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Revenue Share Rent of different retail formats
Indian Retail & Real Estate Performance – Study Series How much do different Indian Retailers pay mall owners as Revenue Share Rent? May 2010 CONTENTS Introduction Methodology Implications / Outcome TABLE: Revenue Share (RS) of Retail Formats in India 2 4 5 6 Summary and Conclusions Retailer Testimonials PRESS PAGE About Asipac 10 12 13 14 1 .
and is reset every year. where the starting Provisional Rent is usually higher than what the MG would have been.Indian Retail & Real Estate Performance – Study Series How much do different Indian Retailers pay mall owners as Revenue Share Rent? May 2010 INTRODUCTION In most established international markets. The drive towards revenue share got a major push during the 15 month recession period in 2008-09. or a Minimum Guaranteed rent (referred to as MG. One could also build-in a minimum guarantee clause within the PR model. or as we call it in India – revenue share rent. whichever is higher. Finally. where the MG could be at least 75% of the previous year’s PR. by the year 2006. this globally prevalent best practice became an accepted norm in India as well. based on the previous year’s actual achieved revenue share rent. greatly improve the owner’s cash flow and also protect the owner from unnecessary rent reductions during a downturn. as retailers thought this was the best way for them to reduce risk. So what is this revenue share or turnover rent model? Although there are multiple types of arrangements in the revenue share model. This model. because rental asks from developers and landlords started shooting through the roof. 2 . all’s well that end’s well. Many other permutations and combinations of the revenue share model can be negotiated. As they say. most retailers resisted. When organizations such as Propzone (then ICS Broll) and Asipac tried to introduce this concept back in 2004. In fact. The most common best practice followed globally is turnover rent. However. some of the larger or more established players started to come around to the fact that this globally accepted best practice was the true way to establish a healthy win-all partnership between the owner and occupant. while reducing the retailer’s risk during slowdowns or recession. the most common one is where the retailer pays the owner or landlord a percentage of its sales turnover or revenue (less VAT or Entertainment Tax or Service Tax or other similar tax). Other models include a Provisional Rent (“PR”) instead of a minimum guaranteed rent. some leading retailers even threatened that they would stop dealing with Propzone and Asipac. but also called Base Rent in some markets). retail tenants do not pay a fixed rent to mall owners or landlords.
will help retail property owners and developers to do research-led decision making in the selection and placement of retail stores in shopping centres (malls) and in freezing that magic figure of % revenue share. But how are mall owners to decide the percentage of revenue share? This study hopes to demystify that question.. We hope that the findings of this study will help faster deal closures and bring greater transparency into the system. the owner is not much concerned about how the individual retailer is performing within the mall. the rental revenue of the owner is directly dependant on the sales revenue of the retailer. This study is the fourth in a series of research-led studies that Asipac has planned on Indian retail in general and retail real estate in particular. business magazines and industry magazines. business dailies. both parties’ negotiation skills. the revenue share percentage either increases or decreases when the retailer’s turnover crosses a threshold). There are also complex arrangements of revenue share. 3 . Sometimes. their anticipated trading density and gross margins in that category. This puts the parties on opposite sides. Under the fixed rent model. Thus. Established mall owners with a good track record may also insert clauses which protect them from comparative under performance by the retailer. The data presented in this study. in the revenue share model. it is in the interest of the owner to increase footfalls and conversions with better mall management and marketing. its size. no one can dispute that the revenue share model is a win-win model.. along with the conclusions. Clearly. the negotiated percentage figure depends on the location of a mall. On the other hand.5% to as high as 30%. in order to achieve a sustainable relationship.Indian Retail & Real Estate Performance – Study Series How much do different Indian Retailers pay mall owners as Revenue Share Rent? May 2010 The exact percentage to be paid by a retailer depends on the nature of the retailer’s business. different for the first year. The data is presented in a fairly simple format. including daily newspapers. Numbers pertaining to trading density are given in Rupees psfpm (per square foot per month). the importance of the particular retailer for a particular mall and finally.e. Therefore.e. such as variable percentages depending on time (i. Two of our past studies were published in multiple publications. Prevalent percentages in India range from as low as 1. the developer’s past record. the second year and from the third year onwards) or based on volume (i. the relationship between the parties changes to a true partnership.
While the trading density data pertains to both. If anyone reading this report comes across any such errors or omissions. NOTE: 1) The first Table (divided into Pg. we will be happy to receive your comments on email@example.com and will incorporate necessary corrections after verifying its/their accuracy. location to location (within a city) and the location of the store (including floor) within a mall. the revenue share percentages are applicable only for shopping centres. the Revenue Share Percentage could vary substantially in situations of Entertainment Tax exemption. as well as high streets or main streets in the Top 20 cities of India. shopping centres (malls). Asipac senior management verified the data by cross-checking almost 40% of the figures and we are reasonably satisfied with the accuracy and reliability of the figures presented.7 & 8) is the data sorted by the Average Trading Density and the second Table (divided into Pg. By and large. 4 . and can greatly vary from city to city. In any extensive study of this nature. but sorted by the Average Revenue Share Rent. these highly respected industry professionals agree with the accuracy of the data. It has to be kept in mind that the ATDs and Effective Revenue Share Rent (ERR) is a national average. the Effective Revenue Share Rent (ERR) of FCC Operators may be divided by five. there are bound to be errors & omissions. 3) Since the sitting area in Food Court is paid by Mall owner. 2) In Cinema.Indian Retail & Real Estate Performance – Study Series How much do different Indian Retailers pay mall owners as Revenue Share Rent? May 2010 METHODOLOGY The data for this study was collected by Asipac consultants through direct contact with senior management executives of more than 80 retail formats currently active in India spread over the last 18 months. Before final publication. in order to give a better comparison. to enable accurate comparison with other retail formats. Some of their comments/remarks form a part of this final report.9 & 10) is the same data. the report was sent for review to some of India’s top retailers.
now make informed and research-based decisions.Indian Retail & Real Estate Performance – Study Series How much do different Indian Retailers pay mall owners as Revenue Share Rent? May 2010 IMPLICATIONS / OUTCOME This study was undertaken in order to achieve the following objectives: 1) To understand the concept of the revenue share model. ABBREVIATIONS PPP – per capita GDP EBO – Exclusive Brand Outlet MBO – Multi Brand Outlet psfpm – Indian Rupees Per Square Foot Per Month ATD – Average Trading Density RS% .Revenue Share Percentage ERR – Effective Revenue Share Rent in Indian Rupees Per Square Foot of Carpet Area Per Month FCC – Food Court Counter 5 . especially on selecting the right retailers (or retail formats) and on deciding the revenue share percentage to be charged. especially shopping centre developers or owners. 3) To help retail property owners. 2) To understand retailer’s rental affordability in absolute terms. ACKNOWLEDGMENTS We wish to acknowledge the contributions of all the retailers. mall owners. mall managers and leasing professionals with other firms who have cooperated in sharing data with us.
Vijay laks hmi. Mochi.00 to 14.50 Multiplex Fas hion Acces s ories Men Res taurants (Formal or Fine Dining) Ey ewear Res taurants (Cas ual Dining) Sports Lifes ty le EB Os PVR.50% Rs .00% Rs . 300 11. 1.250 9.00% Rs . Regal.00 6 .700 12.50 Rs . W rangler.50 to 13. 135. 875. Rocia. Neerus .00 Sports MB Os Pens & Pers onal Acces s ories Ethnic Fas hion . B as kin Robbins Café Coffee Day . Great Kabab Factory Vis ion Ex pres s . 850 9.650 9. property to property. Cos ta Coffee Tommy .50% 20.250 10. Prov ogue. Sunglas s Hut. Fun Neckties & More.00 Rs .50 Rs .00% Avg Revenue Share % 25. Zodiac. B ig.50% 11. Tie Rack London B JN Group. 246. Sev eral Local B rands Rs . 2. Aldo B iba.0% 15.00% 12. Lakme. 3. Gift Ex pres s . Planet Sports Rs . Himalay a Rajdhani. Celio. 1. Soch Archies . W .25 Rs .200 8.500 11.00% 13. 50. 154.00 to 13. Retail Format Food Court Counter Operators FECs B eauty Salons . Cinepolis . Nalli.00% 18. 850 12. 1. Holii. Time Zone.50 to 12.00% Rs .00% 13.50 W illiam Penn.00% 14.00% 11. Hairdres s er Ice Cream.00% 17. Calonge. 600 12. location within mall. B lu-O L' oreal.00 to 11. Arv ind Lev is .50% Rs .00 to 30. B aris ta. Nike.00 to 17. 600 15. Alcott.00 to 15.75 Rs .350 10.00 to 16.50% Rs .50% Rs .650 12. 111. 250 13.00% Rs . Fores ight.50% 12.00% 12.00% Rs .00% Average Rent on carpet area (psfpm) Rs .50% 11.00 to 12. Indus League. 97. 1. Global Des i.50 Rs .400 9. 156.50% Rs . Addons . 225.00% Rs .50% Rs .00% 13.50% 13. 127. NZ Naturals .50% Rs .00% Rs . Orama. Lee.00% Rs .00 to 17. Sev eral Local B rands W alls . B oos ter Juice. 1. Editions Kalanjali.00% 14.50% 11.00 Adidas . Y LG. Es beda.00 Rs . 900 11.00% Rs . the ATD is on carpet area.South Traditional (Vanilla) Rs . B lue & B lues Madura.00% 10. Saty a Paul.00 to 16. 189. Jas hn. Reebok. Fun City . Pothy Rs . 750 15.00 to 16. B ata.00 Rs .00% Rs .025 10. 209. 1. 1. Inox . 1.50 to 23. 126.00 Sev eral Local & National Play ers Amoeba.00% Rs . Lerros .50% 9.50% Rs .00 to 15.New Gen Gift Shops Rs . B enetton. all numbers are indicative and vary from location to location. Mainland China. 176.00% 18. etc. 162.50 to 12. Juices Example of Retailer/Brand Average Trading Density (psfpm) Rs . 214.00 Rs . 750 11. 40.00 Rs . 93.00 to 14.00% Rs . Hallmark.50 Rs . 202.00 Cafes W es tern Fas hion International Leather B ags & Acces s ories W es tern Fas hion National Denim Apparel Rs .50 to 27.00 Rs . Nik Nis h RSH.00 to 23. 123.00 Footwear Ethnic Fas hion . Pepe Rs . Coffee W orld.00 to 18. 2.00 to 22.50 Rs . 1.600 10.Indian Retail & Real Estate Performance – Study Series How much do different Indian Retailers pay mall owners as Revenue Share Rent? May 2010 Revenue Share Ratios of Different Retail Formats in Indian Malls Notes: All Revenue Share %s exclude CAM. 105.500 Revenue Share Range (%) 20. Puma Metro. store sizes. OVS Hides ign.
25% Rs . Reliance Fres h. 63.00 Rs . Local Retailers The Mobile Store. 550 5. 168. Office Depot McDonald' s Piz z a Hut. etc.00% 7. 4. the ATD is on carpet area.50% Rs . Retail Format Example of Retailer/Brand Average Trading Density (psfpm) Rs .50 to 8.50 Grocery Stores Rs .00% Rs .50 to 9. 175.10.50% 3.75 to 3.50 to 7. Central >30. 4.500 6. LG. 135.50 to 8.25 Rs . Reliance Trends . 2.50% 5. 65. Ax iom Telecom Tanis hq.50 B ooks tores Cros s word. B os e.50 to 3.25% Rs .25 to 4.00% 7. B ig B az aar. Spencers Daily Rs . 148. location within mall. One Mobile. Shopper' s Stop.00% 1. 56. Kalanjali. Ethos .00% Rs .00% 8. 40. 1.00 Large Department Stores Lifes ty le.100 7. New U Reliance Timeout.25 Rs . Home Town RMKV. 67. 45. Star B az aar.000 to 25.00% 8.00% Rs .Indian Retail & Real Estate Performance – Study Series How much do different Indian Retailers pay mall owners as Revenue Share Rent? May 2010 Revenue Share Ratios of Different Retail Formats in Indian Malls (continued) Notes: All Revenue Share %s exclude CAM.50% 8.00% Rs . 2.00 to 4.00% 7.00 Rs . Nirulas Rs . Gili.10% Rs .25% 3.000 s ft Megas tore.00 to 4.00% 4. Ox ford Health & B eauty Health & Glow. More.25 Rs .000 3. property to property.800 3. 136. 140.50% Rs . 76. Sams ung Croma.75 to 5.75% 3. Trus t. 800 6.00% higher in Food Courts 7 .Fas hion Hy permarkets >35.000 s ft W atches EB Os Omega.50 Rs .00 to 9.00 Rs .000 to Spar Supermarket. KFC. 700 7. Ody s s ey W orld of Titan.500 5. Marks & Spencer Staples .75% 4.50% 8.000 s ft Electronics Specialty Nirv ana.75 Supermarkets . 625 6.50% 3.50% 7.500 2.75 * 1. Pantaloon.40% 2. Time Factory .50% Rs . Reliance Jewels .00 Leis ure Megas tores Rs .750 4. Spencers Super Jewellery . 2. store sizes. Helios . @Home.500 4. Total. E-Zone. X-Cite. Reliance Liv ing.00% 3.00% Rs . 96. 850 Revenue Share Range (%) 7.Gold & Diamond Rs . W almart Apple. 1. 2.00% Avg Revenue Share % 9.50 to 9. Hy perciti.50 to 8. Univ ercell. 1.200 3.00 to 8. 1.50 Mobile B outique Jewellery .75% Rs .00% Rs . 50.00 to 10. Apollo.500 1. Reliance Digital. 6.00% Rs . 204. 38.00 to 8. 56. Pothy Guardian. Sev eral Local B rands Spar Hy permarket. Rado. 76.00 to 2. 900 6.150 2.400 7.50 to 2.50% Rs .00% Rs . 1. 8.00 Rs . all numbers are indicative and vary from location to location. More 35.00% Rs . Sony . Tis s ot. 1.50 to 4. Swatch Home Centre.500 2.00 Electronics Megas tores Rs .00 Furniture Megas tores Ethnic Fas hion . Reliagare Food B az aar.50 Rs .75% Rs .South Traditional (ANCHOR) Pharmacy Rs . Local B rands Rs .25% Rs . Nalli.50% 7. Manipal C&C. Zims on W es ts ide.00 W atches MB Os Small Dept Stores 10.250 2.00 to 11.000 s ft Office Supply & Equipment Quick Serv ice Res taurants * Rs . Taco B ell. 105.00 to 2.00 Rs .00% Average Rent on carpet area (psfpm) Rs . Landmark.
25 Gift Shops Jewellery .50 Footwear Ethnic Fas hion . 135.50% 11.00 Rs .00 Denim Apparel Lev is . 1. Pepe Metro. 189. Zims on Adidas .50 to 12. 4.00 Rs . B oos ter Juice. 1. 3.00 to 10. Lee. property to property.00% 8.00 to 17.50% Rs .00 to 22. 4.250 9.00% 18. 2. the ATD is on carpet area.00% Rs .500 2. Neerus .00% Rs .50% Rs . Ax iom Telecom W alls . Sev eral Local B rands The Mobile Store. 156.00% 7.Indian Retail & Real Estate Performance – Study Series How much do different Indian Retailers pay mall owners as Revenue Share Rent? May 2010 Effective Revenue Share Rents of Different Retail Formats in Indian Malls Notes: All Revenue Share %s exclude CAM. 176.50% Rs . 162.00% Rs . Nike.75% Rs . Pothy Health & Glow.00 Mobile B outique Rs . 126. Indus League.400 9. Celio.500 1. 1.00 to 16.00% 8.00% 10.500 2. Tis s ot.00 to 15. Himalay a Archies .10% Rs . 135. 2.00 Sports Lifes ty le EB Os Rs . Calonge. W rangler. Juices Rs . B lue & B lues W illiam Penn.00% Rs .00% Rs .600 10.00 to 14. Zodiac. Reebok. 1.000 3. 127.00 to 11. 2. Rocia.00% Rs .00 Rs . Global Des i. 2.00 to 30. Aldo B iba.50% Rs .500 6.00 to 9.South Traditional (Vanilla) Health & B eauty Example of Retailer/Brand Average Trading Density (psfpm) Rs .50% 11. B enetton.50 Rs .00% Rs . Vijay laks hmi.50% Rs .50 to 2. Puma Vis ion Ex pres s .700 12. Editions Neckties & More. location within mall. Local B rands Nirv ana. Es beda. 214.350 10.50 Rs .0% 15.Gold & Diamond Jewellery . Mochi. Rado. 1. Nik Nis h Tanis hq.00% 14. Addons .Fas hion Rs . B ata.100 7. NZ Naturals .00 to 16. Hallmark. Ethos . Time Factory .00% Rs .00% Average Rent on carpet area (psfpm) Rs . 204.00% 12.500 Revenue Share Range (%) 20.500 11.50% Rs .00 to 13. Prov ogue. Sams ung Tommy . One Mobile. OVS Madura. 1. 148.00% 14.00 to 18. Soch Omega.New Gen W atches EB Os Rs .650 12.40% 2.400 7. 202.50% 9.50 Ice Cream.00% 13. Sunglas s Hut. Gift Ex pres s . 168.00 to 2. Jas hn.25% 3. Nokia. Saty a Paul.25 to 4. Gili.50 to 13.00 W atches MB Os Rs . Helios . all numbers are indicative and vary from location to location. 209. Regal. 1.00% Avg Revenue Share % 25. 2.00% 1. LG. B as kin Robbins Apple. 875. Swatch W orld of Titan.75 Rs . 225.00% 11. Fores ight. 850 12.00% Rs . Tie Rack London Kalanjali. 900 11. 175. Holii.75 Rs . 1. Reliance Jewels . Univ ercell.00% 13.00% Rs . Alcott. 6. B os e. Sony .250 10.75% 3.00 to 8. etc. Retail Format Food Court Counter Operators Leather B ags & Acces s ories Pens & Pers onal Acces s ories Fas hion Acces s ories Men Ethnic Fas hion .200 8.50 Rs . 246.00 Rs . 8.00 Sev eral Local & National Play ers Hides ign. Nalli. 136.50 to 3.50% 12.00 Ey ewear Rs .00 Electronics Specialty W es tern Fas hion International W es tern Fas hion National Rs .00 Rs .00 8 .650 9. Arv ind Rs . 154. 750 15. New U Rs .00 to 15.00% Rs . W . 140. Lerros .50% Rs . store sizes.00 to 12.
W almart Home Centre.000 s ft Furniture Megas tores PVR. 50.50% 7. 123.50 to 8. 625 6.50 to 8.025 Revenue Share Range (%) 10. More.750 4. Home Town Rs .75% Rs . 96. Spencers Super Multiplex Hy permarkets >35.00 Rs . Nalli.00 to 11.00% 3. 850 9. Pantaloon. Sev eral Local B rands L' oreal.000 to 25.00% 7. 900 6. 1.00 Supermarkets .50% Rs . Reliance Trends .00 Rs .00 to 4. Central >30. etc.75% 4.25 Rs .00% Average Rent on carpet area (psfpm) Rs .000 s ft FECs W es ts ide.250 2. store sizes. location within mall. @Home. E-Zone.10. 40.50% 5.50 to 4. 105. B ig.50% 8. Apollo. Ox ford Guardian.50% 3.25 Rs . Sev eral Local B rands McDonald' s Piz z a Hut. Hy perciti. all numbers are indicative and vary from location to location.50 Pharmacy Rs . 40.00 to 14.50 to 8.50% 3. Time Zone. Star B az aar.75 to 5. Total. Taco B ell.00% Rs .00 Rs . Ody s s ey Rs . 105. 93. 550 5. Nirulas Café Coffee Day .50% Rs .00% 18. 1. Office Depot Food B az aar. 76.000 s ft Megas tore. 600 15.50% Rs .50% 20.00% Rs . Marks & Spencer Amoeba.00% Rs . 1. KFC.Indian Retail & Real Estate Performance – Study Series How much do different Indian Retailers pay mall owners as Revenue Share Rent? May 2010 Effective Revenue Share Rents of Different Retail Formats in Indian Malls (continued) Notes: All Revenue Share %s exclude CAM. 800 6.000 to Spar Supermarket.50 Rs .25% Rs .00 Rs . Coffee W orld.150 2. B lu-O Reliance Timeout.00 to 17.500 4.00% higher in Food Courts 9 . Landmark.00% Rs . property to property. 1.00% 9.50 Rs . 56.25% Rs .00 Leis ure Megas tores Rs .00% Rs .500 5.00% Rs .50% 13. 250 13. Reliance Digital.50 to 27. 97.50% Rs . Y LG. B aris ta. B ig B az aar.00% Rs .50% 8.50 Rs . Spencers Daily Rs .00 to 16. 850 7.50 B ooks tores Cros s word.50 to 7. 2.50% 7. 750 11.00 to 4.200 3. 300 11. Orama. 700 7.00 Rajdhani. Hairdres s er Quick Serv ice Res taurants * Cafes Res taurants (Formal or Fine Dining) Ethnic Fas hion . Retail Format Res taurants (Cas ual Dining) B eauty Salons . 1.00% Avg Revenue Share % 12.25% Rs . Inox . 65.50 to 23. 45. 1.00% 7. Pothy Rs .50 to 12.000 s ft Small Dept Stores 10.50 Electronics Megas tores Office Supply & Equipment Grocery Stores Rs .00 to 2. Manipal C&C. X-Cite. Reliance Liv ing.50 * 1.00% 4. Reliagare Croma.800 3. 600 12.00 to 8. Cinepolis . Shopper' s Stop. More 35. 63.00% Rs .50 to 9. Fun Spar Hy permarket.00% Rs . Reliance Fres h. 1. Local Retailers Staples .75 to 3.00% 13. Fun City . 50.00% Rs . 38. Planet Sports Rs . Cos ta Coffee B JN Group. Lakme. 67. Great Kabab Factory RMKV.25 RSH. the ATD is on carpet area. Trus t.00% 17.00 Rs .75 Large Department Stores Lifes ty le.00 to 23.50% Rs . 56. Mainland China.00 Rs . 111.South Traditional (ANCHOR) Sports MB Os Example of Retailer/Brand Average Trading Density (psfpm) Rs . Kalanjali.50% 11.50 to 9. 76.
even though they yield very low ERRs. FECs and Multiplexes. Beauty Salons / Hairdressers are #29 by ERR yield but are also a high FFD. it is #19 in terms of ERR. The RS% does not depend only on the ATD. but they should be a preferred tenant.Indian Retail & Real Estate Performance – Study Series How much do different Indian Retailers pay mall owners as Revenue Share Rent? May 2010 SUMMARY & CONCLUSIONS Our findings can be summarized and analyzed as follows: 1) As we had already concluded in the findings of our Trading Density Study. it is #2 in the ERR yield. etc. are a must have in any mall. Revenue Share percentages (RS%) and Effective Revenue Share Rents (ERR) between different formats. are giving more than 70% higher rental yields. Nallis. There is no single rule to correlate the Average Trading Densities (ATD). because they are one of the highest Footfall Frequency Drivers (FFD) and thus play the largest anchor role. 2) 3) 4) 5) 6) 7) 10 . The modern retail anchors need to wake up to this fact. Even anchor stores from traditional retailers such as RMKV. Ethnic fashion stores have a >50% higher rental yield compared to western fashion stores. while the category “Jewellery – Gold & Diamond” has the highest ATD. Hypermarkets as a category are the second last (#40) in the ERR yield based on the revenue share model. On the other hand. Although Pens & Personal Accessories yield amongst the highest rents. it still does not yield the highest ERR to the mall owners. but on the category’s margins as well. you can’t really fill up a mall with too many of such retailers – at best. Categories such as Pharmacies. while the category “Leather Bags and Accessories” is #12 by ATD. In fact. with more than 450 established retailers (including foreign retailers) across 33 formats or categories. there can be 2-3 stores in each of these categories. For example. at least in South India. the organized retail industry in India is now quite evolved.
Indian Retail & Real Estate Performance – Study Series How much do different Indian Retailers pay mall owners as Revenue Share Rent? May 2010 SUMMARY & CONCLUSIONS (continued) 8) Furniture megastores in Indian malls are not doing well. they must start paying a higher RS%. and mall owners do not trust the information provided. if the ATDs of the smaller players is not going to improve. Therefore. Small Department Stores such as Westside. Reliance Timeout and Odyssey) need to wake up and improve their ATDs or start paying higher rents. Shoppers Stop and Central. allowing mall owners to get a share of the retailers’ growth. as the big brothers take much bigger spaces and drive greater footfalls. there is still a long way to go. In terms of rental yield. 9) 10) 11) 12) Revenue Share is the way forward – as it is a win-win scenario. Although the recession forced mall owners to accept the revenue share model up to a certain extent. while making them share greater risk in times of downturn or if a mall is not managed well. Fixed Rent tenancies in malls will be dead in the next 2-3 years. RIP. This is not fair to the mall owners. 13) 11 . as many retailers are still not comfortable sharing accurate revenue data or their books of accounts. Pantaloons and M&S are currently paying the same rent (ERR) as Large Department Stores such as Lifestyle. they are last on the list. Owners/managers of these categories are probably spending too much time on the sample bedrooms in their stores – wake up! Even Leisure Megastores (such as Landmark. as they neither pay decent rents nor drive footfalls. There is no reason for malls to give them space.
I am sure that the industry will be happy to receive the report extremely positively. Chairman. besides finding the contents meaningful. Keep up the good work. In Cinema. Shopping Centres Association of India “Thank you for sending me the Asipac study on revenue share rentals. this study is also very well researched and will definitely help the retail industry and property development. Managing Director. Metro Shoes & Mochi “Asipac’s revenue share study will help develop a framework for decision making for the mall owners as well as the tenants. Reliance Digital “Good work. Marks & Spencer (India) “I’ve gone through the study and greatly appreciate your efforts.” Deepak Marda.” Martin Jones. or saturated markets with e-tax. Your analysis works well in mainstream situations. As with your previous studies. VP – Integrated Retail Services. the % could vary substantially in situations of Entertainment Tax exemption. of balancing volume drivers & profit drivers in the product mix.” Manoj Motta. COO. while at the same time maximizing overall margins”. In the past when we used to take stores in malls. Titan & Tanishq 12 . inefficient designs. Joint MD. CEO.the first international multiplex chain in India “Asipac’s revenue share study is a very interesting study which clearly articulates the win-win benefit of revenue share schemes. What actually emerges is that it takes all kinds of tenants to make a mall and therefore it is important to get the tenant mix right for a mall to succeed! The challenge for the mall owner would be to realize that the revenues he will get from the various types of tenants is different but each one of them have a role to play to make the mall a success. 65% of our shops including high streets are on a pure revenue sharing model. We have been following the revenue share model for over 30 years. V.Govindraj. those are corner cases. the mall owners used to talk only of fixed rentals but in the last couple of years more than 50% of our mall shops have been on revenue sharing basis”. Rafique Malik. pretty much like a product manager’s or merchandiser’s job. The data appears accurate and insightful and I hope developers continue to adopt this approach when letting retail space.” Ajay Baijal. Very useful in setting rental expectations and establishing feasibility of a retail project.Indian Retail & Real Estate Performance – Study Series How much do different Indian Retailers pay mall owners as Revenue Share Rent? May 2010 Testimonials “The report appears to be comprehensive and informative. Cinepolis India . Nonetheless.
by 2006. The RS% does not depend only on the ATD. Revenue Share percentages (RS%) and Effective Revenue Share Rents (ERR) between different formats. There is no single rule to correlate the Average Trading Densities (ATD). the most common best practice is turnover rent (called revenue share rent in India). widely published earlier this year. Nallis. will take the mystery away from landlord-tenant transactions in Indian malls. it is #2 in the ERR yield. “Even anchor stores from traditional retailers such as RMKV. it is a myth that revenue share is a phenomenon of recession. “The revenue share study will help mall owners and developers understand the revenue share numbers and what they actually mean in terms of effective rental yield. it still does not yield the highest ERR to the mall owners. When Propzone and Asipac tried to introduce this back in 2004. but on the category’s margins as well. had already set the path towards greater transparency in Indian retail real estate. Asipac’s study on the average trading density of modern retail formats. The modern retail anchors need to wake up to this fact.” Bagaria added. at least in South India. In most established global markets. 13 .Indian Retail & Real Estate Performance – Study Series How much do different Indian Retailers pay mall owners as Revenue Share Rent? May 2010 PRESS PAGE The first-of-its-kind study of the revenue share rent paid by organized retail formats to mall owners. That study was welcomed by a large cross-section of mall owners/developers as well as retailers. In fact. done by Bangalore-based retail real estate consultancy Asipac. The drive towards revenue share only got a major push during the 15 month recession period in 2008-09. because rentals started shooting through the roof. However. negating the myth that Indians do not want transparency. are giving more than 70% higher rental yields. while the category “Leather Bags and Accessories” is #12 by ATD. According to Asipac. most retailers resisted. etc. while the category “Jewellery – Gold & Diamond” has the highest ATD. The study finds that ethnic fashion stores have a >50% higher rental yield compared to western fashion stores. some larger retailers started to accept that this global best practice was the true way to establish a healthy win-all partnership between the owner and occupant. On the other hand. it is #19 in terms of ERR. For example.” said Asipac Chairman Amit Bagaria. thus bringing about much needed transparency in the industry.
largest strip mall. Ideas and Programs for RE Projects In 14 years. Our study of trading densities of modern retail formats was featured twice in The Economic Times and was cover story of Images Retail’s February 2010 issue. 14 . first 12 minute lifestyle suburb. Bangalore. a multiple award wining real estate marketing consultant. A project launch won a Bronze at 2009 EEMAX Awards.Indian Retail & Real Estate Performance – Study Series How much do different Indian Retailers pay mall owners as Revenue Share Rent? May 2010 ABOUT ASIPAC Established in 1996. and the World’s first fashion-themed SEZ. The Times of India (twice). largest enclosed mall. we have provided high level strategic advice to RE developers on projects with a combined built-up area of 380 million square feet valued at more than US$24 billion. the first hotel condo. We conceived and planned India’s first luxury gated community. Our study on India’s largest malls featured in The Economic Times. first affordable housing project below Rs. including 16 front page/cover stories. a highly respected retail research & consulting firm and India’s newest mall management company. Asipac was voted at GIREM as Best Marketing Firm 2008 competing against 3 IPCs and has won 3 Remmy Awards from Times of India.8 million square feet of retail real estate across India in just four years. first luxury lifestyle resort for seniors. One of our projects broke a Guinness World RecordTM and was a finalist in Mixed Use Project category of Cityscape Asia 2008 RE Awards. In retail real estate.1 million post-2004. our credentials are well known in Indian real estate. Our services include: • Project Conception • Comprehensive Mall Planning • Design Process Management • Letting and Lease Management • Retail Research and Consulting • Mall Marketing Consultancy • Mall Management • Rental Yield Maximization • Conception of New Retail Formats • Marketing Strategy. We have leased more than 6. Business Today magazine and Shopping Centre News magazine. first Brand Factory. Asipac undertakes strategic research on the retail as well as the retail real estate sectors. With 215+ media articles and 40+ TV features. The New Indian Express. we have advised developers on retail / shopping centre projects of over 14 million square feet. An unpublished campaign won GOLD at the Big Bang Awards of Ad Club. including nine of the 25 largest malls in India. Asipac Group comprises India’s most admired mall development consultant and letting managers.
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