A home for luxury

WINDOWLESS SHOPS, MUDDY BYLANES, broken flagstones, smells from open kitchens mixed with the stench from open door urinals, and a battle for hourly parking. Welcome to what real estate consultants Cushman & Wakefield rank as India’s priciest retail destination—New Delhi’s Khan Market. The average rent per square foot here is Rs 1,100. Compare that with the Defence Colony market, a few kilometres away, which has similar shops and ambience. The rent for a shop here skims under Rs 200 per square foot.

Khan Market might be expensive, but it’s not home to any luxury brand. And that’s symptomatic of the state of retail space in the country. “The entire market for luxury retail is deeply fragmented,” says Pankaj Renjhen, managing director–North India, Jones Lang LaSalle, a real estate consultancy. “There are pockets that have developed, but in large areas where there is a clear demand for a home for luxury, there is none.”

There’s very little room for luxury in India right now. Ironically, this is against a backdrop of oversupply; global property consultancy Knight Frank, in a report on organised retail, estimates that between 2010 and 2012, organised retail space will more than double from 41 million square feet (of which 20% is vacant mall space) to 95 million square feet. A tiny fraction of this is operational luxury retail space; Jones Lang LaSalle estimates that there’s only about 250,000 square feet of luxury retail space in India today. Of this, New Delhi’s DLF Emporio, India’s only luxury mall, accounts for 200,000 square feet. Spread across four floors, Emporio is home to major brands including Louis Vuitton, Dior, Gucci, Zegna, Canali, Giorgio and Emporio Armani, Harry Winston, Burberry, and Chopard.

So, what does it take to house luxury? Ask this of Stefano Canali, who, along with brother Paolo, owns the luxury men’s wear company Canali, and he says: “We are looking for spaces that have character not just in themselves but also in the larger area.” But that character has to include basics such as uninterrupted power supply, adequate parking, and security. It’s also important that the surrounding shops attract the right clientele. Canali, for instance, will certainly not want to share space with a kirana shop.

That’s why the big brands prefer to stick to spaces they are familiar and comfortable with. “For the longest time, [big luxury] brands were not comfortable being anywhere apart from a big luxury hotel,” says Renjhen. “They wanted the customer to experience the brand in a specific space.” And so there are islands of luxury in the retail corridors of hotels such as New Delhi’s Oberoi, which houses Dior and Hermès, and Mumbai’s Taj Mahal, which hosts Louis Vuitton and Zegna.

“Now the market has matured and they are prepared to be more in the customer’s face in a mixed retail environment,” adds Renjhen. Which is why there are luxury brands in malls such as Palladium at Mumbai’s High Street Phoenix and UB City in Bangalore, both of which have a mix of luxury and premium brands. In fact, Renjhen says that Hermès is looking to open its flagship Mumbai store at Horniman Circle in the heart of the city’s old finance and business district and a stone’s throw from Dalal Street. “The customer has matured and, therefore, if the store is before the eyes of the people who make a lot of money, they will definitely go and buy.”

But even the right mixed retail spaces can be tough to find. Ilyas Bhat of the Blues Clothing Company, which handles brands such as Versace and Corneliani, says while brands are more adventurous about retail, many issues still remain. “Even the most pricey places in India do not have the right parking,” he complains. Recent events bear him out; a few months ago, a restaurant manager was killed in Khan Market in a case of road rage following an altercation over parking.

In many parts of the world, historic buildings are taken over by stores or banks, which preserve the facade while modifying the interiors to suit their purposes. That’s what Ralph Lauren famously did in the U.S. when he bought the lease of Madison Avenue’s Rhinelander building to house his flagship Polo store.

“Most iconic buildings in India from history are either preserved by the government and so those are ruled out, and whatever is left was so badly maintained that it has all been torn down and destroyed,” laments designer J.J. Valaya. Valaya says he was lucky to have found space in New Delhi opposite the historic Qutub Minar, where he’s opened a 10,000 sq ft store, and adds that it’s difficult to find similar property in Mumbai or Bangalore.

“Until specific projects dedicated to luxury come up, the situation will be tight for the next couple of years. Then, once the market matures, and high streets develop, there will be space,” says Renjhen.