Food, beverages and entertainment draw crowds in malls, says Nexus Select CEO Dalip Sehgal

February 15, 2024

Blackstone-sponsored, mall-focused REIT Nexus Select Trust ended the nine-month to December 2023 with a leased occupancy of 97 per cent and trading occupancy of 96 per cent, while rents escalated 26 per cent.

The quick churn in tenants, newer brands that have come in with more space taken up and a reduction in space for some others have resulted in the high occupancy number, Chief Executive Officer Dalip Sehgal told businessline. Higher propensity to eat out and entertainment are drawing in the crowds, he said.

Tenant sales (consumption) of ₹9,200 crore was up 14 per cent on year while footfalls at a record 100 million show that consumers are thronging malls in large numbers.

Some categories such as food, beverage and entertainment are seeing a boom while others such as fashion have seen a slowdown.

Excerpts from the interview.

You are seeing high occupancy levels. Is it due to more tenants or is it better management of space?

It’s about 110 basis points higher than the same quarter last year. We’ve got new tenants coming in. We have about 10 per cent of our leases come up for renewal every year and we churn that. That gives us a 24 per cent increased range, so essentially the 97 per cent occupancy that you see is a combination of some brands that may have been churned, some new brands that have come in and some where the area may have been reduced. For instance, we are noticing that supermarkets, which was earlier 70,000-80,000 square feet can do much better with smaller area. We have compressed them to 50,000 square feet and given the balance area to new brands in the same mall. So, it’s a combination of these three or four things.

Has your tenant profile changed in any way? More food and beverage, for instance?

You are right. The space that has been given to entertainment and F&B has gone up over a period of time, primarily because after COVID now families have started coming back and obviously there is a lot of eating out that happens both in the food court and in the restaurants. So we have already repurposed some space to accommodate F&B. We have also added family entertainment centres wherever possible. We expect there two categories to continue to do well.

We have seen that the end-of-season sales have started earlier, and some segments are not doing so well as others, for instance, apparel. You can see it in other categories also.

There are certain categories where there is a bit of a slowdown on a comparable basis. For example, if you take fashion, which is almost one-third of our business. Last year same quarter, the growth overall was 21 per cent in the category, this year in nine months the growth is 5 per cent. So clearly that’s moderated on a very high base. Now it’s possible that due to last year’s growth shops have indented more material and they have some leftover stock and that’s the reason the end of season sale started a couple of weeks earlier this year compared to last year. Though fashion has seen some moderation of growth but overall we’ve actually grown higher than the industry.

You have good leasing spreads. Is it due to new tenants or existing ones?

It could be both. It could be leases that have expired and have come up for renewal. So it could be part of that. And part of it could be that some of the underperforming brand leases have ended, they have moved out and the new brands have come in. It’s a combination of both.

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