What drives mall space development? While forces of demand and supply are always in play, given that the laws of economics are inevitable, the fact is that there is no inevitability on the question of over-supply for malls.

THE reasons for this are simple. The Indian consumer is demanding change and choice. The consumer is creating her own set of shopping habits, redefining the way shopping formats are presented. And mall developers are responding.

The point is that the organised sector of Indian retail still comprises only a small percentage of the developments that are occurring. Its still in the single digits. Even some estimates of 20 percent of Indian retail turning organised by 2010 have been taken as optimistic. This development will be crucial since increasing numbers of Indian consumers are expressing their satisfaction with organised formats through higher and higher levels of acceptance and demand. The needs are clearly being defined by the customer and size follows. This is one critical gap that will define the supply-demand situation.

The critical issue is the pace of the development in terms of intelligent space design. Mall developers have to take very swift cognisance of changes in consumer choice patterns and habits in order to respond.

In this context the development of malls and singularly individual brands will be important. Each mall will have to have a very clear positioning in the minds of consumers. Three aspects will then become critical. One, the mall as a destination that is able to fulfil a wide variety of consumer demands across shopping, food and entertainment. Two, convenience through not just offerings like food but through sharply defined location competitiveness and product range competitiveness. Three, Value in terms of being able to define what the consumer in that particular market or catchment area defines as being value both through the right product and pricing mix catering across a wide variety of needs. However value may well go beyond price points available in a mall since the entertainment and food solutions in a mall will also define the end value creation for the consumer

Over the next 3-4 years one will see the development of a few, large and dominant players in the mall space brands in their own right which own the markets and the consumers in their catchment areas. Brand positioning will be critical in the coming years of high decibel competition, where the anchor and the tenant mix will play the most critical role. The mall as a brand is a concept that has to be worked right from the development stage in terms of retail and service offerings especially the tenant and anchor mix. The brand communication in a fast maturing market like the one in India begins at this early stage itself with positioning being decided early and then extending across postlaunch brand communication.

What must be remembered is that customer experience is a very critical component of the brand positioning exercise. Beyond the anchor every touch point with the customer in terms of both the retail mix and the service and facilities aspects needs to be designed precisely and stay consistent.

Urban planning not being a priority in India, mall developments also tend to be sub-optimally planned in terms of their location in urban areas. Urban planning needs to play a critical role in terms of accessibility roads and public transport. Increasingly with real estate costs in city centres being an issue along with land availability mall developments will move to the outskirts of urban areas. Connectivity and accessibility for these areas needs to be an integral part of urban planning in the future.

Parking will have to be provided by these mall developments similar to international malls. This will impact eventual real estate costs for the mall. International finance is now increasingly demanding adequate parking for mall development and given the plentiful finance availability in the country through this route parking will willy nilly be considered a part of the mall cost mix.

Mall development in the real estate context is a complex mix of location, catchment, competition, land and development costs and the cost of funds.

Given the spiraling costs of mall development with both land and development costs the cost of the lease to the tenant which includes both the rental and the CAM will assume increasing importance in the coming days. What will be important will also be the cost of conversion of consumer for the retail tenant as mall developments mushroom and the sameness across mall complicates the consumer's decision making process in terms of location options for shopping. These costs will make cash flows for retailers a challenge further strengthening the case for a shake-out in the next few years, though the shake out could be two or three years away.