By: Col. Ashutosh Beri
Mall management is a huge movement in more developed and matured markets, especially where the mall culture has evolved significantly. Australia, the United States and many European countries come readily to mind this in this context. In India, the phenomenon of mall management is now approximately five years old.
Typically, the Indian psyche is skewed towards self-sufficiency, and many mall owners had, in the past, addressed mall management as a simple facilities management function. However, with the increase in competition, quite a few developers have started outsourcing the overall management of their malls to professional agencies. This trend is likely to catch up as the battle for footfalls in malls gets bloodier.
Mall management in India began with simple facilities management functions, which basically encompassed the operation and maintenance of malls. However, the scope of mall management services has by now been elevated to shopping centre management, which very few companies have upgraded their capabilities to in the current scenario. The expectations of clients are now on complete shopping center management, which is a drastic shift from the earlier model.
There are various business models on which mall management service providers operate. The most basic model is based on a fixed management fee and a small variable component. In this model, the service provider acts a manager on behalf of the mall owners at a relatively low risk quotient. A more evolved business model is based on the reimbursement of operation costs in addition to a pre-defined profit margin, in return for which the service provider has to perform and collect monies from the occupiers so that the cycle of revenues and expenditures is moderated from beginning to end.
To amplify on this new model – there is a fixed chargeable component to a mall management service provider’s fees, which covers a certain portion of the outgoings and also encompasses a margin of profit. Lately, a variable component has been introduced which is a function of the enhancement of the mall’s revenue generation by virtue of these services, and also the collection of monies from the occupiers.
The scope for mall management in India today is tremendous to say the least. As of now, there are many companies with mall development aspirations who have ambitious plans for swamping the Indian retail market in the near-to-distant future, especially in Tier III and Tier III cities. Of course, much depends on the Government’s policies on such proliferation going forward.
If these companies go ahead with their plans for retail footprint expansion, the demand for professional mall management is going to increase manifold. In other words, it is an extremely vibrant business vertical. While Jones Lang LaSalle was the pioneer in this field and currently commands the largest share of malls under management by a single service provider, many other large companies have also stepped up their offerings from simple facilities management to more advanced models.
The author, Col. Ashutosh Beri, is Managing Director – Property & Asset Management, Jones Lang LaSalle India
