Real estate has long been a go-to investment for those seeking stable and lucrative returns. However, not all types of properties offer the same profit potential, making it essential for investors to understand which categories yield the highest rewards. Among the different real estate segments, retail properties consistently lead the way in terms of profitability. Following closely are commercial spaces, such as offices, with residential and agricultural lands offering comparatively lower returns. 

When it comes to retail properties, investors can either purchase in bustling markets or opt for authorized, well-planned shopping complexes. In this modern era, traditional malls are being replaced by trendy ‘High Street Commercials’ or ‘High Street Retail Zones’, which are gaining traction as prime investment opportunities due to their modern appeal and high foot traffic. Nevertheless, any discussion about retail properties is incomplete without the mention of shopping malls.

The mall culture, which first originated overseas in the late 1980s, soon found its way to India, creating a retail revolution. Eventually, malls became popular in the country and sprang up all over Delhi, Gurgaon, Noida, Ghaziabad, Faridabad, and other parts of the country. Large shopping complexes that once attracted significant investment are now facing high vacancy rates, with about 40 to 60 percent of some malls standing empty. Over a period of time, such malls have earned the label “Ghost Malls”. 

Now, you must be wondering whether this term is used solely because half of the mall is vacant or if there are some other deeper implications involved. Your answer lies in this blog, as we will discuss the phenomenon of ‘Ghost Mall’ and explore if you should invest in shopping complexes or not. 

What’s a Ghost Mall? 

A Ghost Mall is typically referred to as a shopping center that has seen a sharp decline in occupancy and footfall. These once-vibrant retail hubs now stand largely vacant, often with over 40% of their spaces unoccupied. The reasons for this decline can vary, such as poor location, competition from other retail developments, or the rapid rise of e-commerce. Whatever the cause, the result is the same: a mall that no longer attracts businesses or customers, becoming a risky investment for retail investors.

How to Avoid Investing in a Ghost Mall?

Investing in a Ghost Mall could prove to be a major concern for any investor. While the empty spaces might seem like a temporary problem, they often signal deeper issues that can lead to long-term financial losses. In order to avoid this pitfall, it is important to stay vigilant about your retail investments and recognize the warning signs before it’s too late. 

The first and foremost thing that you should check is the size of the mall. Understand how huge of a plot the shopping mall is or will be built on. A good mall needs at least four to five lakh square feet of area for shops, entertainment zones, and food courts. Make sure your mall has at least two anchor stores as it will increase footfall comprehensively. For those who don’t know, anchor stores are large retail outlets that offer multi-brand shopping options to customers. 

Further, you should also assess the level of competition in the area. Are there other malls nearby that are drawing potential customers away? If so, you need to consider whether the mall you’re investing in has any USPs or competitive advantages that can help it stand out in a crowded market.

Consider Revenue Sharing

Unlike local markets, shopping malls have additional expenses, including lifts, escalators, common area maintenance, centralized air conditioning, and what not, which also leads to higher rent for retail spaces. Sometimes, these growing expenses result in the losses of retailers, and once they start leaving the mall, it becomes challenging to lease the vacant units. 

If you ever find yourself in such a situation or anticipate similar problems, it is advisable to consider a revenue-sharing model rather than a fixed rental agreement. In this model, the tenant pays a predetermined percentage of their gross income, along with maintenance costs. This option provides the retailer with additional flexibility to sustain their business without the strain of regular rental payments. Currently, several mall developers are opting for this particular strategy to attract renowned retailers and top brands.

In conclusion, investing in retail property can be highly lucrative, but it’s essential to avoid the pitfalls of buying into a Ghost Mall.  A little due diligence now can save you from major headaches later. Don’t let your next retail property investment turn into a ghost story.