How do malls earn?
40% of the rental income comes from clothing brands.
Parking and ads make upto 10% of their total income.
Lets look at the Indian malls closely.๐งต
40% of the rental income comes from clothing brands.
Parking and ads make upto 10% of their total income.
Lets look at the Indian malls closely.๐งต
Malls have 4 sources of income-
1) Lease Rentals
Lease rentals make up 70% of their total income.
Usually, multiplex brands are mall's highest single paying tenant with
upto 12.5% of the total rental income.
1) Lease Rentals
Lease rentals make up 70% of their total income.
Usually, multiplex brands are mall's highest single paying tenant with
upto 12.5% of the total rental income.
2) License fees from tenants.
Most of the tenants have '% of sales' agreement ( 5-25% of the sales will go to the mall)
High sales = High license fees for malls
FUN FACT:
Phoenix Palladium Mumbai recorded the highest sales among malls.
Most of the tenants have '% of sales' agreement ( 5-25% of the sales will go to the mall)
High sales = High license fees for malls
FUN FACT:
Phoenix Palladium Mumbai recorded the highest sales among malls.
3) Maintenance services.
This includes repair and maintenance of common areas, air conditioning, water supply etc.
~20% of their revenue from the fees they charge tenants for maintenance services.
4) Parking and advertisements ( 10% of the total income)
This includes repair and maintenance of common areas, air conditioning, water supply etc.
~20% of their revenue from the fees they charge tenants for maintenance services.
4) Parking and advertisements ( 10% of the total income)
Now let's look at how malls decide which shops to place where.
Multiplex brands and entertainment drive the highest traffic in malls.
Your pathway to the cinemas is designed in such a way that you would cross particular brands before and food court after your movie.
Multiplex brands and entertainment drive the highest traffic in malls.
Your pathway to the cinemas is designed in such a way that you would cross particular brands before and food court after your movie.
Now that we have seen how malls make money, you would believe that operating costs are low and malls make profits.
This is not true!
Being a capital extensive business, majority of the income goes into servicing the high finance cost.
This is not true!
Being a capital extensive business, majority of the income goes into servicing the high finance cost.
Further, e-commerce has affected consumer behaviour and reduced sales in malls.
Now with lower traffic and reducing sales, brands start exiting the mall spaces.
Now with lower occupancy rate, these malls cannot bear the expenses and die out.
Now with lower traffic and reducing sales, brands start exiting the mall spaces.
Now with lower occupancy rate, these malls cannot bear the expenses and die out.
DID YOU KNOW:
54 malls in top cities of India have become ghost malls!
Ghost malls are malls with more than 40% vacancy rate.
54 malls in top cities of India have become ghost malls!
Ghost malls are malls with more than 40% vacancy rate.
However, malls have been pivoting and adding new features to attract retail customers while also adding office spaces.
For eg:
- Malls have been opening up spaces for concerts and events.
- Many malls are adding new global brands to attract new customers.
For eg:
- Malls have been opening up spaces for concerts and events.
- Many malls are adding new global brands to attract new customers.
I believe at the current pace, malls actually might die out unless they reinvent.
They should change their focus to multi-purpose entertainment centres or come up with service apartments and other services to stay relevant.
They should change their focus to multi-purpose entertainment centres or come up with service apartments and other services to stay relevant.
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