2012 retail market report - knight frank€¦ · report moscow knight frank highlights • for the...

RESEARCH

2012RETAIL MARKET REPORTMoscow

Knight Frank

HIGHLIGHTS• Forthesecondyearinarow,Moscowretailrealestatemarketischaracterizedbyanextremely

lowgrowthofsupply:in2012,9shoppingcentreswereputintooperation,withthetotalareaamountingto337.5thousandsqm(GLA–206.8thousandsqm).

• AlreadybytheendofQ12012,itbecameclearthattheopeningofmanyobjectswouldbepost-ponedtoalaterdate(Goodzone,RiverMall,Rio).Theyarepresentlyunderactiveconstructionandlease.

• In2013–2014,12shoppingcentresofregionalandsuperregionalformatareplannedforcom-missioning.Onecanexpectactiveinvolvementofinternationaloperatorsintheseprojects.

• Itisworthnotingthatredevelopmentofretailpropertieswillbeamajortrendforthecomingyears.Analysisofthesituationshowthatinsomecasesitmightbeimpracticaltopreservetheretailfunctionofafacility.


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Retailtraderemainsoneofthemostdevelop-ment-risk resistant economic sectors in Rus-sia. According to the Ministry of EconomicDevelopment, in 2012, the growth rate of re-tail trade inMoscowwas1.7%andamountedto 3,639 billion rubles. Compared to the re-sult in 2011, when retail sales rose by 6.6%,the dynamics of this indicator has consider-ablysloweddown.However,thisdoesnotindi-cateadeclineinconsumption,butratherthechangingroleofretailenterprisesofMoscowin the formation of the Central Federal Dis-trict turnover. Development of local real es-tatemarketsandtheemergenceofhigh-qual-ityretailfacilitiesinthecitiesoftheMoscowregion and the Central Federal District (CFD)affects the dynamics of goods turnover ofthe capital region. For example, according

to Rosstat, Moscow's share in the formationof theCFD turnover is reducedbyanaverageof1%peryear.

Againstthebackgroundofrisingturnover,thestructure of this indicator has significantlychanged, which indicates an improvement inthequalityoftradeinfrastructure:ifin2011,

11.6%ofgoodswereboughtonretailmarketsandfairs,in2012,thisratedroppedto10.6%.The lasting interestofRussians topurchasesoncreditisworthnoting:theconsumerlend-ing growth has reached a record 40% by theend of 2012, which significantly stimulatedconsumeractivity.

RETAIL MARKET REPORT

Sergey Gipsh, Partner,Director,Russia&CIS,RetailDepartment

«In 2012, we have witnessed a reshuffle in the largest consulting companies working in the field of commercial real estate. It is safe to say that the balance of forces, formed in previous years, has changed. Against the background of what was taking place, the Retail Department at Knight Frank distinguished itself with stability. We have managed to continue strengthening our professional team and add major key projects to our portfolio: shopping and entertainment centres Aviapark, Mozaica, Reutov Park, Galleria Novosibirsk and others.

Overall, it is the experience and competence of key players that have proven to be of importance like never before at the current stage of development of the industry. On the one hand, the demand for generic shopping malls, cookie cutter concepts and standard sets of tenants is in decline, on the other – it is time to fix the serious conceptual flaws in shopping centres built more than ten years ago».

Key indicators. Shopping centres* Dynamics

Totalsupplyatoperatingcentres(totalarea/GLA**),millionsqm

6.563/3.503 5

Deliveredin2012(totalarea/GLA),millionsqm 0.338/0.207

Sheduledtoopenin2013(totalarea/GLA),millionsqm

1.757/0.827

Vacancyrate,% 2.5 =Baserentalrate,$/sqm/year(excludingoperationalexpensesandVAT)

Anchortenants 100–500 =Gallerytenants*** 700–4,000 =

Operationalexpenses,$/sqm/year 80–260 =ProvisionofMoscowresidentswithhigh-qualityretailspace,sqm/1,000citizens

309 5

*Thefollowingtableliststheindicatorsonlyonhigh-qualityprofessionalshoppingcentres.Professional

shoppingcentreisdefinedasoneoragroupofarchitecturallycoherentbuildingswiththetotalarea

ofmorethan5,000sqmunitedbyacommonconceptandintegratedmanagement.

**Grossleasablearea

***Ratesforstoreswiththeareaofabout100sqmon1stfloor.

Source:KnightFrankResearch,2013

Aviapark38AKhoroshevskoeHwy

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Key events

• As of July 1, 2012, the new edition of the Law №13-47 “On the territorial division of the city of Moscow” from July 5, 1995, came into effect. According to this normative legal act, the city limits expanded by annexing the suburban lands to the Southwest of Mos-cow. The annexed territories were divided into two administrative districts – Troitskiy and Novomoskovskiy. As a result of this ex-pansion, the territory of Moscow increased by about 2.4 times, and the population has grown by 235 thousand people. The trade infrastructure in new areas is forecasted to gradually develop: the construction of shop-ping centre in Skolkovo has been announced, the projects Vnukovo Outlet Village and Ki-evsky Outlet Village, the Butovo Mall, are be-ing delivered, the construction of Lotus City is almost complete.

• In December 2012, it became known that the Ministry of Industry and Trade is preparing amendments to art. 14 “Trade Act” to allow commercial chains exceed the threshold of 25% dominance in municipalities in the event that the companies are reconstructing old buildings and building new ones for their further development. In the event of passing the amendment, the 25% threshold cancellation will lead to strengthening the position of federal trade operators in many areas and districts of Russia, as well as to an increase in the number of mergers and acquisitions.

• In 2012, the Federal Law №271-FZ “On the retail market”, an amendment to the law on state regulation of alcoholic beverages (which entered into force on July 1, 2012), and the decision of the Government of Moscow on February 3, 2011, №26-PP “On the placement of non-stationary trading facilities”, were the major legislative initiatives affecting the quality of retail infrastructure. The number of tents, stalls and kiosks in Moscow significantly dropped. Furthermore, it was decided to eliminate 20 markets located in semi-permanent structures. Construction of several new objects is planned on the territories of those former marketplaces: shopping centres (in place of LLC Kara Plus market, subway station Altufevo), transportation and freight hubs (in place of LLC Altair, subway station Vykhino) or infrastructure objects (construction of flyovers and organization of a car parking zone in place of the now dismantled market near the subway station Shchelkovskaya).

Announced projects

• Symbolic stones were laid for two objects at a time, by their developer company Amma Development: Russia's largest SEC Aviapark (300 thousand sq m) and SEC Reutov Park.

• GC BIN announced plans to implement the IFC Galaxy Park at the intersection of the Moscow Ring Road and Varshavs-koye Highway (GBA – 700 thousand sq m), which will include a shopping and en-tertainment centre with a total area of 100 thousand sq m.

• The construction of a SEC Columbus (GBA – 200 thousand sq m) began on the ter-ritory of the Prazhsky market.

• In Q2 2012, the developer MDGroup began construction of Butovo Mall (GBA – 142 thousand sq m).

• GC Opin submitted drafts for a retail park on Dmitrovskoye highway (GBA – 30 thousand sq m) as well as for a SC in Aprelevka (GBA – 8,000 sq m).

• Imagine Estate announced plans to build an IFC Petrovsky Park at the Staropetrovsky passage, which will include a multi-brand outlet centre with an area of 18.2 thou-sand sq m.

• Torgoviy Kvartal company has announced construction of a SEC with a total area of 100 thousand sq m near Pushkino.

• The development company Millhouse plans to begin construction of a SC at the intersec-tion of the Moscow Ring Road and the Skolk-ovo Highway (GBA – 100 thousand sq m).

• PPF Real Estate Russia company (a division of the Czech group PPF) is planning to build a large SEC with a hockey arena in the Mitino district (GBA – 120 thousand sq m).

• SEC Vodny (GBA – 50.5 thousand sq m) was announced at MAPIC-2012 exhibition, it will

become a part of the IFC Vodny on the Golovinskoe highway.

• General contractor GC Tashir plans to build an IFC with an area of 168 thousand sq m on the territory of Izvestiya and the now defunct SEC Tver Passage.

Transactions• The Hungarian corporation TriGranit Develop-

ment sold its share (50%) in the project SEC Mozaica (GBA – 134 thousand sq m). The buyer is the co-owner of RGI International Petr Shura.

• At the end of the first half-year, a transac-tion on the purchase of the remaining 50% in SEC Zolotoy Babylon Rostokino by Immofi-nanz group was concluded. Upon closing the transaction Immofinanz has become the sole owner of the shopping centre.

• Romanov Property Holdings Fund, which owns SEC Dream House, bought 40% of The SEC Vremena Goda .

• RB Invest sold two Metromarket shopping centres (by the subway stations of Preob-razhenskaya and Timiryazevskaya). The buy-er is an investment company Atlant Capital Partners. Furthermore, at the end of the year, the company RB Invest closed the acquisi-tion of TC Karnaval (GBA – 38 thousand sq m) in the town of Chekhov.

• The State Oil Fund of the Republic of Azer-baijan (SOFAZ) bought the retail and office centre Gallery Actor from the Capital insu- rance group (CIG). The deal amount totaled $133 million.

• The Finstroy company has sold a SEC underconstruction Vesna, located at the intersection of the Moscow Ring

SECIyun'MytishchiMytishchi,intersectionofVolokolavskoeHwyandMiraSt


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Road and the Altufyevsk highway (GBA – 126 thousand sq m). The new own-ers of the project are two companies: Central Properties and Alto Assets.

• In 2012, the following upcoming deal was made public: investment fund Morgan Stanley Real Estate plans to acquire SEC Metropolis. According to the plans of the Fund, the transaction will be completed in 2013.

In 2012, several significant transactions of ac-quisition and consolidation of retailers took place:

• REWE Group concern (Billa chain) acquired 12 stores Sitistor from LLC Enka TC.

• Company Eldorado (owned by the Czech group PPF) purchased a chain of electronics stores Beringov (LLC Bringov Proliv Delta).

• Co-owners of the pharmacy chain A5 bought 26% of OJSC Mosoblfarmatseya from the Hi Capital fund, thus consolidating 100% of the assets of the OJSC.

• GC Detskiy Mir has acquired 100% of shares of Spartema Limited, which owns LLC Cub Market (franchisee of Russian Early Learning Centre – ELC).

• In December OJSC MegaFon and Garsdale Ser-vices Investment Ltd closed a purchase deal on 50% stake in OJSC Euroset from the busi-nessman Alexander Mamut.

• In 2013, the transaction between Auchan and Metro Group for sale of 91 hypermarkets Real in Central and Eastern Europe, including the 17 hypermarkets operating on Russian territory is planned for completion.

Supply

For a second consecutive year already, theretail market of the capital is character-ized by extremely low rates of supply growth:in 2012, nine shopping centres were deliv-eredwitha totalareaof337.5 thousandsqm(GLA – 206.8 thousand sq m). In addition tothat, the indicator of GLA by the end of thisyearwasevenlowerthanin2011,whenKnightFrank analysts recorded the historical low ofmarket development within past decade. Thissituationresultedfromareductioninthenum-berofnewconstructionprojectsin2008–2010.

TheopeningofthesecondphaseofSECGorod(2RyazanskoeAve)withtotalareaof78thou-sandsqm(GLA–33thousandsqm)tookplaceinDecember2012.Tropa,whichwillbedeliveredin2013,isgoingthroughthestageoffinishingworks. The opening of restaurants McDonald'sandMenza,whichareactuallythetenantsofTCTropa,buthaveindependentinputgroups,tookplaceinDecember2012aswell.

Thus in 2012, the total supply of modern re-tail space in Moscow reached 6.56 millionsq m (GLA – 3.50 million sq m). Meanwhile,Southern Administrative District remainsthe leader in terms of shopping centres spacestock for several years already: by the end of2012, its share accounts for 16% of the totalretail space of the city. The lowest volume

Shopping centres commissioned in 2012

Object AddressTotal Area

(thousand sq m)GLA

(thousand sq m)

Iyun'MytishchiMytishchi,intersectionofVolkovskoeHwyandMiraSt

178 75

Kaleidoscope 7-23Khimkinskiyblvd n/a 41

OutletVillageBelayaDacha*

MR,Kotelniki,5YanichkinAve 23 23

MoskvaGallery 2OkhotnyRyadSt 30 20

Parus1NovokurkinskoeHwy,microdistrict17

35 17

Panfilovsky Zelenograd,6APanfilovskyAve 24.8 13.3

Sombrero 152AWarsawskoeHwy 17.3 6.1

Sviblovo 27SnejnayaSt 18.2 5.9

EGOMALL 23DejnevaAve 11.2 5.5

*Ininternationalunderstandingtheterm“outlet”standsforaformatofashoppingcentrespecializing

inthesaleofapparelbrandsatasignificantdiscount


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9,000thsd sq m

Total Area Retail space growth2004 2005 2006 2007 2008 2009 2010 2011 2012 2013F

For the second consecutive year, the retail property market in Moscow is characterized by an extremely low supply growth rate


SCSviblovo27SnezhnayaSt

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of supply (about 230 thousand sq m) is ob-served in SWAD, because in this region thereare practically no large shopping centres (ex-cept for the SEC Shuka with leasable area of42thousandsqm).

ItshouldbenotedthatasignificantincreaseinsupplyfortheyearisregisteredinSEAD:morethan16%.ThisisexplainedbytheintroductionofamajorsuburbanSECIyun'(GBA–178thou-sandsqm) to itsborder,a subjectof regionalformattargetingthecitizensofMoscowaswell.

Intermsofcitizenprovisionwithretailspace,the first place belongs to CAD, where, due tolow permanent to temporary resident ratio,over 560 sq m of retail space (not countingspace in street retail format) is available perthousandcitizens.

AlreadybytheendoftheQ12012,itbecameap-parentthatdeliveryofmanyshoppingcentreswould be postponed to 2013: SEC GoodZone,SECRiverMall,SECRio,andSECatSheremetyev-kaya(A.I.Raikin).Theconstructionandleas-ingoftheseprojectsiscurrentlyunderway.

Demand

The activity of retail operators throughout2012remainedhigh.Manychaincompanies,fo-cusingontheexpansionofconsumeraudience,brought new trading concepts to market. Themost active from this point of view were thegrocerychains.Forexample,MetroGroupintro-ducedseveralnewformatsforcitieswithpopu-lationcountoflessthan500,000,suchasMetroPunkt(1,500–2,000sqm),aswellasfranchisestoresproject“bythehouse”–Fasol(50–150sq m). Petersburg company O'Key announcedestablishment of a chain dicount chain Da! inwhich they will invest about $700 million by2016. In the fall of 2012, Moscow and SaintPetersburgopenedthefirstdiscountersVerniy(the stores chain is developed by the founderofPyaterochkaandCarousel–businessmanAn-dreyRogachev).

InternationaloperatorspresentontheRussianmarketinotherretailprofilesalsocontinuetointroduce grocery stores concepts. For exam-ple,inDecember2012,aFinnishchainK-rautaopeneditsfirstgroceryhypermarketK-RUOKAin Saint Petersburg (in 2013, the company in-tendstoopenhypermarketsintheMoscowre-gion).AGermancompanyTengelmann,whichismanagingamajorDIYchainofOBIinRussiahasin its short term plans a development of gro-ceryretail(discountersPlus).Atthesametime,itmaybenotedthatmajortradingcorporationssuch as Walmart, Carrefour and Tesco are stillnotrepresentedinRussia.

TheMoscow retail realestatemarket for2012has been a priority for several internationaloperators: during the spring of 2012, a toystore Hamleys and baby goods store Mamas & Source:KnightFrankResearch,2013

Shopping centres opened in 2012. Retail space per 1,000 people ratio by districts, 2012

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GLA supply Provision by retail space

SAD NAD SEAD NEAD CAD WAD SWAD EAD NWAD

Southern Administrative District retains the leading position in terms of shopping centres area supply: its share accounts for over 16% of total retail space in Moscow



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Papas opened in SEC Evropeiskiy; boutiquesBallantyne (Italy) and Juicy Couture (UnitedStates) opened in the GUM; the first storesof the Dutch Scotch & Soda (has previouslybeen represented in the Jeans Symphonystores) and theAmericanchainMichaelKors,aswellastheFrenchchainoperator’sSiaHomeFashion (decorative home goods) opened inSEC Metropolis; Russia's first mono-brandyouth clothing store Volcom opened on theterritoryofdesign-factoryFlacon.

In all , during 2012, 18 international opera-tors(excludingexpandedchains,alreadypre-sent on the market) opened their stores inRussia.Ofthem15chaincompanieschosetoopentheirf irststoresonthemarketofMos-cow.

Thehighlight of autumnof2012was the re-turn to thecapitalofDebenhamschainwiththe eponymous department store opening inSEC Mega Belaya Dacha. It should be notedthat some international operators, whichin previous years, for various reasons, wereforcedtoshutdowntheirstoresinRussia,in2012startedreturningtothemarket.Forex-ample, one could name a re-entry of ItalianbrandStefanel(in2011,thisboutique,whichhaving worked in GUM for several years, wasclosed). The brand Marc O'Polo returned toRussia inSeptember–a storewith the totalarea of 180 sq m, opened in SEC Atrium. ThecompanyJamilCowill carryoutdevelopmentofthebrand.

Internationalpubliccateringoperatorswerealsoactivein2012.Severalchainprojectsen-teredthemarketthatyear:MarugameSeimennoodle restaurant was opened in Moscow, aswellasthefirstoutof50facilitiesofAmeri-can chain Moe's Southwest Grill (GlaventerInvestmentsLtd.Groupisresponsibleforthedevelopment of the franchise). Furthermore,onemaynoteopeningofPaulbakeriesinthecapital , the Israeli chain Sicaffe and FrenchrestaurantBuddha-BarinSaintPetersburg.

Russia may soon experience a significantgrowth in the number of catering chains:companiesthatownsuchbrandsastheGreatAmerican Cookies, Marble Slab, Pretzelmakerare negotiating with potential partners.Opening of the first restaurant of JohnnyRockets chain is planned for spring. KrispyKreme plans to enter the market in March2013. Closer to 2014, exotic South Africanfast food chain Nando's, restaurant chainWingstop(BaxtorLimited),andAmericancof-feeshopQuiznosmayappearinRussia.

Itisinterestingtonotethatseveralunusualconceptsandformats,whichhadhardlybeendeveloped in Russia before 2012 have beenannounced. In December it became knownthattheDepartmentoftradeandservicesofMoscowtogetherwithMoskomarhitekturaarelooking to develop a plan to place catering

facilities on the rooftops of urban buildings(accessible roofs); while the Moscow Metroadministrationproposedtheinitiativetoor-ganizeachainofmetrokafeinlobbiesofsta-tions. The format of professionally equippedmobilecafes (AnySoup,mobilecoffeeshopsof Coffee House brand, etc.) is becoming in-creasingly popular in Saint Petersburg andMoscow.

Commercial terms

Presently, the scheme for calculating leaseratesdependingontheindicatortenantturno-ver is becoming increasingly common on themarket.Itisespeciallytrueoflargehigh-qual-ityretailpropertiesthatenteredthemarketinthelast5years.

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35%

2008 2009 2010 2011 2012

Among the retailers, who joined the market within the past 5 years, 30% opened their stores in 2012


SECKaleidoscope7-23Khimkinskiyblvd

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Commonly, a contractual relationship betweentheownerandthetenantfollowsthreeschemestodefineleaserates:• Fixed lease rate is indicated in the contract

and does not depend on the turnover of the trade operator within the shopping centre.

• Combined lease rate contains various op-tions combining the base rental rates and the percentage of turnover of the operator.

• The lease rate expressed as a turnover per-centage. It usually is calculated based on the term fixed in the contract and does not include the fixed part.

During the five years of retail real estate seg-ment development, the share of contracts be-tween the lessee and the lessor, which contain the lease payments calculation scheme as a per-centage of turnover has reached 70%. However, this fact is true for the developed markets of the capital and major cities. Whereas the regional retail projects are dominated by the contracts with fixed lease rate.

Throughout 2012, business conditions re-mainedrelativelystable.Themostpopularob-jects could adjust rental rates in the processof changing tenants, increasing them by up to20%. The share of vacant space in operatingshoppingcentresofMoscowduring2012wasatavery low level–2.5%.Themosthigh-qualityshoppingcentresstillform"waitinglists"(listsofoperatorswillingtoleasevacantspace).

In the coming 2–3 years, the commercial con-ditions may change: the market will be filledup with an unprecedented number of largefacilities (the volume of supply may increaseby45%).Despitethestrongdemandfromchainoperators, we expect vacancy rate fluctuationbetween3–6%.

Forecast

Forseveralyears,unfavorableeconomicsitu-ation called for a certain line of conductin the f ield of development and long-terminvestment: construction of projects werebeing suspended, shopping centres weredelivered in phases, if not, on the by floorbasis, external f inancing was diff icult toattract.Thisiswhythedeveloperskeptwait-ingforbetterconditionstobeginimplemen-tationofnewshoppingcentres.

Inthepastyear2012,thecircumstanceshavechanged:theconstructionofkeytradecentres,development of which for various reasons hasbeensuspended,–gotresumed.Inthemediumtermrun,thedevelopersannounceddeliveryof30 shopping and entertainment centres witha total area of about 3,000,000 sq m. In thecasetheseplansshallberealized,currentstockvolumewillincreaseby45%.

Inthenexttwoyears,developersareplanningto complete the construction of 12 objects

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Retail space growth Vacancy rate2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013F 2014F

In the medium term, the expectations are to put into operation 30 shopping and entertainment centres with a total area of about 3,000,000 sq m


Percentage of contracts with various lease calculation schemes

Lease rate contracts share 2008 2013

Fixed 80% 28%

Combined 19% 70%

Determinedasapercentageofturnoverwithoutthefixedpart

1% 2%


The lease conditions in Moscow shopping centres, 2012

ProfileFixed lease rate*

$/sq m/yearThe share paid based

on turnover, %

Hypermarket(>7,000sqm) 100–250 2–4

Urbanhypermarket(3,000–7,000qm) 150–350 2–4

Supermarket(1,500–3,000sqm) 250–500 4–6

DIY(>5,000sqm) 200–350 4–6

HomeAppliances(1,500–3,000sqm) 250–500 4–5

Sportinggoods(1,500–2,500sqm) 400–1,200 4–5

Goodsforchildren(1,000–2,500sqm) 250–450 9–12

Apparels(50–300sqm) 800–2,500 12–16

Footwear(50–300sqm) 900–3,000 12–16

Accessories(10–70sqm) 2,500–4,500 11–14

Movietheatres 150–250 3–5

Entertainmentcentres(100–1,500sqm) 250–500 8–12

Entertainmentcentres(2,000–5,000sqm) 100–200 4–7

*ExcludingOperationalExpensesandVAT(18%)



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ofregionalandsuperregionalformat.Inthesecircumstances,onecanspeakofapossibleim-balancebetweensupplyanddemandforhigh-quality retail real estate market: qualitativeand quantitative growth of chain operatorsmight start lagging behind the developmentspeed of real estate projects. Thus, one canexpect increased activity to encourage in-volvementofinternationalretailers.

Itshouldbenotedthatin2013–2014threeout-letcentresareexpectedtobedelivered,andin2015 the first objects in classic “retail park”formatwillbeintroduced(atthemoment,suchconceptdoesnotexistontheRussianmarket):• Fashion House of Fashion House Develop-

mentcompany.• OutletVillageBelayaDacha–ajointproject

byHinesandOJSCBelayaDachacompanies.• Kievsky Outlet Village – a project of Hines

andEsproGroupcompanies.• Retail-park at Nagorny by the LLC Dorinda

Invest.• Retail-park Dmitrovsky – developed by

TrinityRussianRetailPartners.

Developmentof shoppingcentreswill createnewretailformats,suchasstripmalls*,powercentres, socio-shopping centres and themedcentres.

It should be noted that redevelopment ofretail properties will be the current trendof the coming years. By 2013, a significantamountofagingcentresandfacilitieshasac-cumulated in the capital , as well as in manymajorprovincialcitiesandregionalcentres–conceptualmistakesweremadeintheestatedevelopmentphaseoftheseproperties.Giventhe prospect of entering the competitivemarket of large objects, we can predict thatdeveloperswilloftenrefertothereconceptu-alization,usingvariousapproachesto“save”their shopping centres: from minor interiorchanges to the demolition of the existingbuilding, followed by construction of a newshoppingcentre.

Already now one can find examples of rede-velopment on the real estate market, whichinclude a complete reconstruction of anexisting shopping centre (SEC at Yartsevs-kaya), shopping centre format change (thealready opened outlet-centre Brand City inthebuildingofformerWaymart),increasethearea of retail facility (SEC Semenovsky) andthechangeof tenants. Furthermore, in somecases, analysis of the situation may lead tothe conclusion that maintaining trade func-tionisimpracticalfortheproject.

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Retail space growth

2009 2010 2011 2012 2013F 2014F

In 2013-2014, developers plan to commission 12 projects of regional and super regional format



Major shopping centres, planned to open in Moscow and the nearest Moscow region in 2013–2014

*AretailformatcommonintheUnitedStates,CanadaandAustralia,designedfordrivers.Theobjectsareshoppingcentresstretchedalongtheroad,housingavarietyofretailoutletsandservicepoints.Alargecarparkisusuallylocatedinfrontoftheshops.Thearearangesfrom5,000to70,000sqm.

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Street retail

A very slow growth in supply in the segmentof shopping centres in 2011–2012 stimulatedinterestofmanychainoperatorstostreetretailformat. Some circumstances permit to suggestthatthetrendwillcontinueinthefuture:

1. Thesituationispartlyduetotheactiveex-pansion of commercial operators to retailmarket.

2. Furtherdevelopmentofmultiformatprojectswithalreadyexistingmarketparticipantsistakingplace.

3. Street retail properties are still in demandwith private investors, who prefer to gradu-allybuildalargeportfoliooffacilitiesofthis

type. They are attracted by the opportunitytogetdiversifiedandliquidassets.Onaver-age,thecapitalizationrateamountsto10%.

Among the new trends of the demand, one cannote the obvious interest of grocery chainsoperatorsinpositioningtheirstores(conveniencestoresorsupermarkets)onthefirstfloorofofficebuildings. Themostattractive forplacement ofgrocerysupermarketsarethebuildingsinwhichofficecomponentisnotsmallerthan15thousandsq m, the size and configuration of the groundfloorallowtoorganizeretailandwarehouseareasandindependententrances,whilefacadesfaceofthestreetsorhighwayswithintensivepedestrianand car traffic. In 2012, Knight Frank companybecame a consultant for several transactions,confirming this trend: the supermarket Yuppie(Meta group) rented a facility in BC CityDell,supermarket chain of homemade food Bahetlesignedaleaseforanareaofover2,000sqmintheAclassBCOlympicHall,tradingoperatorMiratorgopenedastoreinthebuildingofBCDomnikov.

Another key market trend is the return of someof the operators to the main retail corridor ofMoscow – the Tverskaya Street. For example,the company Euroset, which closed down itsflagship store during the stagnation decidedto re-rent the same premises at the end of2011. In 2009, a well-known manufacturer ofconsumerelectronics,Samsung,decidedagainstcontinuingtorentthepremisesof1,700sqm.In2012,thecompanyre-leasedspaceonTverskayaStreet (on first floor of BC Summit). JewelrystoreKristalMechtireopenedatthesameplace(Tverskaya street, 4), occupying about 85 sq m.

Itshouldbenotedthatiftheearlieropeningofastoreinthecentralshoppingstreetswasinthefirst place aimed at creating brand awareness,now these objects are, rather, to maintain theimageofabrandandanindicatorofitsstatus.

Lease rates in the street retail segment de-pend primarily on the distance of the objectfrom the city centre: for the main shoppingstreetsofMoscow,theratesvaryintherangeof1,500–3,000$/sqm/year,reachinginsomecases8,000–10,000 $/sq m/year. Lease rates in theGarden Ring, on average range between 1,200and3,000$/sqm/year,formainhighwaystreets–from800to2,500$/sqm/yearandinresiden-tialareas–from500to1,500$/sqm/year.

Major shopping centres, planned to open in Moscow and the nearest Moscow region in 2013–2014

Name AddressTotal area

(thousand sq m)GLA

(thousand sq m)

Aviapark 38АKhoroshevskoyeHwy 293 252

Vegas2 66kmMKAD 283 111

RiverMall 16-18AvtozavodskayaSt 258 87

Vegas3 55kmMKAD 231 113

Columbus 140WarsawskoeHwy 200 140

Mozaica 3A7thKozhukhovskayaSt 134 67

GoodZone 12KashirskoyeHwy 122 56

Otrada(phasesII–V) 2PyatnitskoyeHwy 109 75

ReutovPark Reutov,NosovikhinskoyeHwy 90 41


The average range of rental rates in major trade corridors of Moscow 2012

Location Lease* $ / sq m / year

ThemostexpensivetradingstreetsinsidetheGardenRing(StoleshnikovSq,TverskayaSt,KamergerskiySq) 2,500–10,000

OtherstreetsinsidetheGardenRing(KuznetskiymostSt,PyatnitskayaSt,ArbatSt) 1,500–3,000

GardenRing 1,200–3,000

Maintransporthighways(LeningradskyAve,LeninskyAve,KomsomolskyAve,KutuzovskyAve) 800–2,500

Residentdistricts 500–1,500

*ExcludingOperationalExpensesandVAT(18%)


RESEARCH

Europe

Austria

Belgium

CrechRepublic

France

Germany

Ireland

Italy

Monaco

Poland

Portugal

Romania

Russia

Spain

Switzerland

TheNetherlands

UK

Ukraine

Africa

Botswana

Kenya

Malawi

Nigeria

Tanzania

Uganda

Zimbabwe

Zambia

SouthAfrica

Middle East

Bahrain

UAE

Asia Pacific

Australia

Cambodia

China

India

Indonesia

Malaysia

NewZealand

Singapore

SouthKorea

Thailand

Vietnam

Americas & Canada

Bermuda

Caribbean

Canada

USA

EstablishedinLondonmorethanacenturyago,KnightFrankistherenownedleaderoftheinternationalrealestatemarket.TogetherwithNewmarkCompany,KnightFrank’sstrategicpartner,thecompanyencompasses243officesin43countriesacrosssixcontinents.

KnightFrankhasbeenasymbolofprofessionalismfortensofthousandsofclientsallovertheworldfor116years.After16years,KnightFrankhasbecometheleadingcompanyinthecommercial,warehouse,retailandresidentialrealestatesegmentsoftheRussianrealestatemarket.Morethan500largeRussianandinternationalcompaniesinRussiahavealreadymadeuseofthecompany’sservices.

ThisandotherKnightFrankoverviewscanbefoundonthecompanywebsitewww.knightfrank.ru

© Knight Frank 2013Thisoverviewispublishedforgeneralinformationonly.Althoughhighstandardshavebeenusedinthepreparationoftheinformation,analysis,viewandprojectionspresentedinthisreport,nolegalresponsibilitycanbeacceptedbyKnightFrankResearchorKnightFrankforanylossordamageresultantfromthecontentsofthisdocument.Asageneralreport,thismaterialdoesnotnecessarilyrepresenttheviewofKnightFrankinrelationtoparticularpropertiesorprojects.ReproductionofthisreportinwholeorinpartisallowedwithproperreferencetoKnightFrank.

Professional Consulting ServicesKonstantinRomanovPartner,[email protected]

Valuation ServicesOlga Kochetova Director, Russia & CIS [email protected]

Marketing, PR, HRMariaKotovaPartner,[email protected]

Market ResearchOlgaYaskoDirector,Russia & [email protected]

Saint PetersburgNikolaiPashkovGeneralDirectornikolai.pashkov@ru.knightfrank.com

KyivYaroslavaChapkoBusinessDevelopmentDirectoryaroslava.chapko@ua.knightfrank.com

Office Real EstateNikola ObajdinDirector [email protected]

Warehouse Real Estate, landViacheslav Kholopov Director, Russia & CIS [email protected]

Retail Real EstateSergey GipshPartner, Director, Russia & CIS [email protected]

Residential Real EstateElena YurgenevaDirector, Russia & CIS [email protected]

International [email protected]

Financial Markets and InvestingEvgeniySemyonovPartner,[email protected]

Business [email protected]

MOSCOW

26ValovayaStreetLighthouseBC115054RussiaPhone:+7(495)9810000Fax:+7(495)9810011

ST.PETERSBURG

3BMayakovskogoStreet191025RussiaPhone:+7(812)3632222Fax:+7(812)3632223

KYIV

39-41HoryvaStreet04071UkrainePhone:+380(44)5456122Fax:+380(44)5456122

2012 retail market report - knight frank€¦ · report moscow knight frank highlights • for the...

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