‘Malls to get back to pre-Covid levels in a year; hotels to take more time’

Though the real estate sector is gradually coming out of the Covid-led disruptions with sales slowly picking up across segments, malls and hotels are still not out of the woods. Brigade Enterprise COO (commercial) Subrata KC Sharma in an interview with Rishi Ranjan Kala said malls could take up to 12 months to get back to pre-Covid footfalls level, while the hotel businesses could take up to two years. Excerpts:

What is the latest development in the World Trade Centre (WTC) project at Chennai?

Out of the total 2 million sq ft leasable space, WTC Chennai is 85%-plus leased. Businesses are majorly e-commerce and captive IT-ITeS. Premises have been handed over to the respective tenants. Currently, client fit-out works are in progress. The leasing momentum has been extremely heartening.

With WTC Chennai, Brigade will have these premium office towers in three cities. How has the performance of the other two properties in Bengaluru and Kochi been?

WTC Bangalore is near 100% occupied. WTC Kochi is 70% plus occupied; also, we have additional space requirements from select existing tenants. Hence, the performances of these two properties have also been extremely good. The business mix is majorly e-commerce and IT/ITeS in Bangalore and IT/ITeS in Kochi.

What are your plans for the remaining two WTCs?

We are keen to expand our footprints with the two WTCs. However, amid this pandemic, our decisions will be based on deep analysis of the market trend.

How has the retail segment performed so far? Also with the government allowing multiplexes, entertainment parks to open, when do you see this segment returning to normalcy in terms of both footfalls and sales?

Footfalls are still a fraction of what they used to be. It’s around 20% of pre-Covid levels. Initially, when the malls opened it was only people with a single minded shopping agenda were visiting the malls in their own vehicles. Now the demographics are slightly changing with the onset of festival season. Window shoppers and those who want to grab a bite at the restaurants are also visiting malls. Theatres have just opened. Films that are being screened are mostly in regional languages with one English film. Tickets have been priced competitively to encourage moviegoers. It might still take a good 12 months for the malls to get back to pre-Covid levels.

What scenario do you anticipate for the hotel business in the next 6-12 months? When do you expect any sort of recovery happening in this segment?

Hotels have significantly ramped up their food and beverage (F&B) offerings to generate additional revenue due to the impact of the loss of room business. Some hotels in the city are able to break even with the income from F&B, small conferences and weddings. Resort destinations within driving distance of major cities are doing extremely well, especially over weekends. It will take a while for business travel to resume in a full-fledged manner. I expect the hospitality industry as a whole to get back to pre-Covid levels only in 24 months, hopefully by FY23. In office leasing, analysts say inquiries are rising, yet there is some hesitation regarding converting them into deals.

How do you analyse Covid’s impact on this segment, especially vis-a-vis work from home (WFH)?

Yes, we are seeing increased momentum in terms of inquiries and inspections; and at the same time decisions are getting prolonged due to pandemic related uncertainties, which we feel is understandable. Companies are taking time to figure out the appropriate real estate need and spend, keeping in view WFH, need for increased physical distance, rental movements, etc. Currently, the overall situation is extremely fluid and normalisation may take some time. Notwithstanding the uncertainties, select businesses are considering/ will consider new spaces based on consolidation/ expansion/ reduction needs. Such requirements will be motivated by the opportunities to optimise cost, increase operational efficiency, migrate to newer and more efficient spaces, etc. or purely for the need of additional space.

For office rentals space, what scenario do you anticipate in the short to medium term? Do you anticipate a decline in rentals in the next 6-18 months with focus being on retaining clients and/ or adding new ones?

While there are chances of decline in the weighted average rentals due the decreased transaction momentum, rentals are correlated to the micro-market supply and demand dynamics and the existing vacancies. We expect the mature and in demand micro-market with minimal vacancies to hold on to the rentals.