retail market review · key indicators enter of new premises vacant premises rental rates...

Moscow

RETAIL MARKET REVIEW

MOSCOW The results of 2012 year

2 / COMMERCIAL REAL ESTATE / RETAIL / The results of 2012 year

Moscow

OLGA ZBRUEVA The head of client service department of ASTERA in alliance with BNP Paribas Real Estate

“The distinguishing feature of 2012 has been the decentralization of demand. Under the conditions of the ban on the construction of new commercial real estate in the center of Moscow, limited amount of high-quality supply and competition many retailers had to develop its

business in residential areas of the capital, Moscow suburbs and Russian regions”.

THE MAIN TENDENCIES

In 2012 the activity of the players of real estate market remained at a high level. Particular activity was shown by the networks of food stores, food service, children's goods, clothes and footwear. They have expanded their presence on the market, also by adapting to the existing concept to the characteristics of the rented premises and by the development of new formats.

The owners of existing shopping centers pursued a policy of increasing the efficiency of their objects by attracting new brands; planned rotation of existing tenants for more interesting, stable and solvent ones; by using of marketing instruments for promotion the object and strengthening the loyalty of its visitors.

The level of rental rates in the segment of shopping centers in the whole

market has not changed significantly, increasing occurred within the annual

indexation. The growth of rental rates was observed in the most successful

and popular among the tenants shopping centers.

Under condition of limiting construction of objects in center of Moscow and the low volume of new commercial objects commissioning public catering retail chains, banks, pharmacies increased activity in segment premises format - street retail. In its turn it has led to increased competition for the most attractive premises and to the growth in rental rates, especially in the popular shopping corridors in the center of Moscow.

In 2012 in the street retail segment the determining factors for retailers in choosing a new location for the shop were the intensity of pedestrian traffic in the area of the object location and the presence of the target audience. The operators aimed to benefit from each square meter. Image projects became sporadic.

From the owner of real estate in street retail format the high activity was associated with the desire to replace inefficient tenants for more reliable and solvent partners that can provide a steady flow of rental payments. Therefore, often the owners were willing to leave the tenants before the end of the lease term.

In 2012 due to a shortage of quality retail premises and high rental rates in Moscow many retailers have changed their focus to the regions.

KEY INDICATORS

ENTER OF NEW PREMISES

VACANT PREMISES

RENTAL RATES

CAPITALIZATION RATE

The main indicators of retail premises market in Moscow shopping centers on results of 2012 Total stock of retail premises in Moscow on results of 2012

Total area, sq.m 6 246 717

Leasable area, sq.m 3 439 247

Stock commissioned in 2012

Total area, sq.m 337 704

Leasable area, sq.m 183 747

Source: ASTERA

Average rental rates in street retail premises market in Moscow, Q4 of 2012

Average rental rates**, USD/sq.m /p.a.*

Inside the Garden Ring 1900-2600

Between the Garden Ring and the Third Ring

1600-2400

Between the Third Ring and Moscow Ring Road (dormitory districts)

700-1500

Source: ASTERA

Rent levels and sale prices are influenced by different factors such as

proximity to subway stations, size and condition of premises etc., which

are not reflected in the chart


Moscow

SUPPLY

The eleven trade objects with total area of 337 704 sq.m were commissioned in

Moscow according to the results of 2012. The volume of new supply is

approximately equal to that of 2011 (349 000 sq. m).

The total area of quality retail premises market in Moscow in 2012 was 6 246 717

sq.m.

The name of the object

Type Address GBA, sq.m GLA, sq.m

Kaleidoskop SEC Himkinsky blvd .,7-23 119 079 41 047

Outlet Village

Belaya Dacha, 1

queue

Outlet Novoryazanskoye highway,8

40 800 38 000

Parus SC Novokurskinkoe highway, mkr.17, 1

35 500 18 000

Otrada, 2 phase ТП Pyatnitskoye highway, 2

31 590 28 000

Panfilovsky SC Zelenograd 24 820 13 300

Konfetti SC Nagatinskaya, 16 21 000 17 600

Sviblovo SC Snejnaya, 27 18 215 6 200

Sombrero SC Varshavskoe highway,152А

17 000 6 500

Sammit MFC Tverkaya str., 22 17 000 6 400*

Tropa SC Profsoyuznaya, 118 7 800 5 500

Kazansky Komsomolskaya sq., 2 4 900 3 200

In total 337 704 183 747

New objects of Moscow commercial real estate commissioned in 2012

Source: ASTERA

* Considering the multifunctionality of the object it is shown trade area, which is also a leasable

area In 2012 the real estate market players took particular interest to the format of outlets. At the moment four such projects is realized in Moscow: Outlet Village Belaya Dacha, Outlet Village Kievsky, Fashion House Moscow and BrendCity.

The pace of commercial real estate commissioning in Moscow in 2012 were not

sufficient to satisfy the demand for high quality retail objects in Moscow from

the network retail. As a result many operators have made the focus on opening

new stores in the cities near Moscow and other regions. According to the official

plans of developers in 2013 the situation in Moscow has to change. The

projected volume of new objects in the capital for the next year – 1 203 000 sq.

m (SC “Guzdo”, outlet Fashion House Moscow, River Mall, MC, etc.). If all the

projects will be realized the rate of 2013 will reach the level of 2010 (1 196 000

sq. m). In this case the total amount of quality retail premises in Moscow will be

7 449 717 sq.m. New objects of Moscow commercial real estate to be commissioned in 2013



Vegas «Кrokus City»

SEC 66 km МRR 283 456 111 398

River Mall SC Аvtozavodskaya, 16-18 260 100 91 200

Vegas Кунцево SEC 55-56 km MRR 231 253 113 402

Dynamics of new retail space commission in Moscow, 2003 – 2012, total area, thousand of sq.m*

Source: ASTERA

**Projected volume of commissioning of new objects in 2013 is

calculated on the basis of declared plans of developers

Classification of Moscow shopping centers according to zone of influence, Q4, 2012

.

Sourse: ASTERA

Commissioning of new SC in Moscow in 2012

SC Kaleidoskop


Moscow

Vesna SEC Altuf’evskoe highway 126 000 56 000

Gudzone SC Kashirskoe highway, 12 120 000 56 000

Fashion House

Moscow Outlet Leningradskoe highway 38 800 28 765

Moskvorechie SEC Kashirskoe highway, 52 30 000 19 780

River Dail MFC Paveleckaya bund. 25 131 *4 000

MC SC Mikluho-Мaklaya,36 18 000 12 400

Mandarin SEC Montazhnaya, 9 17 600 *14 900

In total 1 150 340 469 165

Source: ASTERA

* On MFC objects is considered only leasable area in the calculation of the projected new supply in 2013

Commercial real estate market of Moscow region filled with volume of new

supply due to commissioning of 256 716 sq.m.

New objects of commercial real estate commissioned in Moscow region in 2012



Torgovy kvartal SEC Domodedovo 31 216 22 001

Iun’ SEC

Mytishchi

178 000 75 000

Iun’

SEC

Krasnogorsk 25 000

15 000

Gagarin SEC Ivanteevka 13 500 11 000

Oktyabrsky SC Podolsk 5 000 4 000

Citrus SC Himky 4 000 3 000

In total 256 716 130 001

Source: ASTERA

DEMAND Over 2012 the activity of the players of real estate market remained at a high

level. Because of the limit of quality retail premises in Moscow and the high level of competition some retailers have had to change the focus of their development in the capital from the shopping centers to the premises of street retail format. In Podmoskovye the segment of shopping centers still has the priority. Other network operators have continued to open new outlets in Podmoskavye (“Detsky mir”, “Svyaznoy”, “G.М.R. Planeta Gostepriimstva”, etc.), to build independently retail objects (“Magnet”, “Globus”), to try new formats of trade

(“36.6 Company”, “OTP Bank”, “Metro Group”, “Magnet”, etc.), to develop regional markets (“Kira Plastinina”, “Eldorado”, “Budu mamoy”, etc.). In particular the network retailers interested in small towns with a population from 300 thousand people, and in the cities with developed oil and gas industry with the population from 60 thousand people. Increasing competition and strengthening of online trading makes the market players to adjust marketing strategies and to use new tools to attract potential

customers, for example, social media. In the ASTERA consultants’ opinion, exactly consumer demand will determine the dynamics of development of real

estate market of Moscow and regions of Russia in the next 2-3 years. During the year the following tenant groups have been developing in the most active way: clothing and footwear, children's goods, pharmacy, electronics

SC «Parus»

SC «Sombrero»

Outlet Village Belaya Dacha

Commissioning of new SC in Moscow region in 2012

SEC «Torgovuy kvartal»

SEC «IUN’»


Moscow

stores, furniture stores. Russian banking structures, food networks (both network operators and stores with walking distance) have continued its development. One of the most active players in the market remains the catering segment.

The search for new formats

In 2012 the tendency of development by retailers of new formats has continued:

Company “36.6” transfers part of pharmacies under the new brand “The pharmacy warehouse”.

ОTP Bank opened the first mini-offices in the format of “OTP-Light”.

Meat Processing Plant “Pavlovskaya Sloboda” (brand “Velkom”) has begun to develop the network of shops and fast food restaurants.

“Real – Hypermarket” presented the first store in a new format of “urban

hypermarket” in Shchelkovo, Moscow region.

Metro Group runs in Russia two new formats of shopping complexes: Metro Punkt and ekomagazin, and also plans to open an online store.

Retail network “Magnit” is actively developing the medium format stores.

“Footwear of Russia” invests in the brand “Westfalica”, adapted to the shopping centers.

Starbucks plans to develop a network of coffee houses “along the road” Seattles Best Coffee.

“Euroset” is actively pursuing the rebranding of its stores, and Mexx – the reconception of boutiques.

Sbarro opened its first “street” pavilion - restaurant on Komsomolsky

avenue, 28. The first in Europe perfume and cosmetics boutique Chanel was opened in

hotel “Moscow”.

The company “Coffee House” starts a new format of urban institutions “CAFE HAUZ” where in addition to the standard menu, you can order a light alcoholic beverage (beer).

Networks Lenta, O’key traditionally developing in the hypermarket format, open stores in supermarket format with area 1200-1500 sq m.

The operators of home appliances and electronics Ulmart and Eldorado

starts the format “places for delivery of the goods” in shopping centers of

Moscow.

New platforms for development

In 2012 retailers have actively continued to explore the regions:

In order to enter the regional markets A5 group creates the franchising

program for its pharmacies.

“Detskiy Mir” opens its stores in the cities of Moscow Region (Himki,

Mytishchi) and in small cities with developed oil and gas industry

(Almetyevsk).

Brand “Kira Plastinina” is also planning to explore small cities. “Svyaznoy” has opened the flagman salons under the new brand “Enter” in

Moscow region, Voronezh, Tver.

The network “Eldorado” purchased the retailer “Beringia” in 2012 (28

stores in 27 cities) is negotiating with three regional networks.

The group of companies “Detskiy Mir” continues its expansion not only in

the Russian regions, but also in Kazakhstan.

Restaurants Holding “G.M.R. Planeta Gostepriimstva” has brought to the

Russian market pan-Asian cuisine restaurant chain under the brand Yam

kee (Moscow, St. Petersburg, Ryazan, Ufa, Samara, etc.).

The structure of demand In 2012 in a great demand among potential tenants of shopping centers were the premises 50-100 sq.m. It is connected with the high rotation of tenants in the premises of such format.

Distribution of the tenants’ demand in accordance with format of premises in shopping centers in 2012

Источник: ASTERA

Бренды, развивающие новые форматы в 2012 г.


Moscow

Shoes network Ecco opened new outlets in 15-17 new cities (SEC RIO

Nizhny Novgorod, SEC “Surgut City Mal” Surgut, SEC “Aura” Surgut, TEC

“Versaill”, Novosibirsk, SEC “Kaleidoscope”, Moscow, etc. ).

The network “Budu mamoy” plans to increase the number of outlets till

100 stores. For example, some of them have already been opened in SEC

“City Mall” Surgut, “Megamall”, “Mega”, “Moscowskiy”, OZ MALL

Krasnodar, etc.

The key deals on the lease

The most notable deals in 2012 in Moscow shopping centers

Company- tenant

GLA, sq.m Shopping center Аddress

Torgovuy dom 7 5 500 RIO Leningradskoye highway

Inditex 5 442 IUN’ Mytishchi, Volkovskoye highway

Inditex 5 000 Vesna Altufievskoye highway

Kronverk Cinema 4 000 Vesna Altufievskoye highway

Rе Trading 2 400 Otrada Pyatnitskoye highway

О’КEY-Express 2 000 Sombrero Varshavskoye highway, 152А

H&M 2 000 Otrada Pyatnitskoye highway

Sportmaster 1 880 BrandCity 26 km MRR

Funky Town 1 800 IUN’ Mytishchi, Volkovskoye highway

CUM Outlet 1 600 Fashion House

Moscow Leningradskoye highway

Kanzler 1 500 Mega Belaya Dacha Kotelniki

Mirotorg 1 500 Evrodom Odintsovo

Detskiy GUM 1 500 Маly korpus GUM

Vetoshny lane

MaxFitness 1 400 Erevan Plaza B. Tulskaya str., 13

Uyterra 1 100 Afimoll City ММDC «Moscow City»

Domarket 1 000 MC Mikluho-Maklaya str., 36

Sourse: ASTERA

RENTAL RATES

During 2012 a significant increase in rental rates was not observed both in the

segment of shopping centers, and in the segment of street retail. Rates rose

within the stipulated already signed lease contracts indexing - 5-15%.

The dynamics of rental rates in Moscow shopping centers depended on the

demand for each separate SC. The particular relevance had such factors as good

location of commercial object, the competent concept and efficiency of

marketing solutions.

In the segment of premises of street retail format there was an increase in rental

rates for the most liquid premises located on the most popular destinations in

the central part of the city.

VACANCY RATE During the whole 2012 the total amount of vacant premises in the most attractive shopping centers in Moscow remained at 2%.

In the most popular objects such as the shopping center "Okhotny Ryad",

"Europeysky", "Metropolis", "Atrium" are still present waiting lists. Rotation in

such complexes occurs only by replacing by the management company tenants

Distribution of demand on the profile of

companies renting premises street retail in 2012

Sourse: ASTERA

Rental rates (min/max) on the premises street retail on the main trade corridors of Moscow, Q4 of 2012

Тrade coridor Rental rate, USD / sq.m.

per year Tverskaya str. 2000-7000

Petrovka str. 2000-4200

Arbat str. 1800-3000

1st Tverskaya-Yamskaya str.

1700-3000

Leningradskiy avenue 1300-3000

Bolshaya dmitrovka str. 1800-3000

Leningradskiy avenue 1100-3000

Kuznetskiy Most str. 1800-2900

Myasnitskaya str. 1200-2800

Kutuzovsky avenue 1700-2800

Maroseika str. 2000-2800

Mira avenue 1300-2100

Pyatnitskaya str. 1200-2000

Sourse: ASTERA

The most active participants of the market:

The networks of food stores in the following formats:

The shops selling products from the manufacturer, 20 -70 sq.m. in dormitory areas and near metro stations;

The supermarkets 300-1000 sq.m as in shopping centers as in the format of

street-retail. Network public catering establishments in the following formats:

the restaurants with the area of 200-600 sq. m;

cafe and coffee houses 120-200 sq.m.


Moscow

for more successful and interesting for customers brands.

In the less popular shopping centers the vacancy rate is around 3%. In just

commissioned shopping centers and unsuccessfully located objects this rate

reaches 10.7%.

PROGNOSIS

The limitation of construction of commercial real estate the center of Moscow,

no plots for building, as well as the situation of instability in international

financial markets have predetermined low volume of commissioning of new

retail premises in Moscow. According to the prognosis of ASTERA consultants,

the main part from 1,203,000 sq.m of quality retail premises, announced by

developers to be commissioned in 2013, will be implemented not earlier than in

2014. So, the deficit for quality retail premises will continue. It can be predicted

that the owners of shopping centers will continue the policy of active rotation of

tenants in order to increase the efficiency of their objects. Therefore, the rental

rates for premises in format shopping centers have a definite growth potential,

especially in liquid objects.

In the segment of street retail the growth in the volume of trade offer in 2013

will occur due to the premises on the first floors of new residential complexes.

Demand for premises street retail format will be consistently high, but it will not

lead to the growth in rental rates. Considering the experience of the crisis years

(2008-2009) and the struggle for improvement the effectiveness, in 2013 many

operators will continue the conservative development strategy, abandoning the

unprofitable outlets. The main criterion will be the opportunity for profit.

Anchor tenants’ rental rates in Moscow shopping centers in 2012

Business category Rental rate*, USD/sq.m/p.a.

Cinema 120-250

DIY 100-150

Foods 200-400

Household goods 250-400

Goods for children 300-600

White goods 200-400

Clothing and footwear 400-800

Sourse: ASTERA * Rent rates are indicated excluding VAT and operational expenses

Rental rates distribution on the profile of trade galleries tenants in Moscow shopping centers in 2012

Business category

GLA, sq.m Rental rate*, USD/sq.m /p.a.

Public catering 50-300 1000-3000

Clothing and footwear

50-200 700-2500

Perfumery, Cosmetics

50-300 1500-2500

Accessories, jewelery

30-60 1500-3000

Cellular network 30-80 2500-4000

Sourse: ASTERA * Rent rates are indicated excluding VAT and operational expenses


Moscow

ABOUT ASTERA COMPANY

ASTERA an alliance member of BNP Paribas Real Estate – an

international consulting company, provides professional services in commercial and élite residential real estate. The company has been actively operating on the Russian market since 1992. Company’s offices are located in Moscow, Saint-Petersburg and Kiev. ASTERA is a partner of BNP Paribas Real Estate company in Russia and the Ukraine. BNP Paribas Real Estate — a leading international

company in real estate sphere, which occupies leading positions among the consulting companies on the European market in terms of turnover volume by the results of 2010. Alliance with BNP Paribas Real Estate gives the ASTERA an opportunity to represent the clients’ interest abroad and to attract foreign investment to Russian development projects. In ASTERA company's portfolio are retail, office, industrial, warehouse and hotel facilities, including large multifunctional complexes and commercial premises in the format of street retail, separate buildings, projects "for the client» (built-to-suit) and land. In ASTERA company's portfolio there are more than 500 implemented projects of strategic and investment consulting, exclusive database of 30,000 objects in all segments of commercial real estate. Since 1992 ASTERA consultants have realized more than 6,000,000 sq.m of commercial premises and concluded over 9000 transactions in the real estate market in Russia and in the Ukraine. ASTERA clients are more than 4 000 companies, including major international and russian financial, investment, commercial and industrial corporations and networks.

ASTERA provides a full range of services for

investors, developers, owners, tenants and

buyers of commercial real estate:

• Consulting services

• Investment consulting

• Real estate assessment

• Brokerage services

• Pre-brokerage

• Representation of client’s interest • Legal services

• Promotion of real estate objects

Reputation of ASTERA is confirmed by

membership in the leading Russian and

international professional

associations:

• The guild of Managers and Developers of

commercial and industrial real estate

• Russian Council of Shopping Centers

• Russian Guild of Realtors

• Russian-British Chamber of Commerce

• The Association of European Business

Office in Moscow Тel.: +7(495) 925-00-05 Fax: +7(495) 981-05-65

Office in St.Petersburg Tel.: +7(812) 703-00-03 Fax: +7(812) 703-00-04

Office in Kiev Тel.: +380(444) 501-5010 Fax: +380(444) 501-5011

www.asteragroup.ru [email protected]

retail market review · key indicators enter of new premises vacant premises rental rates...

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