Shortage of retail property in Moscow forecast for 2012-2013

The first half of 2010 saw a recovery in the supply of new space on the Moscow retail property market – a development driven by the opening of several new large shopping centres in the city. The aforementioned period saw the addition of 258,000 m² completed-to-use gross leasable area (GLA) onto the Moscow retail market. However, the expected shortage of new retail premises in Moscow in 2012-2013 may reduce the overall amount of vacant space in the city, which in turn may push rents up.

Share of vacant premises still at 10-12%

By the end of the first half of 2010, there was a total of 3.69 million m² (excluding catering trade) of trading area in Moscow’s shopping centres, of which 10-12% was vacant, according to a GVA Sawyer report. The total area of the shopping centres was 6.49 million m². However, despite an increase in the total volume of trading area and a rise in demand for retail space from retailers, the share of vacant premises remained the same as in 2009. This was largely due to the fact that in 2009 many shopping centres were opened despite being only half occupied (typical occupancy rate of 40-60%).

GVA forecasts that there will be almost 4 million m² of retail area in Moscow by the end of 2010.

Five major shopping centres opened

The first six months of 2010 saw five major, in terms of trading area, shopping centres opened in Moscow. The largest of these was the Vegas shopping centre with 180,000 m² of trading area (total area 298,000 m²).

Major trading centres completed to use in Moscow. H1 2010

Shopping centre	Total area (‘000 m2)	Trading area (‘000 m2)
Vegas	298.0	180.0
Tvoy Dom	57.0	26.0
Viva	32.0	21.6
Rechnoy vokzal	30.0	20.0
Azovsky	21.7	10.4

Source: GVA Sawyer, 2010


5-10% increase in rental rates

According to the GVA Sawyer report, during the first half of 2010 the majority of retail operators in Moscow observed a 5-10% year-on-year increase in rental rates. What is more, the practice of replacing fixed rents with rates calculated based on the turnover generated by tenants of shopping centres has become increasingly popular. This is particularly true in the case of large clothing chains.

New retail formats developed in H1 2010

From January to June 2010, a period in which the retail market experienced slow recovery in the aftermath of the financial crisis, the major retailers present in Moscow continued to develop new retail formats. The majority of retailers focused on smaller-format and discount stores. As Elena Prosvetova, the senior expert analyst from the consulting department at GVA Sawyer, told Retail Update Russia, the development of smaller formats represents an opportunity for retailers to save on rent and labour costs. Stores operating in the low-price segments also increased in popularity.
According to Rosstat, in H1 2010 retail turnover in Moscow amounted to RUB 1,348bn ($44.2bn), which represents an increase of 4.6% year on year. Food products accounted for 50.4% of the total value of retail turnover in the Moscow area.

Shortage of GLA in Moscow expected in 2012-2013

The GVA report predicts that the Moscow retail market will experience a shortage of available-to-use trading area in 2012-2013. This will be largely due to the low number of shopping centres scheduled to open during this time. Of those shopping centre projects that have already been confirmed, the majority are set to open in 2011. These planned openings include the River Mall (total area of 258,000 m², of which 88,000 m² will be trading area), the Tverskaya Mall (113,500 m², of which 37,500 m² will be trading area), and the Gudzon shopping centre (120,000 m², of which 71,000 m² will be trading area). Mrs Prosvetova explained to Retail Update Russia that the shortage of new retail premises in Moscow in 2012-2013 may reduce the overall amount of vacant space in the city, which in turn will push rents up. However, the situation on the market will largely depend on the debt-financing possibilities available to Moscow retailers, and the rate at which consumer demand recovers.

Mateusz Lasek
Business Editor
PMR Publications