescribed format received in advance and upon payment of addi onal charges plus ---%, as computed by the Lessor/Developer. 5. PROVISION OF ELECTRICITY: The Lessor/Developer will ensure provision of electricity during mall opera ng hours up to the panels in the Premises. The electricity load provided for the said premises shall be as per the provisions of the Lessee Input Form. The Lessee shall be required to deposit a security deposit for the sanc oned load with the Lessor/ Developer as per the rates of the State Electricity Board/Electricity Supply Company. The Lessee may apply for addi onal load and the charges for the extra load shall be paid by the Lessee as per the policies of the Lessor/Developer. The Lessee shall be provided with dual sub-meter for recording consump on of electricity supplied to the said Premises by State Electricity Board/ Electricity Supply Company and for electricity supplied through generator sets. The same meter shall be capable of recording both the readings separately. The meter shall remain the property of the Lessor. If the meter ceases to func on, the average of the electricity supplied during the preceding ----

Appendix 263

- months or the average of the corresponding months of the preceding year, whichever is higher, shall be taken as the basis of billing. Charges for electricity supplied through the State Electricity Board/Electricity Supply Company shall be calculated and paid by the Lessee as per the State Electricity Board/Electricity Supply Company rates on actual units consumed along with distribu on losses/service charges as per the reading of the sub-meters (dual meters) on monthly basis along with the electricity tax/du es as applicable. The Lessee agrees to pay/reimburse the Lessor deposits as may be demanded by State Electricity Board/Electricity Supply Company from the Lessor under the Bulk Supply Scheme applicable to the said plot/said complex. The Lessee shall adhere to the Schedule of Tari & Charges for supply of electrical energy and shall also pay Minimum Monthly Charges, if applicable, on the load sanc oned as may be s pulated. Charges for electricity supplied through generators to the said premises shall be calculated and paid by the Lessee on cost plus --- % on actual units consumed as per the reading of the sub-meters on monthly basis. The bill for energy consumed within the premises will be based on the dual meters/submeters installed for the said premises. The bill for electricity shall be presented by the Lessor by the seventh (----th) day of the succeeding month and the same shall be paid by the Lessee within ------ days from the date of receipt of the same. The Lessee shall comply with the terms of supply of electricity/DG set supply against prepaid coupons as and when the Lessor/Maintenance Agency introduces the same. Electricity meter shall be installed in the common space under lock and key by the Lessor/ Developer. Before commencement of supply of electrical energy to the Premises, the Lessee shall be liable to pay to the Lessor/Maintenance Agency an interest-free security deposit, meter hire charges and other charges as may be s pulated. No addi on/altera on in the electric installa on work, no addi on of load other than contracted upon, shall be carried out by the Lessee without the wri en permission of the Lessor. The Lessee shall not connect or sub-let the load, or permit connec on from its sanc oned supply to any other premises/user. PREJUDICIAL USE OF SUPPLY: The Lessee shall not connect to the Lessor’s supply, any apparatus, which is likely to interfere with or injuriously a ect the Lessor’s supply to other users. The Lessee shall balance the load on the three phases of the supply, the maximum permissible di erence in current between any two phases being ten per cent. The Lessee shall not use the supply given by the Lessor so as to interfere with the safety or e cient working of the Lessor supply lines or other works, or to prejudicially a ect the Lessor in any manner whatsoever. The Lessee shall not draw load more than the sanc oned load. DISCONTINUANCE OF SUPPLY: The Lessor/Developer reserves the right to discon nue supply of electricity to the Lessee by giving ------ days no ce in wri ng if the Lessee defaults in making payment of the bill on due date or there are reasons to believe that the Lessee is contravening any of the provisions of the concerned Electricity Act, rules and regula ons of the Lessor, the condi ons of supply or is commi ng a breach of any terms and condi ons.

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THEFT OF ENERGY: In case any representa ve of the Lessor/Developer detects any the /pilferage of electrical energy on the said premises, its connec on is liable to be disconnected immediately without any no ce and the Lessee shall be liable for all costs, expenses, including damages, if any, and consequences arising out of the said act of the / pilferage. In the event of a breach by the Lessee, whether of these Terms and Condi ons or the Lease Deed, the Lessor also reserves the right and authority to disconnect the electricity connec on to the said premises. During the period of such suspension, the Lessee shall con nue to be liable to pay and bear all charges for the supply of electricity to the Premises. All costs and expenses incurred in connec on with the disconnec on and discon nua on of electricity supply to the Premises and any subsequent re-connec on and re-con nua on of electricity supply shall be borne by the Lessee. 6. The security of the common areas of the said Mall will be under the direct control and supervision of the Lessor/Developer. The security personnel shall remain present at the Mall 24 hours a day including public holidays. However, vehicles and goods le in the vehicles parked in the Building/Premises shall be at respec ve owner’s risk. The security of men and property within the Lessee’s premises shall be the responsibility and liability of the Lessee. However, if by any reason or by any act of any person within the Lessee’s premises, it is felt that the security of people and property other than that within the Lessee’s premises are at risk, the security as provided by the Lessor/Developer may take appropriate ac on against the person crea ng possible danger to the overall property/security. 7. DISCONTINUATION OF SERVICES: The Lessee shall be liable to pay the CAM charges and other dues payable to the Lessor as envisaged herein by the due dates. However, it is agreed that in the event of the Lessee not paying the bills by the due dates to the Lessor/Developer for any reason whatsoever, the Lessor/Developer shall be en tled to disconnect, discon nue and disallow the use and enjoyment of the infrastructure and maintenance services etc. by giving ------- days no ce in wri ng to the Lessee un l the charges and arrears are cleared by the Lessee. This remedy is however in addi on to other remedies as may be available to the Lessor/Developer under this Lease Deed and as per the law. 8. RIGHT TO TRANSFER MAINTENANCE AGREEMENT TO MALL MANAGEMENT AGENCY: The Lessee agrees and acknowledges that in case the Lessor/Developer transfers or assigns the opera on and maintenance of the Premises to some other Mall Management Agency, the Lessee shall have no objec on to the same and the Lessee shall a orn to such transfer or assignment on the same terms and condi ons. Signed by For and on behalf of the Lessor

Signed by For and on behalf of the Lessee

Appendix 265

Annexure 3 LEASING HANDBOOK (a) The Lessee shall not dump any garbage in the corridors, common areas etc. The Lessee on its own shall arrange to bring its waste and garbage from its respec ve premises to the said bins, refuse collec on areas etc. and abide by the direc ons of the Lessor/Developer with regard to the collec on and disposal of garbage and other waste. (b) The Lessor shall frame rules for observing safety and security within the said Mall and circulate a copy thereof to the Lessee for compliance. The Lessee shall not store any material within the said premises or otherwise engage in any ac vity, which is hazardous, explosive and/or otherwise dangerous to the building and other owners thereof. (c) The Lessee shall use the said premises only for purposes of its business and shall not engage itself in any ac vity, which may cause pollu on and nuisance to the environment whether by noise, disposal of waste—gaseous, solid or liquid. The Lessee shall arrange to obtain the requisite licence and permissions in respect of its business ac vity. The Lessee shall not use the premises for any unethical, immoral or unlawful purpose. (d) The Lessee shall not encroach on these areas and shall not use the common passages and areas for any ac vi es including but not limited to distribu on of hand-outs, bills, pamphlets, pu ng banners and other such materials for promo ng sales of its products and services or organizing business campaigns. (e) The Lessee shall not carry heavy loads in the li s and escalators and only such number of persons as permissible shall undertake travel in the li s/on the escalators. If goods/ furniture or equipment is to be carried to any floor, the Lessee shall inform the security/ property manager so that due care is taken and the li s/escalators are not damaged. (f) The Lessee hereby agrees that the costs and expenses at the me of its moving into the premises or vaca ng the same shall be borne by the Lessee and it shall ensure that it does not cause any hindrance and obstruc on to the enjoyment of the Mall by other occupants and users in any manner whatsoever. The Lessee shall ensure that the damage and/or loss, if any, caused to the Mall and other owners and users shall be made good by the Lessee failing which the Lessor shall take steps to redress the grievances and the Lessee shall be liable to pay such costs, charges etc. within ------- days from the date of receipt of the debit note by it from the Lessor/Developer. (g) The Lessee shall follow the relevant Indian Standard Codes of Safety while execu ng the internal electrical/mechanical works within the said premises and the Lessor/Developer shall not be responsible for the same. (h) The Lessee shall also not change the colour scheme of outer walls or pain ng of the exterior side of the doors and windows etc. or carry out any change in the exterior eleva on or design. (i) To apply for and to pay all charges for and connected with licences required for running its opera ons and for the use of any equipment, apparatus etc. on the Premises. (j) Not to make or permit to be made any change, structural or otherwise, altera ons in or addi ons to the Premises or any part thereof or the Lessor’s fixtures, fi ngs and decora ons therein, if any provided, and without prejudice to the generality of the foregoing not to install any equipment save with the prior wri en approval of the Lessor,

266 Mall Management

and if any consent or approval is sought to be obtained from the relevant authori es, such consent and approval shall be obtained at the Lessee’s own cost. (k) Not to a x or install any further or addi onal electrical points in or about the Premises without the prior wri en consent of the Lessor and to ensure that the exis ng circuits are not overloaded or unbalanced. (l) All debris and waste materials of whatever nature resul ng from any works herein shall be disposed of by the Lessee in a manner prescribed by the Lessor. (m) To keep the interior of the Premises, the flooring and interior plaster or other surface material or rendering on walls and ceilings and the Lessor’s fixtures therein including doors, windows, wires, installa ons and fi ngs in good and tenantable repair and condi on (normal wear and tear excepted) and to use the same in a proper and careful manner and in the event that any part of the Premises shall be damaged due to any act or omission of the Lessee and/or its agents, invitees and licensees, to replace or repair the same and further, the Lessee shall be wholly responsible for any injury or loss caused to the Lessor/Developer or any other persons through the damaged condi on of any part of the Premises and the Lessee shall fully indemnify the Lessor/Developer against all claims, demands, ac ons and legal proceedings whatsoever made upon the Lessor/Developer by any person. (n) To keep the Premises and every part thereof clean and hygienic and dy and at a standard acceptable to the Lessor and to keep all pipes, drains, basins, sinks and water closets if any in the Premises clean and unblocked. To comply with all statutory provisions and all rules and regula ons made under any statutes, legisla on or bye-laws in respect of the sanitary arrangements, hygiene, health or cleanliness of the Premises. (o) To collect and/or to remove all refuse or rubbish whatsoever from the Premises and deposit the same in approved refuse bins, receptacles or containers as the Lessor/Developer may from me to me direct at such mes and places as specified by the Lessor/Developer. (p) Forthwith to repair, clean, maintain and paint the Premises in a good and workmanlike manner and as required by the Lessor. (q) Not to do (or permit or su er to remain upon the Premises) anything which may be or become or cause a nuisance, annoyance, disturbance, inconvenience, injury or damage to or give cause for reasonable complaint from the Lessor/Developer or its Lessees or the occupiers of adjacent or neighbouring Premises. (r) Not to use the Premises for a sale by auc on or for any dangerous, noxious, noisy or o ensive trade or business, nor for any illegal or immoral act or purpose. (s) Not to store or bring upon any part of the Premises or the Building arms, ammuni on, or unlawful goods, gunpowder, salt-petre, kerosene, chemicals, gases or any explosive, combus ble or hazardous substance or material etc. (t) To keep the Premises securely fastened and locked at all mes when they remain una ended and not to sleep or allow any person to sleep on the Premises and not to use the Premises for residen al purposes nor keep any animal or rep le on the Premises. (u) Not to install any pay telephone or vending machines outside the Premises. (v) Not to tout or permit its agents, invitees and licensees to tout or to use freelance touts in the public areas of the Building.

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(w) Except where the permi ed use of the Premises is that of an ea ng outlet, not to serve any food or drink or allow any consump on of food or drink on the Premises without the prior wri en consent of the Lessor. (x) To par cipate in any joint marke ng programs organized by the Lessor/Developer/Mall Management Agency for the benefit of regular shoppers in the Building upon terms to be mutually agreed between the Par es. (y) In all adver sements in any media or other communica ons bearing or which may include the Developer’s name or business mark/name of the Building or any picture or likeness of the Building or the Premises, the Lessee shall use only pre-approved formats for the Developer’s name or business mark or picture to ensure consistency in treatment of brand name/logo in terms of size, colour and posi oning statement. (z) To provide privileges as may be determined by the Lessor/Developer on goods, merchandise and/or services for any loyalty program(s) which may be implemented by the Lessor/Developer and to honour and accept as good payment gi vouchers in all available denomina ons issued by the Lessor/Developer. (aa) In the event that the Premises are not open during the Business Hours for a con nuous period of ------ days, such event shall cons tute a fundamental breach and the Lessor/ Developer shall be en tled to re-enter the Premises. (bb) Not to apply at any me for a licence or licences for the sale of wine, spirits or similar intoxica ng liquors on the Premises or any part thereof or allow the Premises or any part thereof to be used for carrying on thereon of the trade of sale of wine, spirits or similar intoxica ng liquors, except a er obtaining prior wri en approval from the Lessor and obtaining the necessary licences from statutory authori es at the costs of the Lessee. (cc) Not to a x, erect, a ach, paint or exhibit or permit or su er so to be upon any part of the exterior of the Premises or any part of the Building any placard, poster, no ce, adver sement, name or sign or television or wireless mast or aerial or any other thing whatsoever save and except such as shall have been previously approved in wri ng by the Lessor/Developer at the Lessee’s own cost and expense. (dd) Not to change or in any way vary the shop front without first having obtained the wri en consent of the Lessor. (ee) Not to u lise any unethical business prac ce or conduct the business of the Lessee in such a manner as to prejudice the goodwill and reputa on of the Building as a shopping centre/Mall. ( ) Not to block up, darken, or obstruct or obscure any of the windows or lights belonging to the Premises or to any part of the Building and not to cover or obstruct any ven la ng sha s or air-inlets or outlets. (gg) Not to place or leave outside the Premises or in common areas, packages boxes or crates of any descrip on or parcels of goods or ar cles or any containers of any descrip on and to carry out all unpacking of goods within the Premises. (hh) Not to a x or cause to be a xed any alarm system, door bells, hidden cameras or any other devices in or around the Premises without obtaining prior wri en permission of the Lessor/Developer. In default thereof the Lessor/Developer shall cause the same to be removed and put right at the expense of the Lessee.

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(ii) Not at any me to load or permit or su er to be loaded on any part of the floors or structures of the Premises any weight greater than 5 kilo-Newton per square meter (or as the Lessor/Developer may from me to me prescribe) or any weight which will cause undue strain and not to install any equipment or machinery which shall be unduly noisy or cause dangerous vibra on or cause air pollu on or noise pollu on or be a nuisance to the Lessor/Developer or occupiers of the Building. (jj) The Lessee shall not bring into or use in any part of the Premises or the Building any goods prohibited for import and domes c sales, goods infringing upon trademarks, copyright, patent rights or other intellectual property rights of any person or party. (kk) Immediately prior to the expira on or earlier determina on of the Term and if required by the Lessor to reinstate the Premises to its original state and condi on to the sa sfac on of the Lessor (ll) The Lessee shall at all mes observe and comply with Fire Safety Regula ons. (mm) As and where applicable, to subscribe to the point-of-sale system implemented by the Lessor in the Building (the “Mall POS System”) to electronically record gross sales received or receivable by the Lessee and the Lessee agrees and undertakes to observe and perform the terms and condi ons, as framed by the Lessor, in respect of the Mall POS System. (nn) Wherever wash rooms have been provided as part of the Premises, to keep such washrooms and facili es within the Premises clean, hygienic, dy and at a standard acceptable to the Lessor/Developer. (oo) Notwithstanding anything herein contained, the Lessor/Developer shall have the right at all mes to refuse access to the Building or otherwise control such access in respect of any person whose presence in the Building might in the judgment of the Lessor/Developer be prejudicial to the safety, character, reputa on and interest of the Building and its occupants. (pp) That in case the Lessor is having an agreement/arrangement with any Bank/Financial Ins tu on for availing financial assistance by mortgaging the Demised Premises and/or by arranging the receivables from the Demised Premises then the Lessee at the request of the Lessor undertakes and agrees to remit the monthly rentals and other payments directly to the Bank/Financial Ins tu on. All such payments made by the Lessee to the aforesaid par es shall be deemed good and full payment of the monthly rentals to Lessor. (qq) The Lessee agrees and consents that it would have no objec on to the Lessor raising finance by way of mortgage/charge of the Demised Premises and the Lessee shall sign documents required, if any. (rr) That if during the term of the Lease Deed, the Demised Premises or any part thereof be lawfully acquired or requisi oned by the Government or any local body or authority, local or otherwise, the Lessor alone shall be en tled to any and all compensa on payable and the Lessee shall not raise any claim in respect thereof. (ss) If the Lessee merges/amalgamates/consolidates or transfers its assets with/to any en ty on account of any merger/amalgama on/consolida on, then a fresh Lease Deed at the discre on of the Lessor shall be executed between the Lessor and the new en ty and all costs, charges, expenses including penal es, payable on or in respect of execu on and registra on of the fresh Lease Deed and on all other instruments and deeds to be

Appendix 269

executed pursuant to the fresh Lease Deed, shall be borne and paid solely by the Lessee/ new en ty/transferee. Signed by For and on behalf of the Lessor

Signed by For and on behalf of the Lessee

Appendix 4 Possession Le er

Date:-----------

XYZ Retail Ltd, ABCD Road, UVW City

Dear Sir, We are pleased to hand over the possession of Unit no. XYZ at ------ Mall situated at --------------. The above unit has been taken by you for your brand --------- with e ect from ------ day of ------(month),--------- (year). You may start the required fit-out work in the said unit. You are required to pay balance Rs. ------------by --------(date), ------- (month), -------- (year), else the possession stands cancelled.`

Thanking You For (Lessor)

Appendix 5 Retailer Feedback Form

Dear Retailer, We at the -------- Mall are trying to knit an even stronger bond with our retailers. That’s why we are seeking your valuable opinion and precious sugges ons. We assure you that your sugges ons will be given first priority. 1. How have you found the services provided by the Mall to you? { } Excellent { } Very good { } Good { } Average 2. Has the Mall opera ons been considerate towards the day-to-day opera onal problems that you face? { } Always

{ } Usually

{ } At mes

{ } Not at all

3. Are you facing any problems with regard to the facili es being provided to you by the Mall? { } Yes { } No If yes, then do let us know. We shall try our best to resolve them. ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------3. Does the ambience of the Mall meet your expecta ons? { } Yes { } No If no, then do let us know what we can do to improve it. ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------5. What can we do at our end to help your sales prosper? -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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6. What role do you expect the Mall to play to help increase the publicity of your brand? --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------7. Do you receive full support of the Mall management while organising events and di erent kinds of publicity for your brand? { } Always { } Usually { } At mes { } Not at all What support can we extend in the future to make these events even be er for you? --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------8. Is the behavior of the Mall sta good and coopera ve towards you and your team? { } Always { } Usually { } At mes { } No 9. Do you find the security and housekeeping services being provided to you up to the mark? { } Excellent { } Very good { } Good { } Average If average, then do let us know why. --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------10. Do you find the maintenance and engineering services being provided to you up to the mark? { } Excellent { } Very good { } Good { } Average If average, then do let us know why. --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------10. Is the behavior of the security o cials appropriate towards you and your team? { } Yes { } No 11. Do you feel that some loopholes in the mall management hamper your business and other ac vi es? { } Yes { } No If yes, then do let us know what we must do to plug the loopholes. -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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12. Are you comfortable while following the rules and regula ons that have been implemented by the Mall management? { } Yes { } No What changes would you like us to bring in these rules and regula ons so as to make things more comfortable for you? --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------13. Do the bills (electricity, CAM and rent) reach you on me? { } Always { } Usually { } At mes { } No 14. The Mall management would like to ini ate a few more systems. What according to you must we add? -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------If you have any other sugges ons or complaints that you feel, you must pass onto us then please do let us know. ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------RETAILER DETAILS:OUTLET _________________________ SHOP NO. _______________________ INCHARGE NAME_________________ SIGNATURE ______________________

DATED__________

Glossary Account A category used to group financial informa on and to create financial statements for a business. Accounts are typically represented by an account number. A well-defined chart of accounts is essen al for good financial records. Accoun ng interface A method of transferring distribu ons and vouchered receivings from a retail so ware system to an accoun ng so ware package. Accounts payable Amounts owed to others (a liability) for goods or services purchased on credit. Accounts receivable Amounts owed to a business (an asset), usually by customers who purchased goods or services on credit. Adjustment An increase or decrease in the quan ty indicated in the retail so ware package. The adjustment ensures that the records in the retail so ware match the actual physical quan ty in the inventory. Addi onal markdown An increase of a previous markdown to further lower the selling price. Ageing A process that determines the age (number of days old) of customer open items. Anchor A business, usually a department store, that is par cularly important to a shopping centre because it a racts a great deal of tra c. Anchor stores The largest retail outlets, usually located at the ends or corners of shopping centres, and generally chosen for their poten al to a ract customers to the shopping centre. Department stores usually anchor regional and super-regional malls, and supermarkets are typical anchors in community centres. Ancillary tenant A shopping centre tenant that occupies a smaller space and a loca on that is secondary in rela on to the anchor tenant. Atrium The central area of a building, equipped with a ceiling of translucent material that allows natural light to fall on the interior. Audit trail A method of tracking transac ons through the en re sequence of their history so that all financial informa on can be traced. Certain reports should be printed or stored electronically in the retail so ware as part of the business’s permanent records. Authoriza on The act of ensuring the cardholder has adequate funds available against his or her line of

Appendix 275

credit. If authorized, an authoriza on code will be generated and adequate funds are set aside. The cardholder’s available credit limit will be reduced by the authorized amount. Available quan ty The quan ty of an item that is currently available for sale. Generally, the available quan ty is equal to the on-hand quan ty minus any quan es set aside for open orders. Average cost An accoun ng cost method for calcula ng or recalcula ng a weighted average of the cost of all inventory items currently in stock. This cost is recalculated each me items are added to the inventory, and in certain situa ons, when items are removed from the inventory. Base year The year in a lease term used as a standard in a rent escala on clause. The opera ng costs in the next year are compared with the costs in the base year, and the tenant’s rent is adjusted either up or down. Basic rent The minimum monthly rent payment as set forth in a retail lease, excluding pass-through, percentage rents and other addi onal charges. B2B (Business-to-Business) A business model focused on sales to other businesses. Manufacturers, wholesalers, and suppliers are typical B2B companies. B2C (Business-to-Consumer) A business model focused on sales to consumers. Retailers are typical B2C companies. B2G (Business-to-Government) A business model focused on sales to na onal, state or local government agencies. Backorder A type of order normally created when there is insu cient quan ty available for a sale or order. Balance sheet inventory account An account that tracks the value of on-hand inventory. Barcode A unique iden fier for an inventory item or for a par cular colour/size combina on for an item. A barcode may be printed in the machine readable format using one of a number of common symbologies, such as UPC-A and Code 39. Batch processing A processing model for entering several transac ons in a sequence, then finalising (or pos ng) all of these transac ons at the same me. The batch processing allows mul ple employees to enter and edit the same types of transac ons simultaneously in their retail so ware. Bin Represents a physical place to store inventory. Bins are subdivisions of a loca on and are used to locate items. Generally, bins refer to physical rows/shelves or to actual bins.

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Biometric A measurable characteris c or unique trait, such as a fingerprint, used to recognise the iden ty of a person. Biometric devices can be used with retail point-of-sale systems as a secure log-in mechanism. Black Friday The day a er Thanksgiving. While Black Friday is o en thought of as the busiest retail shopping day of the year, in fact the busiest retail shopping day of the year is usually the Saturday before Christmas. The origin of the term Black Friday comes from the shi in profitability during the holiday season. Black Friday marks the day when many retailers shi from being unprofitable, or “in the red”, to being profitable, or “in the black”. Breakpoint In retail leases, the point at which the tenant’s percentage rent is equal to the base rent and beyond which the tenant will begin to pay overages. It is also called natural breakpoint. Some mes the tenant and the owner nego ate an ar ficial breakpoint that allows the tenant to begin paying the percentage rent either before or a er the natural breakpoint is reached. Buyer An execu ve who is responsible for selec ng, pricing, and purchasing merchandise. In many companies, the term “buyer” designates a department manager whose responsibili es include, but are broader than, the purchasing func on. Build-to-suit An arrangement between a shopping centre developer and a large tenant (such as supermarket, department store, fast food franchise and bank whereby the developer agrees to construct the tenant’s building according to the tenant’s specific instruc ons. The tenant will then lease that building and the site from the developer. Calendar A schedule that defines the beginning and end of an accoun ng year. For retail purposes, the calendar year may be divided into seasons, months and weeks. Calendar year A 365-day period that begins on January 1 and ends on December 31. Capitaliza on rate A rate used to calculate an es mate of a property’s value based on that property’s income. Cash discount The discount on the retail price when a shopper pays cash for an item. Many merchants encourage shoppers to pay cash in order to avoid processing fees for credit card transac ons. Cash receipts The money received from a customer for the purchase of goods or services. Category A classifica on assigned to retail items. Categories are useful for grouping similar items for pricing and repor ng purposes.

Appendix 277

Chart of accounts A list of all of a business’s accounts in numerical order, usually grouped by type. Cheque guarantee A service that guarantees a customer’s payment by cheque for a specified amount. The pointof-sale merchants must typically follow standard cheque authoriza on procedures. Cheque verifica on A service used to verify that a cheque writer and/or their checking account informa on is valid, and/or the account is in good standing. Closing A er final nego a ons, the signing of a lease. Closing a drawer The process of recording the ending amount of cash and other payment types in a drawer before performing the end-of-day pos ng. Normally, a drawer is closed at the end of each day. Con nuous occupancy clause A lease clause that requires the tenant to occupy the space con nuously throughout the lease term. Con nuous opera on clause A retail lease clause in the area that requires tenants to keep their stores fully stocked at inventory levels equal to (1) when they first opened for business (2) their stores in other loca ons, or (3) stores o ering similar merchandise. There may also be requirements regarding store hours, sta ng, and business name. Construc on rider A part of the lease that lists in detail all work that is to be done for the tenant by the landlord. It is also called a work le er. Core space The central or arterial area in a building that houses the building’s func on and service needs. It usually includes elevator banks, washrooms, stairwells, and electrical and janitorial closets. Commission The amount of money due to a sales rep when the sales rep makes a sale. Commissions can be based on an item’s sales price, profit margin, or other parameters. Commissions due The amount of money to be paid to a sales rep who is given credit for a par cular sale. Commit To allocate (commit) inventory to a transac on (e.g. an open order, cket and adjustment). Cost • The amount you pay a vendor for merchandise. • The derived value of an inventory item, calculated over the life me of the item.

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Cost method The process that determines the cost of each inventory item. Generally accepted methods of cos ng include average cost method, standard cost method, first-in-first-out method (FIFO), and last-in-first-out method (LIFO). Credit • The power or ability to obtain goods, services or money in exchange for a promise to pay later. • The right side of an account of any G/L account. Credits will normally be increases to liability accounts and decreases to asset accounts. They may also be increases to income accounts and decreases to expense accounts. Customer An individual or organiza on that purchases goods and services from your company. Cyber Monday Refers to the Monday immediately following Black Friday, which marks the beginning of the Christmas shopping season for online retailers. In recent years, Cyber Monday has become one of the busiest days for online retailers. Declining percentage rent A nego ated percentage rent structure such that the tenant pays a smaller percentage of gross sales a er a specified sales volume is reached. Dignified use clause The provision in a retail lease that the merchant will not use the property in a way that will damage the image or reputa on of the shopping centre as a whole. Discount Represents a reduc on in the price of an item. Distribu ons G/L accoun ng transac ons created during pos ng. Drawer A physical container that stores money and other tender, including cheques and credit card dra s, received at the point of sale. Drawer fund The amount of money le in a drawer a er the drawer has been closed. The drawer fund is typically used to provide start-up money (change) for the next business day. DUKPT (Derived Unique Key per Transac on) A method of PIN pad encryp on. Dun A demand for payment of a bill or account. EDC (Electronic Dra Capture) An automa c method of authorizing, balancing and se ling credit card transac ons entered in your retail so ware package.

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EDI (Electronic Data Interchange) The ability to electronically exchange purchasing informa on between your retail so ware and the vendor’s system. Employee discount A reduc on in the selling price on merchandise sold to an employee. Encryp on The technique of automa cally scrambling credit card data in the point-of-sale system before the data is transmi ed. Used for security and an -fraud purposes. End caps The end pieces of display units typically used to display promo onal items or featured items. Ending inventory Merchandise on hand at the end of an accoun ng period. Escala on clause In a retail lease, a provision requiring the tenant to pay more rent based on increased opera ng costs, changes in a given economic index, or an agreed-upon schedule stated in the lease. Etailer A merchant who sells retail goods or services through the Internet. Related terms: internet retail, retail ecommerce, online retailing, ecommerce, e-retail, e-tail and e-tailing Excep on repor ng The repor ng that only includes informa on not mee ng established criteria. For example, if you plan to sell between 2% and 5% of your inventory per week then the excep on repor ng would allow you to report on sales outside your criteria limits (e.g. sales that fell below 2% or rose above 5%). Exclusive use clause A clause preven ng the owner from leasing space to other retailers that sell merchandise similar to that specified in the tenant’s lease. Expenses Costs of opera ng a retail business. Fiscal year Any accoun ng period that contains one of the following: • 52 weeks • 13 four-week periods • Calendar year (Jan 1–Dec 1) • Any 12-month period Fixed rate op on The tenant’s guaranteed right to renew lease at the end of a lease term at a previously determined rental rate.

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Floor load capacity The weight per square foot that a building’s floors are able to sustain. FOB (Freight On Board) A shipping term indica ng that freight charges are included for the specified des na on. Food court A separate area of a shopping centre containing fast-food outlets and a common sea ng area. Forecas ng Predic ng the future, usually in sales or trends. Form feed The capability of most printers to automa cally feed perforated fixed-size rolls of paper to the top of the next page. Frequent Shopper Program (Customer Loyalty Program) A program designed to reward customers for their con nued business, promote loyalty, increase visita on and encourage future purchases. Rewards may be in the form of discounts, awards or other perks. Frontage The sec on of a store that faces the street or the pedestrian walkway in a mall. It also refers to the window display area and entrance. FSI Floor Space Index GAAP (Generally Accepted Accoun ng Principles) A set of financial accoun ng standards and repor ng guidelines many retail businesses follow. Gateway, Internet Gateway Manages the electronic connec on between consumers and financial ins tu ons, and transmits data. An Internet gateway that processes credit cards is a gateway connec on between the point-of-sale system and the credit card processors. General Ledger (G/L) • The collec on of all balance sheet, income, and expense accounts used to keep a business’s financial records. • A so ware package that uses accounts to summarize a company’s fiscal records. Gi cer ficate A voucher for goods or services that is sold to one customer with the expecta on that it will be redeemed by another. Gi receipt A receipt without prices that allows easy exchange of a gi . Gi receipts act as proof of purchase for the gi recipient and allow the purchaser of the gi to keep the original detailed receipt for his or her own records.

Appendix 281

Grid A table or matrix of the available combina ons of characteris cs for an item such as colour, size, pa ern, width, length, and so forth. Retail apparel grids are typically one-dimensional (e.g. colour only or size only), two-dimensional (e.g. colour/size) or three-dimensional (e.g. colour/size/pa ern). Grid cell The intersec on of two dimensions (e.g. colour and size) in an item grid. Also referred to as a colour/size combina on or simply colour/size. Gross lease A lease that allows the tenant to pay a fixed rent while the owner pays all opera ng expenses for the property Gross leasable area (GLA) The total area of floor space (usually cited in square feet) leased for retail shops, consumer services and entertainment, including restaurants. The total floor area of any shopping centre or mall is inevitably larger than the gross leasable area. The di erence can be accounted for by mall o ces, u lity areas, storage, rest rooms, interior plazas and other non-revenue producing spaces. GMROI (Gross Margin Return On Investment) A numerical indicator of the company’s return on its investment for an item or a group of items. GMROI measures the profitability of a company. GP% (Gross Profit %) The gross profit divided by the price. Gross profit (margin) The di erence between an item’s price and cost. Hang tag The nanufacturer’s label describing the merchandise, or a hanging price tag used for apparel and similar merchandise. Holdover Clause A clause in the lease agreement that details exactly what will happen if a tenant stays past the lease end date. A holdover clause may s pulate that the tenant will pay 200% of their base rent a er the lease end date. HVAC A building’s hea ng, ven la ng and air condi oning system. Inventory • The merchandise on-hand for sale to customers in the ordinary course of business. • The value of merchandise on hand at cost or retail. Inventory adjustments An increase or decrease made to the inventory to match an item’s actual on-hand quan ty. Adjustments are typically recorded to account for breakage, the , loss, incorrect receivings, over shipments, and so forth.

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Inventory cost The actual or average value of on-hand merchandise. Invoice A document deno ng money owed from one en ty to another. Item A clearly iden fiable product or service that may be sold to your customers. Journal The electronic record of transac ons, including drawer ac vity, ckets, inventory adjustments, transfers, purchase requests and receivings. Keystone mark-up A mark-up equal to the cost of the merchandise. Retail price is determined by doubling the cost of an item. Kit A single inventory item that is constructed from other inventory items (components). For example, you might create a kit called “toolbox set” that includes a toolbox, a hammer, a wrench and a screwdriver. You could then sell the toolbox set as a single item. Kiosk • A small leased area, booth, or cart inside a store or mall. Frequently, it is an extension of a larger retail business. • An interac ve computer display used for gi registries, online shopping, merchandise loca on, or other electronic interac ons between a shopper and a retail store. Landed cost The final cost per unit of items received into the inventory. Landed cost = (Purchase cost + freight cost + miscellaneous charges) / Quan ty received Last cost The cost of an item as of the most recent purchase of the item. Layaway A method of deferred payment in which merchandise is held for the customer un l it is completely paid for. The customer makes periodic payments towards the price. Lease A contract between the owner and the tenant that transfers to the tenant the right to use a piece of property for a specified length of me under specific condi ons. Leasing plan For a given retail site, the statement of rental rates and suitable tenants for specific space, usually presented to the owner or developer in the early stages of prospec ng. Lessee The tenant in a lease agreement. Line item A single item on a cket, order or PO.

Appendix 283

Loca on A physical place where the inventory is kept (i.e. a stocking loca on or warehouse). Load Factor It is the percentage of the building space that is common area or is used by all tenants and customers. This percentage is used to determine how much extra rent per square foot the tenants should pay to cover their pro rata share of rent for the common areas. Lot-controlled item An item whose quan ty is tracked by unique lot number within the item. Lot numbers are commonly used for chemicals, paints, dye-lots and pharmaceu cals. Loss leader A pricing strategy where a par cular item is sold below cost in an e ort to s mulate other, more profitable sales. For example, during the Thanksgiving season, turkeys are frequently sold at pennies per pound in the hope that the grocery store will profit from other groceries purchased at the same me. Loss preven on Stopping or reducing shrinkage inventory losses (or shrinkage) due to shopli ing, employee the , paperwork errors and breakage. Loyalty • Commitment to a par cular store or brand. • A programme designed to reward customers for their con nued business. Mall rat A young person who frequents a shopping centre primarily for socialising and entertainment rather than for shopping Management history Historical daily summary figures for registers, categories, payments, sales reps and taxes. Margin (gross profit) The di erence between the cost of an item and its price. Markdown A reduc on in the original retail price, primarily taken for clearance of broken merchandise, prior stock or to meet compe tor’s pricing. Mark-up Upward revision of the original retail price, resul ng in a price higher than the original price. Merchant agreement A wri en contract between a merchant and a financial ins tu on that details their respec ve rights, responsibili es and warran es. Minimum order The smallest sale permi ed by a manufacturer or wholesaler (vendor). Miscellaneous charge An addi onal charge that is not normally included in the price of an item, such as a fee for shipping or handling.

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Mixed-use centre An integrated complex that may contain residences, o ces, restaurants, theatres, a hotel and other services in addi on to retail stores. Magne c Stripe Reader (MSR) A device that converts the informa on contained in the magne c stripe of a credit card into data that can be understood by the retail so ware. Merchandising Buying and selling of goods. Metrics Measurements of data surrounding sales ac vi es, resources and/or deliverables. MOTO (Mail-order/Telephone-order) Net terms Terms calling for the billed amount of the invoice with no discount allowed. Net lease A lease specifying that the tenant will pay a share of the owner’s opera ng expenses, real estate taxes and insurance premiums, usually in return for a lower base rent. The terms netnet and net-net-net (or triple net) are also used. The use of these terms is being discon nued, as their meaning is not clear in spelling out who pays, and what are the services o ered. Occupancy level The rela on of the space already rented to the total amount of the leasable space (gross leasable area) in a shopping centre, expressed as a percentage On order Merchandise that has been ordered but not yet received. Open item • A type of customer whose account balance is determined by keeping individual document details and applying payments to specific documents. • A specific A/R document (e.g. an invoice, finance charge, debit memo and payment) showing an individual transac on that occurs for an open item customer. Open-to-buy (OTB) The amount of merchandise that a retailer can order for a par cular period. The interim open-to-buy is calculated by deduc ng from the period’s planned purchases the amount of merchandise already received and the retail amount of purchase orders planned for delivery within the period. Opera ng Expenses The costs the landlord incurs on property tax, building insurance and common area maintenance (CAM). These costs are passed on to the tenants on a pro rata basis. If a store leases 25% of a project then it will pay 25% of the project’s opera ng expenses. Order A request or instruc on to buy, sell or supply goods or services.

Appendix 285

Original markup The ini al markup on an item from cost to retail price. Overage • The amount by which a physical inventory exceeds a book inventory. • The amount by which the actual drawer amount exceeds the reconciled amount at the me the drawer is closed. Packing slip A contents list (or a copy of the invoice) included with a shipment. PABP (Payment Applica on Best Prac ces) The guidelines established by Visa to protect credit card data from fraud and misuse. Percentage Rent Mostly seen in shopping malls, the percentage rent is a rent structure where the landlord takes a percentage of a tenant’s sales—some mes gross sales and some mes a er a certain sales milestone is met. This type of rent mo vates landlords to promote their proper es with adver sing, thus helping tenants’ sales that directly increase the landlord’s bo om line. Parking area ra on The rela onship between the size of the parking area and the size of the retail building. Payment The money received from a customer to pay his or her bill. Payments may be made in the form of cash, cheques, gi cer ficates, store credits, debit cards, credit cards, or companyspecific A/R charge accounts. Percentage rent This rent paid by a tenant is based on a percentage of gross sales or net income. It is o en set against a guaranteed minimum rent, and therefore considered “supplementary basic rent.” Period A specified con guous interval of me, such as a week or a month. Periodic inventory A method of determining the value of retail merchandise at periodic intervals by performing a physical count of the items in stock. Peripheral devices Retail point-of-sale (POS) hardware devices used in conjunc on with your retail POS worksta on. Retail POS systems support a number of peripheral devices, including printers, cash drawers, barcode scanners, modems, card readers, cheque readers, customer displays, weight scales and PIN pads. Picking cket A list of items used for physically gathering items for shipment. Picking ckets typically include item and customer informa on, where the item is physically located (the bin), the quan ty ordered, and a place to write the actual quan ty of the item being shipped. PIN (Personal Iden fica on Number) The individual number or code used by a cardholder to authen cate card ownership for the point-of-sale debit transac ons.

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Planned sales An cipated sales for a given period of me based on retail sales trends and planned increases over a period of me. Planogram Schema c drawings of retail store fixtures that illustrate product placement. Point of Sale (POS) The physical loca on at which goods or services are sold to customers. Also called point of purchase. Power mall A shopping centre containing several category-killer stores such as home-improvement, discount department, toys and sta onary Preleasing The leasing of a large retail project before and during mall construc on to ensure a high occupancy level when the construc on is completed. I t is o en necessary to obtain financing. Price The amount a customer would pay to buy a par cular item from you, or what a customer actually paid for an item. Pricing unit The unit of measure by which an item is priced. Price war A cycle that begins when one retailer a empts to under-price another, and it results in retailers con nuing to lower prices in turn to undercut their rivals. Prior stock The stock that has been in a retailer’s inventory for more than six months. Processing fees Fees associated with processing credit card transac ons. Processor A company responsible for processing payment transac ons and is either operated by the acquirer or is ac ng on the acquirer’s behalf. Profit centre • A dis nct area within your company for which sales, expenses and profits can be calculated separately from the total sales and expenses of the whole company. • A segment of the G/L account number used in genera ng distribu ons Profit percentage The di erence between the cost of an item and its price, expressed as a percentage value. Promo on A special item price available for a limited period of me. Purchase order (PO) A record containing the details of an order for merchandise that has been placed with a

Appendix 287

vendor. Typically, the PO includes the items purchased, costs, discount terms and shipping informa on. Purchase request It contains all the informa on that will go into a purchase order a er the purchase request is approved. Purge To remove unnecessary records from your retail so ware. Quan ty discount A reduc on in price based on the volume of sale. Radius clause n ar cle in a retail lease that prevents a retailer from opening and opera ng another business, whether compe ve or not, within a certain radius from the shopping centre. Receivables Monies owed to a company by customers who have deferred payments. Receiving A document that details the receipt of merchandise ordered from a vendor. Refund The money or credit given to the customer back/return. Rent roll A record of rents and other income payable from and paid by tenants. Rentable square footage and usable square footage The rentable square footage is the amount of square footage on which you pay rent. The useable square footage is the actual amount of square feet in your unit (although in retail, they may be the same). The rentable square footage includes a load factor, which is the tenant’s pro rata share of common area. If 10% of a retail project is common area (e.g. elevator, hallways and restrooms) then the rentable square footage includes a 10% load factor. In this example, the rentable square footage of 1,650 square feet actually has a “usable” (the actual size) square footage of 1,500 square feet. The extra 150 square feet for which the tenant is paying rent is that tenant’s pro rata share of the common areas. Retail POS System (Retail Point-of-Sale System) A computerized system made up of the retail so ware and the point-of-sale hardware. Retail POS systems expedite point-of-sale checkouts, track merchandise performance, reorder items, iden fy sales trends, enable buyers to make be er merchandising decisions, track customers and monitor loyalty, and report on historical sales ac vity. Retail price Typically, the highest price at which an item is sold. Retail method An accoun ng method used to es mate the cost of ending inventory based on the cost of the goods available for sale rela ve to the retail price of the goods available for sale.

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Retailer An individual or company that sells goods and services directly to the consumer. Relieve To remove quan ty from the inventory due to an adjustment, sale, etc. Return A transac on in which a customer gives back a purchased item in exchange for the amount the customer paid for the item. Revenue (sales) The income generated by a company. Reversal When an acquirer successfully represents a chargeback to the issuer, the chargeback is reversed and the funds are returned to the merchant. Rota ng stock The method of stocking new merchandise behind or in place of old merchandise. Sale A transac on in the retail so ware in which a customer exchanges an agreed amount for an item. Sales forecast An es mate of future sales based on current sales figures and current informa on from manufacturers, wholesalers, accountants and bankers. Sales per square foot Net sales divided by the square feet of retail selling space. Sales rep An employee for whom sales ac vity and commission informa on is tracked. Sales tax An addi onal charge levied on the sale of goods and services, usually calculated as a percentage of the purchase price. Sales taxes vary according to the taxable status of the merchandise and customer and can di er according to loca on. Seasonal merchandise Merchandise purchased for a specific season that is only in demand for a short period of me (e.g. summer, Christmas and back to school). Serial number A number that iden fies a unique unit of an item. Serial numbers are used to track specific items from acquisi on to sale to history. Serialized item An item whose individual units are assigned unique serial numbers. Se lement The act of comple ng a credit card transac on. Shrinkage (Shrink) The di erence between actual stock and book records of stock. Shrinkage represents the

Appendix 289

aggregate of errors in stock record keeping plus actual losses of merchandise through shopli ing, employee the , paperwork errors and breakage. SKU (Stock Keeping Unit) A number used to iden fy each unique item. SKUs are used in retail so ware to iden fy items and may be ed to the item’s UPC or EAN barcode. Special order A type of order typically used for items not generally kept in stock, especially those ordered by you from your vendor for a par cular customer. SPIFF (Sales Promo on Incen ve Fund or Sales Person Incen ve Fund) Cash, reward, or addi onal commission paid to sales clerks for increasing sales of a par cular item or brand of merchandise. Split dial The capability of a point-of-sale card terminal to dial di erent phone numbers to obtain an authoriza on or se lement of di erent card types. Statement (customer statement) A no ce sent to a customer describing monies owed. Statements may include details of invoices, payments, credit memos, debit memos, and/or ageing along with the current balance of the account. Sta on A retail point-of-sale worksta on at which ckets and orders are entered and other cash register func ons are performed. Stocking unit The unit of measure by which an item is kept (stocked) in the inventory. Store A physical place at which the retail business is conducted. Store credit A document that represents money owed to a customer by the merchant. A merchant normally issues a store credit (also called ‘due bill’) when a customer returns merchandise that is not eligible for a refund. Store credits can be redeemed (tendered) by the customer for future purchases. Strip A small open-air neighbourhood shopping centre, typically smaller than 10,000 square feet GLA , with at least three stores arranged in a connected row facing a parking area Sub-category A specific classifica on within an item category that further defines the characteris cs of a group of items. Sublease A lease given by one tenant to another to create a sub-tenancy, usually only for the dura on of the original tenant’s lease term. The original tenant remains liable to the owner in case of default by the subtenant. (Compare with assignment.)

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Subscrip on service A method of delivering periodic retail so ware updates that may include product updates, new features and bug fixes. Subscrip on services typically have an annual fee. SVC (Stored Value Card) The most common type of gi card. Each card is uniquely numbered and represents a specific dollar amount. SVCs typically include a magne c stripe encoded with a unique ID number allowing them to be processed with a standard MSR device. The value of each SVC is typically stored in a central database. Tag A physical label a ached to merchandise for sale, such as an adhesive price tag, hang tag or bu erfly tag. Target market A defined group of consumers whom the retailer a empts to sa sfy with its products and services. Tax An amount levied on an item at the me of sale for the support of na onal, state and/or local government. Taxable amount The per unit amount of an item’s price to which a tax can be applied. TDR Transfer of Development Rights Tearsheet An actual copy of a retail adver sement. TeleCheck A cheque verifica on service for merchants designed to expedite the processing and handling of chques and reduce fraud. Temporary tenant A tenant that rents for a short period of me, o en seasonal or month-to-month. These tenants some mes occupy kiosks or carts. Tender Any form of payment that is o ered to purchase goods or services. Tenant The individual or en ty that pays rent in order to exclusively occupy a retail site for a specific length of me. (Also see lessee.) Tenancy The occupancy or holding of land or other real estate on a rental basis, with or without a tenant-mix. The tenant-mix refers to the combina on of retailers and service vendors leasing space in a shopping centre. Tenant profile A study and lis ng of the similar and dissimilar characteris cs of a property’s current tenants.

Appendix 291

Term The dura on of a tenant’s lease. Terms A set of payment requirements for an invoice. For example, terms of 2/10, net 30 indicate that an invoice paid within 10 days receives a 2% discount, otherwise the undiscounted amount must be paid within 30 days. Ticket A transac on used for the sale or return of goods or services. Ticket tax The total tax amount for one cket or order. Ticket history Detailed historical records of the ckets issued in the retail so ware. Track 1/Track 2 The informa on stored on the magne c stripe on the back of a card. Track 1 stores the cardholder’s name, account number and expira on date. Track 2 stores the account number and expira on date only. Transac on A completed record in the retail so ware that involves the exchange of goods, products or services. Transfer A transac on that facilitates the movement of some quan ty of items from one loca on to another. Trunk show The occasion when vendors present their merchandise directly to retail store owners, buyers and/or customers. Turn rate (stock turnover rate) A measure of how quickly your inventory sells. For example, a turn rate of 6 would indicate that you sell your merchandise quickly enough to replace it six mes per year. Unallocated A purchase request or PO in cases where the goods ordered are intended for delivery to a single loca on. Uniform Resource Locator (URL) A unique address that locates a specific resource on the Internet. Unit • A quan ty of one • A fixed quan ty used as a standard for entering quan es in the retail so ware. For example, the stocking unit for an item might be ‘each,’ but you might receive an item from your vendor by the alternate unit ‘case.’ UPC (Universal Product Code) The standard for encoding a set of lines and spaces (or barcodes) that can be scanned and interpreted by the retail so ware to iden fy a product.

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Vendor An individual or organiza on from which a retailer purchases merchandise for resale. Vanilla Shell The Vanilla Shell is an industry term that describes how most landlords will deliver a space to a new tenant. It may include textured and painted walls, drop ceiling and ligh ng fixtures. Vanilla Shell descrip ons may di er from one landlord to the other, so it is important for tenants to ask for a detailed descrip on of the Vanilla Shell. Vouchering The process of crea ng an accounts payable voucher, or record of what is owed to a vendor, for items received from and invoiced by the vendor. Warranty A wri en guarantee of a manufacturer’s or retailer’s responsibility. A limited warranty provides specific condi ons under which a manufacturer or retailer will repair or replace an item. Worksta on The computer used to run a retail so ware package. X–Z Year An accoun ng period most o en defined by the company’s fiscal year or as a calendar year (January 1 through December 31). Zoning The Floor Area Ra o (FAR) or Floor Space Index (FSI) is the ra o of the total floor area of buildings on a certain loca on to the size of the land of that loca on, or the limit imposed on such a ra o. The Floor Area Ra o is the total building square footage (building area) divided by the site size square footage (site area). As a formula: Floor Area Ra o = (Total covered area on all floors of all buildings on a certain plot)/(Area of the plot).Thus, an FSI of 2.0 would indicate that the total floor area of a building is two mes the gross area of the plot on which it is constructed. This ra o could apply to a mul -storey building.

Index

Ansal Plaza 7,8, 177 Ac va on strategies 75 Ambience 163,177 Anchor store 211,212,213,220 Anchor tenants 50,54 Atmospherics 98 Baskin & Robbins 151 Brokers 142,143,144 CAM 120,129,131,132 Catchment areas 42 Cloning 228 Clustering of malls 228 Cold Canvassing 126 Comparison Goods 95 Cosme c face-li ing 232 CPI 124,131 Cross-shopping 101,109 De-Malling 233 Department stores 212,213,214 Design phase 41,47 Discount malls 31,32 Dog bone 93

EIL 196 Emerging trends 32 Entertainment retailing 29 Environmental monitoring 194 Environmental regula ons 191 Event marke ng 74,79 Exclusivity Clause 121,122 Fair price shops 2,3 Fast-Food joints 212,219,220 Fit-out Le er 128 Floor space index 185 Food fourts 219 Foot-fall index 150 Forum Mall 93 Four R’s 194 Graduated Rental 123 Great India Place 53 Gross lease 118 Health and hygiene 164,167 HNWIs 15 HVAC 54 Hypermarket 215,216

294 Mall Management

Inaugural Décor 149 Index-based Rental 124 Internal accruals 66,67 IPOs 74 Kiosk leasing 74,77 Labour laws 188,197 Landscaping 50,51 Leasing Brochure 145 Liability insurance 196 Life style retail 213 Luxury retailers 41 Mahagun Mall 110 Mall design 39,40,47,49,55 Mall Expansion 27 Mall Exteriors 146 Mall financing 66,70,75,83 Mall life cycle 227,230 Mall Life-Cycle Curve 27 Mall management 10,11,16,17 Marke ng perspec ve 23,24 Modern retail 3,4,5,13 MSUs 96,101 MTBF 166 MTTR 166 Mul plexes 212,213,217,218,219 Net lease 118,119 Note and mortgage 67,69 Occupa on cer ficate 187 Organized retail 1,2,4,9,15,16 Out-hopping 96 Parking standards 173 Periodic rejuvena on 232 Planning phase 41,47 Posi oning 10 Private funds 66

Project Brochure 140,141 Public funds 66,71 Regional malls 30 Regulator 228,229 REITs 227,229 Re-leasing 147,153,154 Rent Reviews 131,133 RMUs 76,77 Rowdy shoppers 169,170 Safety features 55 Sahara Mall 100 Select City Walk 112 Sewage treatment 195 Shopping centre 22,23,25,28,31,33 Social perspec ve 24 South Dale Centre 213 Special Displays 108 Specialty malls 31 Specialty stores 211,220 Spencer 6,7,20 Stampede 169 Strip malls 31 Structural Perspec ve 22 Super Regional Centre’s 226 Supermarkets 42,45,50,54, 212,214,215,216 Temporary Tenants 151 Tenant strategies 230 TI Mall 118 Trust deed 67,70 UB city mall 54 Unorganized retail 4,15, Vending machines 74,78,87 Wrap-up liability 197 Zoning 7,10,11,18, 92,93,98,101,103,108