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Viable or not

Shopping malls are a thriving business in Pakistan and there are many reasons why

Viable or not

Over the last few years, the culture of shopping malls has become popular in the country.

Cities like Lahore and Karachi were the trendsetters. Smaller cities like Sheikhupura, Gujranwala and Hyderabad are catching up fast. Just like in the big cities, they are offering the small city residents a unique shopping experience in a comfortable and secure environment. Almost all of these are doing well and the average footfall of customers is found to be quite high.

The list of country’s popular shopping malls is quite exhaustive. To name a few, one can mention Dolmen Mall Clifton (Karachi), Emporium Mall (Lahore), Atrium Mall and Cinema (Karachi), Centaurus (Islamabad), Safa Gold Mall (Islamabad), The Mall of Lahore (Lahore), Lucky One Mall (Karachi), Sitara Mall (Faisalabad), Kohinoor One (Faisalabad) and Gold City Shopping Mall (Quetta).

How viable are these ventures, Are they highly lucrative as businesses, attracting more and more investment and what is the volume of transactions carried out here? Has the disposable income of people increased overtime, creating demand for new shopping malls, and whether it is a means for business conglomerates to diversify and showcase their other businesses?

How viable are these ventures and what economic activity they generate? Is it a highly lucrative business, attracting more and more investment? What is the volume of transactions carried out here?

Ahmed Khan, former head of leasing at Nishat Group, comes up with a reason. He says malls are popular because retail business is booming and people with high disposable incomes now want to shop in a comfortable environment without having to move from one place to the other. “Now more members of an average household are working and earning which naturally leaves them with more to spend,” he says.

Leading national and international brands want to have their presence at these malls because it is a good way to introduce their brands to a huge number of visitors. “The shopping malls here are the best place for this purpose because the daily footfall of visitors is between 30,000-35,000 on average at the large-sized ones. The visitors’ footfall increases considerably on special occasions, like eid when it becomes too hard for them to make their entry,” says Khan.

Impulsive buying is another thing that helps boost revenues of different outlets at a shopping mall. Khan affirms this by saying “it is just like taking children to a shop to buy candies and, in the end, purchasing many other goods on their insistence.”

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Once a family comes to a shopping mall it may end up buying things they did not have in their initial shopping list. “The availability of everything at one location increases their options of spending.”

So, what makes shopping malls crowd-pullers are the myriad shopping options, multiple choices of what to eat, cinemas, ample parking, play areas for children, central air-conditioning, security, more time, and a feeling that goods on sale are not counterfeit.

The prices are also the same as applicable at other retail outlets of recognised brands in other parts of the city. There were times when people from smaller cities would travel to mega cities with their families to enjoy this experience. But now they can access similar facilities set up in their hometowns.

Jabir Hussain Dada, Head of Business Unit, Dolmen Real Estate Management, says “people want convenient access to quality amenities, their favourite restaurants and recreational avenues, without compromising on location.”

This, in his opinion, is a possible why multi-purpose buildings, offering a mix of residential and commercial units, are being developed. “So, what is happening is that investors are building multi-storey multi-purpose buildings having shopping malls, office spaces and residential suites all at the same time.”

In the context of shopping malls, the concept of anchor tenants and ancillary tenants is important. The anchor tenants are businesses and brands that have a huge customer following and can attract customers in large numbers from day one. On the other hand, ancillary tenants are those who are likely to have lesser sales and visits by customers. The anchor tenants are charged lower rents than ancillary tenants because they are serving the purpose of drawing crowds that may also visit other outlets and do impulsive shopping. Departmental stores like Green Valley, food courts and children’s play areas can be categorised as anchor tenants in Pakistan’s context.

On the types of ownership and lease agreements, Ahmed Khan says, “Nowadays the preferred model is that the malls are owned by one person/company and all the space is rented out. The responsibility of providing facilities like maintenance, security, air-conditioning, etc, is with the owner who charges per-square-foot rate from the tenants,” he adds.

He terms the emergence of shopping malls an encouraging trend and says a reasonably sized one gives employment to at least 1000 people. If there are 250 shops they are also likely to employ a similar number of jobs by hiring four employees each on average.

Khan says “the overall lack of entertainment facilities, outdoor activities, and security at public places make malls a preferred destination for customers.” Here, he says, one can hang out, have meetings and even pass time when they have nowhere else to go. “When people are here they are bound to spend.”

Syed Ather Ali Kazmi, a real estate adviser based in Lahore, says the big business groups having large tracts of land now prefer to build shopping malls instead of selling these out to real estate developers. This, he says, “is for the reason that a shopping mall is a regular source of income because the ownership lies with the original investor and the space is rented out at high rates.”

He says one problem with shopping malls is that they charge too high the rents and that is why one sees tenants moving out from here quite frequently. “The mall owners face loss of rent till the time a new tenant arrives.” So, he thinks the rates should be revised downwards to retain tenants.

Shahzada Irfan Ahmed

shahzada irfan
The author is a staff reporter and can be reached at [email protected]

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