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Q3 2011 RETAIL REAL ESTATE MARKET Moscow
Knight Frank
MAIN TRENDS• DevelopersactivityinMoscowremainedathighlevelinQ32011.
• Growthofsupplyinninemonthsof2011wasthelowestsince2003:only263,000sqmofmodernretailspacewasbroughtintooperation.
• InterestofbothdevelopersandretailoperatorswasfocusedontownsinMoscowRegionanddormitorydistrictsinthecity.
• ThevacancyrateatMoscowshoppingcentresdecreasedandrentalratesincreased,partlyduetorotationoftenants.
OVERVIEW
Q3 2011 RETAIL REAL ESTATE MARKET Moscow
2
Main events
• YITMoskovia,asubsidiaryoftheFinnishconcernYITConstruction,announcedplansforconstructionofseveralshoppingcentresinMoscowRegion.ThefirstcomplexwillbebuiltaspartofanewresidentialdistrictinthetownofPushkinoandafurthertwoprojectswillbedevelopedinRamenskyandKrasnogorskydistricts.
• RekstalGroupispreparingtoopenthe19,000sqmSolnechniyshoppingcentreinthetownofSolnechnogorsk.ThefirstphaseiscommissioninginDecember2011andthesecondphase-inFebruary2012.KnightFrankisanexclusiveconsultantforconceptdesignandleaseofretailspaceintheproject.
• AlargenumberoftransactionswithretailrealestatewerecompletedinQ3.Thelargesttransactionswereasfollows:
· InAugustRomanovPropertyHoldingsboughttheDreamHouseshoppingcentrewithtotalareaof13,000sqmlocatedontheRublevo-Uspenskoehighway,6kmfromMKAD(theMoscowringroad).
· TashirGroupannouncedacquisitionofA.I.RaikinshoppingandentertainmentcomplexintheMar’inaRoshchadistrictofMoscow.Thecompanyplanstoinvest
morethan$200millioninordertocompletetheproject.
• Theinvestmentfund,UFGRealEstate,agreedtobuyanumberofassetsfromCapitalGroup:twobusinesscentres(ConcordandPushkinskyDom)aswellasthe9,000sqmMetromarketshoppingcentre.
• Rostelecomplanstodevelopitsownretailchainof2,500salons.Thecompanyintendstoput80%oftheoutletsundermanagementofoneoftheexistingRussianmobiletelephoneretailers,basedontheresultsofatender.
RETAIL REAL ESTATE MARKET. MOSCOW
Main indicators. Shopping centres Trends
Totalsupplyatoperatingcentres(totalspace/GLA),mlnsqm
7.77/4.18
OpenedinQ1-Q32011(totalspace/GLA),mlnsqm 0.26/0.15
ScheduledtoopeninQ42011(totalspace/GLA),mlnsqm
0.24/0.16
Vacancyrate,% 2.5
Baserents,$persqmperannum(notincludingoperatingexpensesandVAT)
anchortenants 100-500
retailgallerytenants 700-4,000
Operatingexpenses,$persqmperannum 80-260
GLAinqualityshoppingcentresper1000population(Moscow),sqm
363
*Thetableonlyshowsdataforprofessionalshoppingcentres(aprofessionalshoppingcentreisdefinedasonebuildingoragroupofarchitecturallyconnectedbuildingswithtotalspaceinexcessof5,000sqm,unitedbyasingleconceptandundersinglemanagement)
**Ratesforstoreswithspaceofabout100sqmonthegroundfloor
Source:KnightFrankResearch,2011
Sergey GipshRegionalRetailDirector,Partner,KnightFrank
TheretailpropertymarketofRussiacanbedeterminedatthemomentbyhighlevelofinvestmentsanddevelopmentandalsobytheshifttowardsthetownsinMoscowRegionandtocitiesinotherregionsonbehalfofdevelopersandretailersalike.
Thisyearpromisestosetnewrecordsforretailinvestmenttransactions.Currentlytotalsegmenttransactionsareinexcessof$1.5billion,representingabout40%oftotalcommercialrealestatetransactionsontheMoscowmarket.
www.knightfrank.ru
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Supply
OpeningsofanumberofMoscowshoppingcentres,whichhadbeenscheduledforthirdquarter,werepostponed.OverallspaceatmodernshoppingcentresinMoscowincreasedby3.3%(263,000sqmwith146,000sqmGLA)inninemonthsof2011andreachalevelof7.8millionsqm(4.2mlnsqmGLA)*.
LimitationsonconstructionofretailobjectsinsidetheThirdTransportRing
conditionedbytheauthorities’policyonrevisionofinvestmentprojectscausedfocusofdevelopersattentioninthethirdquarteronprojectsindormitorydistrictsofMoscowandtownsinMoscowRegion.TheGrenadashoppingcentrecommissionedinAugust2011inthetownofLubertsyjustoutsideMoscow(3kmfromMKADontheNovoryazanskoeHighway),andseveralmoreopeningsinMoscowRegionareexpectedbytheendoftheyear,includingthefirstphaseoftheSolnechnyshoppingcentreinthetownofSolnechnogorsk.
It’sworthnotingthatnewretailprojects’sizeisnottypicalforMoscowstandards.Annuallysince2006fourormoreshoppingcentresofregionalorsuper-regionalscalehavebeenbroughtintooperationinMoscow.
Butthisyearonlyonesuchcentre(Afimallcity)wascommissioned.Financingdifficultiesandconcernsoneconomicuncertaintyareshiftingdevelopersinteresttosmaller-scaleprojects.
Growthofsupplyinstreetretailisinsignificantincomparisonwithshoppingcentres.Mostofstreetretailexpansionislinkedtoopeningofnewretailpremisesinmixed-usedcomplexes.Forexample,theBahetleopenedastoreintheSummitmixed-usecentreduringthethirdquarter.
SeveralMoscowresidentialdevelopershaveannouncedplanstoinstallretailpremisesonthegroundfloorofnewresidentialdevelopments,whichmaygiveasubstantialboosttostreetretailinthemedium-term.
*WeincludeintheMoscowmarketlargeretailcentreslocatedoutsidecitylimitsbutclosetotheringroad(MKAD),whichservecityresidents.
Shopping centres brought into operation Q1-Q3 2011
Name Address Total space (thousand sq m) GLA (thousand sq m)
ShoppingcentreaspartoftheMonArchmixed-usecomplex
Bld.1,31Leningradskyav. 16 10.7
PlanernayaInterchange Planernayametrostation 50.3 11
AfimallCity 2Presnenskayaemb. 179.4 114.2
SevernoyeSiyaniye 1DmitriaDonskogoblvd. 17 10
Source:KnightFrankResearch,2011
Rates of supply growth slowed down in 2011, causing further decrease of the vacancy rate Thousand sq m
4%
34%
14%
1 000
800
600
400
200
02008 2009 2010 2011
%
10
8
6
4
2
0
Q1 Q2 Q3 Q4 Vacancy rate, %
Sourse: Knight Frank Research, 2011
Q3 2011 RETAIL REAL ESTATE MARKET Moscow
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Demand
SeveralprominentclothingbrandsenteredtheMoscowmarketinQ32011,includingDesigual(Spain),Victoria’sSecret(US)andBananaRepublic(US),whileotherretailchainsexpandedtheirpresence.RetailersarefollowingdevelopersintothetownsofMoscowRegion:AzbukaVkusasupermarketsopenedafourthstoreintheRegionandthefootwearchain,Obuv’RossiiopenedthreestoresinMoscowRegionduringthesummerandplansfurtheropeningsbytheendoftheyear.
Limitedopportunitiesforexpansioninthecapitalandincreasingcompetitionhaveencouragedmainretailchainstofocusonqualitativedevelopment.Thebiggestconsumerelectronicschains–EldoradoandM.Video–carriedoutrebrandingduringthesummerandpresentednewstoredesigns.
Fornowthenewdesignshavebeenimplementedonlyatafewstores,buteventuallyallstoreswillbeupdated.AzbukaVkusaisrebuildingitsoldeststores.
Severaloperatorsplantoopenstoresinnewformatsinthenearfuture.ForexampleStarikKhottabychplanstodevelopchainofmini-stores,whicharehalfthesizeofthecompany’spresentstandards.SvyaznoyplanstodevelopinMoscowdepartmentstores“SvyaznoyMarket”,offeringarangeofeverydaygoodsinadditiontoitstraditionalcellular-relatedproducts,whileMetroC&Cisconsideringnewopeningsinthecorner-shopformat.
Shortsupplyinshoppingcentrescontributesretailersdevelopmentonstreetretailmarket.DuringQ3growthrateofclothingretailersisapproachingtotraditionalleadersofthesegment–restaurantsandbanks.
Commercial conditions
ThecurrentsituationontheMoscowretailrealestateisdeterminedbyretailerslarge-scaledevelopmentplansandveryslowgrowthofsupply.AsaresulttherewasfurtherdecreaseofvacantpremisesinMoscowshoppingcentresduringthethirdquarter.Thevacancyratedecreasedby2.5%duringtheperiodandapproachedhistoriclows.Thevacancyrateofpremisesinoutdatedcomplexeswithpoorlocationand/orwithunsatisfactorydesignremainssignificantlyhigherthanthemarketaveragerateandreaches7-10%.
Intensecompetitionbetweenretailoperatorsisenablingpropertyownerstorotatetenantsprovidingasaresultrentalratesincrease.
Rental rates at Moscow shopping centres, Q3 2011
Type of premises Area, sq m Retail profile Rate, $ per sq m per annum*
Anchortenants >5,000 Foodhypermarkets 100-250
Otherretailers 150-250
1,500-5,000 Foodsupermarkets,otherretailers 250-400
500-1,500 Foodsupermarkets,otherretailers 300-600
Anchortenants 300-500 Children’sgoods 400-1,000
Clothing,footwear(groundfloorandfirstfloor) 600-1,200
100-300 Clothing,footwear(groundfloorandfirstfloor) 800–2,500
50 Leathergoods,bijouterie,gifts,jewellery,mobilephones(groundfloor)
1,500–4,500
*NotincludingoperatingexpensesandVAT(18%)
Source:KnightFrankResearch,2011
Otradashoppingcentre,
2Pyatnitskoyehighway
www.knightfrank.ru
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AsawholeMoscowshoppingcentresrentalratesdemonstratemoderatelypositivetrend:duringQ3rentalratesgrewby7%onaverage.Operatingcostsremainedunchangedingeneral,althoughtherewereincreasesatsomeshoppingcentres.
Therewasasmallincreaseofrentalratesinstreetretailduringthethirdquarter.Sincethebeginingoftheyearrentalratesinthesegmenthaveincreasedbyabout15%.
Forecast
Sixshoppingcentreswithtotalareaof250,000sqm(165,000sqmGLA)arecommissioningbytheendoftheyear.TheWaymartshoppingcentre,locatedinMoscowRegion26kmfromMKAD,isnowredevelopingintoanoutletcentre.
Asfarassincelast2-3yearstheconstructionofthemostnewprojectswaspostponed,ashortageofretailspacecanbeexpectedinthenearfuture,whichwillprobablycausefurthergrowthofrentalrates.
Average rental rates in main street retail areas of Moscow Q3 2011
Location $ per sq m per annum
MostexpensivestreetsinsidetheGardenRing(Stoleshnikovln.,Tverskayast.,Petrovkast.,Kamergerskyln.) 2,500-7,000
OtherstreetsinsidetheGardenRing(KuznetskyMostst.,Pyatnitskayast.,Arbatst.,BolshayaYakimankast.,etc.) 1,500-3,000
GardenRing 1,000-3,000
Mainroadarteries(Leningradskyav.,Leninskyav.,Komsomolskyav.,Kutuzovskyav.) 1,000-2,500
Dormitorydistricts 500-1,500
Source:KnightFrankResearch,2011
Shopping centres commissioning in Q4 2011
Name Address Total space (thousand sq m) GLA (thousand sq m)
Kaleidoscope 7-23Khimkinskyblvd 66.2 41
Parus 1Novokurkinskoyehw. 35.5 25.8
Aventura Bld.2,1SevernoyeChertanovomicro-region 35 20
Confeti 7Venevskayast. 30 23
EGOMall 23Dezhnevapassage 11.2 5.5
Otrada 2Pyatnitskoyehw. 66.2 49.6
*NotincludingoperatingexpensesandVAT(18%)
Source:KnightFrankResearch,2011
OVERVIEW
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Office Real EstateStanislav [email protected]
Warehouse Real Estate, landViacheslav Kholopov [email protected]
Retail Real EstateSergey Gipsh RegionalRetailDirector,[email protected]
Professional Consulting ServicesKonstantin RomanovPartner,[email protected]
Elite Residential Real EstateElena [email protected]
Financial Markets and InvestingEvgeniy [email protected]
Valuation ServicesOlga Kochetova [email protected]
Saint PetersburgNikolai Pashkov
KyivMikhail [email protected]
Marketing, PR, and Market ResearchMaria [email protected]
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© Knight Frank 2011
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