City malls going the extra mile to outsource management

GURGAON: Taking a cue from matured markets abroad, the Indian retail market is gradually shifting towards outsourcing its mall management services to firms which are into business of real estate analysis and consultancy.
Take, for example, Jones Lang LaSalle India, which is at present managing 22 malls in the country. Of these, eight malls are of DLF, one of Unitech, one is the Mahagun Metro mall at Vaishali and another is the Dreamz Mall at Gurgaon.All these malls avail of professional mall management services.
Under the consultancy model, mall management service providers such as Jones Lang LaSalle India and CB Richard Ellis provide the necessary process roadmap, guidance and staff training for developers who want to self-manage their malls.
The service provider lays down the entire systems and processes and does periodic audits and training. Such services are currently being provided to Ambience Mall owned by Raj Singh Gehlot. Select City Walk Mall at Saket availed of hands-on mall management services for over a year before going in for self-management, explained Ashutosh Beri, managing director, Property & Asset Management, Jones Lang LaSalle India.
The reason behind this growing trend is primarily driven by the fact that in India, malls have multiple ownership.
The builder sells or leases out individual units to private owners. As a result, maintenance becomes a major cause of concern.
Mall maintenance is a challenge compared to office spaces or residential buildings since security is one of the biggest concerns due to the shear volume of footfalls, explained Anshuman Magazine, chairman & MD, CB Richard Ellis.
Over the years, mall management has acquired a bigger dimension. However, with the increase in competition, quite a few developers have started outsourcing the overall management of their malls to professional agencies.
Mall management 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. The expectations of clients are now on complete shopping center management, which is a drastic shift from the earlier model, added Beri.
Depending on the requirement, the facility can range from Rs 5 per sq-ft to Rs 15 per sq-ft. A good building with poor maintenance loses its worth and appeal while an average building with good maintenance has higher takers, added Magazine.
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 of which the service provider has to perform and collect money from the occupiers so that the cycle of revenues and expenditures is moderated from beginning to end.