Real Estate Quarterly - Q4 2O11 Retail - The Moscow Times
←
→
Page content transcription
If your browser does not render page correctly, please read the page content below
RealEstate Quarterly
Retail
Q4 2O11
Shopping malls take on new formats,
and the regions attract retail space
For office developers, parking wins out
Penthouse market in Moscow matures
Q4 2011 CO NTE N T S
EDITOR’S VIEW ................ 4 IN THE REGIONS
Regional Malls Pick Up
WHAT’S UP
Pace ................................................. 17
News and views from Mall developers see gold mine in
Moscow and beyond................. 5 provincial cities, even small ones
A pictorial roundup................. 10
INSIDER’S VIEW
Hotels Are Heading to
MARKET UPDATE
Economic Hubs .......................... 23
The Next Evolution
Hyatt International’s managing
in Retail .......................................... 12
director details the brand’s plans
New types of malls are springing
up in Russia, starting with an incom- LEGAL NOTE
ing wave of outlet centers Acquiring Rights to Premises
in ‘Future’ Shopping
The Big Squeeze:
Centers........................................... 30
Developers Battle Moscow
Tenants should be cautious buying
Parking Woes ............................. 20
into malls still under construction
Parking is a selling point for
offices, especially if free parking ST. PETE SCENE
is banned
Real estate overview from
The Most Expensive the northern capital, with a look at
Apartments in Moscow ......... 26 St. Petersburg’s new governor. .. . 32
Panoramic views worth millions
APPOINTMENTS .............33
in the capital’s exclusive
17
penthouses INDEX...........................................34
12 26
realestate.themoscowtimes.com 3
EDITOR’S VIEW Q4 2011
Letter From
the Editors
Publisher Ekaterina Son
Editor Rachel Nielsen
r.nielsen@imedia.ru
Deputy Editor
Alec Luhn
a.luhn@imedia.ru
R
Art Director
Maria Georgiyevskaya
Project Manager eviewing the past year in the Russian real estate market, it is
Marina Khloptseva clear that a giant bounceback has occurred. Investment in
Cover photo
Andrei Makhonin/Vedomosti Russian real estate totals more than $5 billion thus far in 2011,
The Moscow Times Business Review
according to a third-quarter estimate by Jones Lang LaSalle,
Real Estate Quarterly Q4 2011 (№ 32) and more deals are cropping up this quarter.
Published: November 2011
Retail is one of the segments fueling the expansion of the market. A number
Chairman of Supervisory
Board Derk Sauer
of the deals with the largest price tags this year have been for shopping malls
CEO Elena Myasnikova in Moscow. In this issue we look at related trends. Retail formats new to Russia,
Director Mikhail Doubik
Editorial & Production including outlet centers, speciality centers, convenience centers and even so-
3 Polkovaya Ul., Bldg. 1, Moscow, Russia called power centers, are appearing in Moscow and other locales, either in tra-
127018
Editorial tel: +7 (495) 234-3223 ditional or improvised forms. Meanwhile, cities as far-flung as Surgut and Barnaul
Editorial fax: +7 (495) 232-6529
are receiving investment in the form of elegantly designed malls.
Advertising tel: +7 (495) 232-4774
Advertising fax: +7 (495) 232-1764 Hotel expansion is a topic to which we return in this issue of REQ, with an
Printed in Russia at interview with the top gun for Hyatt’s international operations and strategy. In that
Moskovskaya Gazetnaya Tipografia,
reporting, too, we found that investors and developers aren’t shy about getting
Ul. 1905 Goda, 7/1, Moscow, Russia
123995 into regional cities.
Tel.: +7 (499) 259-8110
www.mosgt.ru
Back in Moscow, we looked at office parking and penthouses. For the first
Заказ № 3932 topic, we sat down with developers and asked about their parking dilemmas. For
This publication is registered by the Federal the second, we went on a tour of penthouses to give you a glimpse of a world
Service for Media Law Compliance and
Cultural Heritage that literally few see from the inside.
ПИ No. ФС77-23860.
This is the final issue for 2011. But you can follow us online at www.the-
© Copyright 2009 by OOO United Press.
All Rights Reserved. moscowtimes.com/realestate. You can poke through this issue’s contents, plus
ISSN No. 1566-7472.
an exclusive Q&A with the general director of one of post-Soviet-Russia’s first
Тираж 35 000. Цена свободная.
architecture firms. We also are updating the real estate section with each week’s
www.realestate.themoscowtimes.com
commercial and residential news.
Founder and Publisher: OOO United Press
Address: 3 Polkovaya Ul., Bldg. 1, Or get in touch: r.nielsen@imedia.ru and a.luhn@imedia.ru. T ell us what you
Moscow, Russia 127018
want to see covered in our next issue. And see you on these pages again soon.
4
Q4 2011 W HAT ’S U P?
RESTORED BOLSHOI THEATER/ IGOR TABAKOV/ MT/
Bolshoi Impresses, Price Tag Stuns
The Moscow Times
T he Bolshoi Theater has re-opened its doors to theatergoers for the first
time in half a decade, and both Russian and foreign observers praised
the meticulous restoration of the home of Russian ballet and opera.
Such success in architecture and preservation didn’t come cheaply.
Summa Capital, the investment group that took over the project in 2009,
estimated in October that the final cost was 21 billion rubles ($680 million).
The cost of the restoration skyrocketed as the extent of the theater’s struc-
tural weakness was uncovered, the original contractor was fired, corruption
charges were leveled and the project ran years behind schedule.
A bill of $680 million is about $70 million more than the initial estimate.
Some authorities have suggested the final cost could easily have been 40bil-
lion rubles ($1.3 billion), and the Audit Chamber claimed in 2009 that the
price tag had jumped to 16 times the original estimate.
The restoration rebuilt the foundation of the theater, enlarged the theater’s
stage and returned 19th-century flourishes to the interior, which has been
restored to its pre-revolutionary grandeur.
“There was no cost or effort spared in the reconstruction of this theater,”
said Mikhail Sidorov, the Summa Capital spokesman.
realestate.themoscowtimes.com 5
WHA T ’ S U P ? Q4 2011
The renovation of the Bolshoi’s main stage began in 2005 and was sup-
posed to be finished in 2008. In the interim, performances were shifted to the
smaller “New Stage,” which opened in 2002.
The project spiraled out of control when engineers discovered that the
building’s foundation had dangerously shifted, leaving numerous giant cracks
running from the roof to the base.
“When it was decided to reconstruct the theater, no one could have fore-
seen the real scope of the work,” Sidorov said during an October press tour.
“Cracks in the lower wall were so big you could put a hand through them.
The theater could easily have just collapsed like a house of cards.”
After extensive efforts to shore up the foundation, a cast of thousands set
to work restoring the theater to what it looked like in the 1850s. That meant
tearing out the concrete floors and orchestra pit installed in the Soviet era,
while bringing an army of 3,600 skilled craftspeople to recreate the elabo-
rately-gilded paneling, velvet and gold-brocaded balconies and reveal MAYOR SERGEI SOBYANIN /MAXIM STULOV/ VEDOMOSTI/
19th-century murals covered over by decades of paint.
The plush red seats of the theater’s main hall were stuffed with horse- Some Land Sales Frozen Ahead of
hair, upholstered with Italian fabric using 18th-century methods and glued Approval of New Moscow Borders
together with a special recipe of tea leaves and sturgeon guts. Six kilograms
Combined Reports
of sound-reflecting gold-leaf paint was applied to the chandeliers and
partitions, and tens of thousands of pounds of hand-cut crystal pieces strung
from the chandeliers — the centerpiece being a two-ton glistening behemoth
hanging over the main hall.
M oscow City Hall has told the Russian Housing Development
Foundation to cease land sales on territories slated to become part
of greater Moscow, a step that comes even before the borders of the
Crews also excavated deep beneath the theater and the square in front expanded capital have been officially approved, sources told V edomosti.
of it, carving out more than 40,000 square meters of new rehearsal, storage The Russian Housing Development Foundation placed a two-month
and technical space — double what previously existed. freeze on the sale of two land plots in the Moscow region within the planned
Similarly intense efforts were put into upgrading the rigging, lighting and new administrative borders of the city. According to the foundation’s web site,
acoustical elements using the leading technological advancements avail- the freeze “is necessary to clarify information on the potential land allocation
able, Sidorov said. for governmental and parliamentarian centers.”
Some work is continuing. The Moscow metro plans to close the part of Announced by President Dmitry Medvedev in June, the plan to expand
the Dark Green Line between the Teatralnaya and Novokuznetskaya stations Moscow would attach a giant blob of land to the capital’s southwest edge.
— which runs directly beneath the theater — for the last two weekends of Federal and city officials have explained the addition as a way to relocate
November to install the final acoustical dampeners. federal government offices from central Moscow and to construct a hub of
financial offices. There also could be one or more town-sized spots of land
included in Moscow’s land holdings.
But the government hasn’t decided where in this territory the government
center would be located, or which government agencies would be relocated
and how much land would be needed, Marat Khus nellin, director of the city
construction agency, said in October.
The Federation Council must confirm the new city borders before they can
become legally binding — a step the authorities in Moscow hope will occur
before the end of this year.
The territories are being zoned and surveyed, a source at the city con-
struction agency told Vedomosti.
Previously, Alexander Braverman, director of the housing foundation,
reported that the land to be annexed by Moscow for the city expansion
includes 1,247 hectares of land belonging to the fund and slated to be
developed into residential housing. However, for the time being the founda-
tion has been advised not to sell any of this land, an official in the Mayor’s
office told Vedomosti.
The official in the Mayor’s office said deals involving land annexed by the
capital will be restricted until the city has reserved the plots it needs. Such an
injunction is possible when the authorities know that they will need to appropri-
ate land, but the exact size and location are unknown.
BOLSHOI THEATER FACADE/ IGOR TABAKOV /MT/
(Vedomosti, REQ)
6
WHA T ’ S U P ? Q4 2011
Andrei Kocherov, a spokesman for Alfa Group’s investment unit A1,
confirmed that the company had acquired the assets but declined to provide
details of the deal.
Several sources close to the deal have told V edomosti that the assets
acquired by the group had been released by the court.
Khalin said apartments in the complex could be in high demand among
members of the regional elite eager to flaunt their status.
The prices for housing in the complex could range from $30,000 to $60,000
per square meter, depending on the interior design, Khalin estimated.
Garkusha said it could take up to 10 years for the hotel and the apartment
complex to become profitable.
OPPOSITE THE KREMLIN/ COURTESY OF DB DEVELOPMENT
Mostotrest Wins $550M Contract to
Upgrade Road to Khimki
District to Be Built Opposite Kremlin By Anatoly Medetsky, The Moscow Times
By Irina Filatova, The Moscow Times
T he capital’s first elite district with a high-end apartment complex, luxury
hotel, restaurants and shops — a district worth a total of $300 million
M oscow-traded Mostotrest has won a $550 million government con-
tract to rebuild a traffic overpass system in north of Moscow.
Mostotrest announced the deal in September. Work on the Businovskaya
— might appear across from the Kremlin in the near future. overpass, which is on the MKAD highway and connects the city with the
DB Development has announced that it signed a contract to develop a suburban area of Khimki, is expected to be completed by October 2014,
30,000-square-meter site on Sofiiskaya Naberezhnaya, the Moscow River Mostotrest said.
embankment facing the Kremlin. Mostotrest, co-owned by Prime Minister Vladimir Putin’s former judo part-
DB Development, a joint venture of Deutsche Bank and Austria’s Strabag ner Arkady Rotenberg, outbid another construction firm, Avtoban, in a tender
focusing on Russia and the CIS, will develop the site on the Moscow River by state company Russian Highways.
embankment, which stretches from Kamenny Bridge to the British ambassa- The 17 billion ruble contract includes construction and improvement of
dor’s residence. flyovers, overpasses and exit roads with a total combined length of 14.5
The project, whose overall area will be about 87,000 square meters, kilometers.
includes an apartment complex of about 37,000 square meters, a boutique Upon completion, the system will become part of the road from Moscow
hotel of about 19,000 square meters — both to be managed by international to St. Petersburg that will be mostly a toll road. The current system was built in
hotel operator Four Seasons — and underground parking for 400 cars. It will the mid-1990s and strains to accommodate the increased traffic.
also incorporate several historical buildings in the area. Mostotrest, which had an order backlog of $7.7 billion at the end of last
A pedestrian area will be organized on the embankment, and that area year, describes itself as Russia’s largest diversified infrastructure company. Its
will be “scattered with expensive restaurants and shops,” DB Development current projects include work to prepare Sochi for the 2014 Winter Olympics.
said in a statement in September. According to a study by industry research firm PMR, Russia needs to
Overall investment in the project totals $300 million, said Dmitry replace 35 percent of its roads and 20 percent of bridges. The country also
Garkusha, chief executive of DB Development. needs to build new roads to match the ratio of roads to people in more-
Garkusha said his company, which will ensure the financing, plans to developed nations.
hold negotiations with several banks, including Alfa Bank, Sberbank and
Deutsche Bank, to provide a loan for the project. Strabag will be in charge
of development.
Given that the construction site is located in Moscow’s historical center
— a protected area where large-scale construction is forbidden — the
projects’s main problem could be getting a construction permit from city
authorities, said Alexei Mogila, head of the trade real estate department at
Penny Lane Realty.
Garkusha promised that the upcoming construction, which is expected to
start in 2012, would not spoil the skyline in the heart of the capital.
The plot of land, which analysts say is worth $160 million to $200 million,
was previously developed by two firms, Kremlin Sait and Kamenny Most, in
which Alfa Group recently acquired controlling stakes.
The two companies were previously controlled by State Duma Deputy
Ashot Yegiazaryan — who faces arrest over a multimillion-dollar fraud case
in Moscow — via an offshore company and were among his assets that were
MOSCOW REGION ROAD/ DENIS ABRAMOV /VEDOMOSTI/
frozen last year after an investigation was begun.
8
WHAT’S UP? Q4 2011
The first Active House in Russia
opened in the Zapadnaya
Dolina housing development 20
kilometers southwest of Moscow
in September. The Active House
concept is a set of guidelines for
building houses that are energy-
efficient and offer a healthy liv-
ing environment. Including the
price for interior finishing and
landscaping, the house cost a
total of 40 million rubles ($1.3
million) and was built by dev el-
oper Zagorodny Proyekt in col-
laboration with Russian, Danish
and French companies. Annual
hot water and heating costs for
the 230-square-meter home
are expected to be 12,556
rubles, far less than the cost of
24,000 rubles in a house using
gas and 217,000 rubles in a
house electric heating. Solar
panels provide the house with
electricity, and it is heated by a
geothermal pump. Realtors said
$1 million is a realistic price for
IRINA FILATOVA /MT/ the house.
IRINA FILATOVA /MT/
One of the largest new banks of Class A office space in Moscow is
Olimpiya Park Business Park, located on Leningradskoye Shosse in
one of the city’s emerging business clusters. The multi-building com-
plex has a total area of more than 71,000 square meters, including
45,000 square meters of office space.
Annual rental rates start at $675 per square meter, according to
leasing agent Knight Frank, and much of the space is already rented.
In one of the biggest deals of the year, Kaspersky Lab agreed to rent
out 29,847 square meters of offices. BMW Group will also situate a
4,700-square-meter headquarters in the park.
The business park features a hotel, restaurants, a fitness center and a
dry cleaner, as well as 700 parking spaces. /COURTESY OF KNIGHT FRANK/
10Q4 2011 WHAT’S UP?
/COURTESY OF S.A. RICCI/
Malls continue to open outside the MKAD, and the Grenada shopping center on Novoryaz anskoye Shosse is the latest addition to th is
trend. Coming in at 18,000 square meters, the shopping center features tenants including food retailer O’Key , sporting goods su pplier
Sportmaster, electronics chain T ekhnosila and cosmetics retailer L ’Etoile, according to S.A. Ricci, the project consultant for marketing and
rental. The estimated annual rental price starts at $500 per square meter. Inv estor and developer Vesta-SF built the project.
Alongside shopping centers, office real estate is also expanding
outside the MKAD. The Business Park Rumyantsevo, which is located
at the intersection of the MKAD and Kievskoye Shosse, includes both
a shopping center and Class B office space. The park has warehouse
space for rent as well.
Offices in the newly built fourth section are being rented at a starting
price of 4,600 rubles ($150) per square meter per year. Total office
space comprises 36,800 square meters. Like many centers outside
the MKAD, Rumyantsevo has extensive parking space for both shop-
pers and office workers, as well as a bus that takes riders back and
forth between the park and the Yugo-Zapadnaya metro station.
/COURTESY OF JONES LANG LASALLE/
The most recent addition to the city’s office real estate scene is the
nine-story Delta Plaza business center, which opened in October
on 2nd Syromyatnichesky Pereulok near the Kurskaya metro sta-
tion. The center has a total area of 27,000 square meters, includ-
ing 20,00 square meters of Class B+ office space.
About one-third of the center’s space is owned by the Russian gov-
ernment, although the dev eloper, Accent Real Estate Inv estment
Managers, is in negotiations to buy back this share, according to
the developer.
The first floor of the building will hav e a restaurant and retail
space. It is being managed by Sawatzky Property Management.
MAXIM STULOV /VEDOMOSTI/
realestate.themoscowtimes.com 11MARKET UPDATE Q4 2011
The Next Evolution
in Retail
offer the market a new product in the
form of an outlet center,” said Sergei
Krylov, director of development for
Way-M.
Although BrandCity’s layout and
design is admittedly far from the
classical concept of an outlet cen-
ter, which entails a single level of
stores that are usually freestanding,
all of its stores are committed to
providing goods at 30 percent to
70 percent off the market price, as
per outlet center practice. Soon it
will be joined by a wave of new-
build outlet malls on the outskirts
COURTESY OF CUSHMAN & WAKEFIELD
of Moscow: Outlet Village Belaya
Dacha is slated to open in April,
and Fashion House Moscow and
Vnukovo Outlet Village are slated
for opening in 2012.
Alongside the first outlet centers,
a number of other new shopping
center formats are appearing in
By Alec Luhn Russia, including the power center,
a type of mall that is dominated by
several large anchor tenants. As
Steady sales growth and rising competition for consumers the Russian consumer goods market
continues to expand and evolve,
have piqued retailers’ interest in new mall formats. A wave consultants predict that still more
formats, such as the neighborhood
of outlet centers is on the way, and power centers will follow. center, will appear here.
“The most important thing is that
the customer is becoming ever more
W
hen the huge Ve- chose the “brains over brawn” hungry for new forms of retail,” said
gas mall opened approach and devised what it Charles Slater, head of retail at
next door, the hopes will prove to be a clever Cushman & W akefield, which is
Waymart shop- solution: the reconceptualization leasing Outlet Village Belaya Dacha.
ping center on of Waymart as an outlet center. The shopper “is always wanting the
the 26th kilometer of the MKAD Working with developer Rosital and next new thing,” he said.
highway found itself outsized and consultant Core Group, it created a “Here in Russia, we’re pretty far
outgunned. Located barely a kilome- new maritime theme, reworked floor behind more developed markets,
ter down the road, Vegas featured a plans and renovated the building so there’s plenty of scope for new
total area of 386,000 square meters without closing the mall down. The formats,” he added.
to Waymart’s 30,000, Russia’s first newly christened BrandCity Outlet Even in terms of traditional shop-
indoor amusement park and anchor Center, which officially opened in ping centers, the Russian market is
tenants including popular stores September, is arguably the first out- far from saturated, especially in the
Auchan and M.video, which also let center in Russia. regions. Russia built the most square
had a store in Waymart. “There’s a new trend in [consum- meters of shopping center space
Faced with such a hulking com- er] demand, and for us it’s important out of any country in Europe, with
petitor, Waymart owner W ay-M to pick up on this trend, catch it and 404,000 square meters — one-fifth
12Q4 2011 MARKET UPDATE
Instead, it’s better to build a dif-
ferent kind of format that will attract
customers with the allure of cheaper
prices, such as an outlet or power
center, he said.
Of course, these two bargain-
based formats are possible only if
construction and land costs are kept
low, which is why they are usually
built on the city outskirts (redevelop-
ment of unused factories, however,
can offer a cheap alternative within
a city). Thus, a final factor facilitating
the building of new retail formats is
COURTESY OF MAGAZIN MAGAZINOV
low construction costs, which have
decreased in comparison with pre-
crisis levels, Gasiyev said.
Last Season’s Goods,
But at Lower Prices
of the European total — constructed A rendering of Fashion House next door to some shopping center,
T he new outlet centers opening
now are the Russian incarnation
of a retail format that was pioneered
Moscow, set to open in 2012.
in the first half of 2011, accord- there’s no reason to build a classic in the United States in the 1970s.
Belaya Dacha (p. 12) is one of
ing to a Cushman & W akefield three coming outlet centers. shopping center in direct competi- Now the Russian retail market has
report. It is expected to remain in tion. Both centers will lose money.” reached a point where outlet retail
first place through 2012, as a further
2,900,000 square meters of shop-
ping space will be brought online.
Demand from consumers, retail-
ers and investors is driving the boom.
Investment in retail real estate is
increasing, as are total retail sales:
following a contraction in 2009,
sales have continued to grow at a
rate of about five percent in 2010
and 2011, according to the State Here in Russia, we’re
Statistics Service.
As more shopping centers are
pretty far behind
built and more retailers enter the more developed
market, however, competition is stiff-
ening. To attract traffic to their malls,
markets, so there’s
developers and retailers will have to plenty of scope for
set themselves apart from the crowd,
which will require them to build new formats.
these new formats, Slater said. Charles Slater,
“What’s going to have to hap-
pen in this market is retailers will Cushman & Wakefield
have to get smart to draw the cus-
tomer in,” he said.
“The driver for these [new]
formats is growing competition,”
agreed Maxim Gasiyev, general
director of Colliers International. “If
you have a land plot or factory
realestate.themoscowtimes.com 13MARKET UPDATE Q4 2011
makes sense here, consultants said.
The appearance of this new format
is being fueled by consumer goods
brands and their growing interest in
outlet retail in Russia, Slater said.
Outlet centers are “very much a
brand-driven commodity, how many
stores can retailers actually have,
how much product can they supply
to their outlet stores,” he said.
Outlet goods come from two
sources: leftover stock and special
collections produced by a brand
specifically for its outlets. A brand
needs to be selling large amounts of
its wares before its leftover stock can
become massive enough to support
an outlet store. T oday, such large
brands are present in Russia, and
foreign brands are ready to put out
special collections for outlet stores
VEDOMOSTI
here, Gasiyev said.
“Our country already has big
enough sales volumes that outlets The Gorbushka shopping center
can appear,” he said. percent leased out, Slater said. Brands uses the specialty center concept, sure the vast majority of retailers
Colliers is leasing the V nukovo that have signed on include Levi’s, with similar stores in one mall. are ready for trade on day one,”
Outlet Village project, and so far its Calvin Klein Jeans, Salomon, Adidas, Slater said. The new date was also
experience has indicated brands are Lacoste and Baldinini, many of which planned to coincide with the start of
ready to go into outlet, Gasiyev said. are “magnet brands,” he said. the fashion season in March and
“Brands are reacting positively, The project is poised to become April, so the many fashion brands
whereas five years ago it was too the first outlet center built from the involved will be able to stock their
early,” he said. ground up in Russia when its first outlet stores with the leftovers from
The first phase of Outlet Village phase opens in April. Although the the current season, he added.
Belaya Dacha, which is being built center was supposed to be up and Hines and Belaya Dacha will
by international real estate company running in September, the opening invest a total of $160 million in
Hines and local agricultural company was pushed back to the end of this Way-M (r) is making its mall into the mall, which will feature rows
an outlet center. At left, a render-
Belaya Dacha, is already over 90 year and then to next year to “make of shops along open-air lanes in a
ing of Fashion House Moscow.
COURTESY OF MAGAZIN MAGAZINOV
COURTESY OF WAY-M
14Q4 2011 MARKET UPDATE
“village” theme, with a cupola at “big flow of outlet centers” will be success, Krylov said. “Now we’re
the center. in St. Petersburg, he said, where negotiating with those [retailers] that
The 150 stores at Vnukovo Outlet Fashion House owns a land plot didn’t believe in our project at first
Village, which is being developed and is planning to build another because they now understand that
by three private investors, will also outlet center. outlet stores can work and make
be laid out along pedestrian streets Meanwhile, BrandCity is pro- money,” he said.
joined by a central square, all of it viding a trial run for outlet center
designed to achieve a village feel. shopping in Moscow. According Power Centers to
Investment in the project will total to Krylov, seven outlets including Strengthen Presence
about $55 million, a sum that will be
paid off in five to seven years, the
project’s co-owner, Dmitry Kulkov,
stores by Baldinini, All Seasons and
Samsonite are already open there,
other brands including M.video will
A fter outlets, consultants predict-
ed the next big thing in Russian
retail will be the power center for-
told RBC in July. soon be opening, and several exist- mat pioneered in the United States,
Fashion House Moscow, with ing stores will switch to the outlet for- which Slater said is analogous to
192 stores and restaurants, will have mat next spring. About 65 percent the European concept of retail park.
some outdoor areas, but most of the of the space has been rented or is This format — a center where big-
shopping area will be covered. The already operating at rental rates box retailers take up a majority of
project is being developed at a ranging from 15,000 rubles ($500) space in proportion to the shop-
cost of 97 million euros by Fashion to 25,000 rubles ($850) per square ping gallery of small specialty stores
House Group with investor Liebrecht meter, he said. — will establish itself in Russia within
& Wood Investment Fund, accord- Although the temporary mix the next few years, Gasiyev said.
ing to Brendon O’Reilly, managing of full-price and outlet stores has “Retail parks will be the next evo-
director of Fashion House Group. caused some customer confusion at lution of retail in large cities,” mainly
O’Reilly said that 75 percent of the BrandCity, it continues to develop in the millioniki, he said.
center’s retail space is leased or and will soon attract the W estern Power centers, like outlet centers,
has been agreed to be leased, add- Retail parks will be mono brands that are key to outlet are generally located on the outskirts
ing that TsUM, Puma, Nike, Lacoste the next evolution of
and many other brands will have
outlets there. retail in large cities,
Fashion House has opened other
outlet malls in Eastern Europe and
in the millioniki.
offers investors and developers a Maxim Gasiyev,
franchising agreement that O’Reilly
said is designed to reduce the risks
Colliers International
of opening such a center.
Russia’s climate would seem to
pose problems for the outlet center
format and its usually uncovered
general spaces, which reduce heat-
ing costs and thereby contribute to
lower rental rates and, in turn, lower
prices for the consumer. But Gasiyev
said the weather won’t stop deal-
seekers and will simply challenge
developers and operators to make
the shopping experience entertain-
ing all the same.
“I think that such formats will sur-
vive in Russia because there always
has been street retail here,” he said.
After these three new centers
open, there could be room for one
more outlet mall in Moscow, but
after that the market will probably
be tapped out, Slater said. The next
realestate.themoscowtimes.com 15MARKET UPDATE Q4 2011
city and geared toward residents of
its neighborhood. Often weighing
in around 3,000 to 10,000 square
meters, a convenience center will
usually feature a small supermar-
ket as an anchor tenant, a varied
shopping gallery and restaurants or
cafes, Gasiyev said.
In addition, Gasiyev noted that
another possible new format is the
specialty center, usually a multi-level
mall comprised of retailers in a sin-
gle category, such as electronics,
sporting goods or furniture. In fact,
COLLIERS INTERNATIONAL
Moscow already has some malls
that evoke this concept, Gasiyev
said: the Sport-Hit sporting goods
center on Skolkovskoye Shosse
and Gorbushka, an electronics
Investment in Vnukovo Outlet
of a city so they can save on land Village, a 150-store outlet center, square-meter M.video store, as did shopping center near the famous
costs and thereby offer consumers is expected to total $55 million. Waymart before it was converted bazaar of the same name on metro
lower prices. Build costs for power into BrandCity. Whereas U.S. and Bagrationovskaya.
centers are also generally less than European power centers are often The specialty center and power
those of traditional malls because the comprised of free-standing stores, center formats can also work in the
design is simpler, and less technolo- each of these two examples is one city, since they are well-adapted to
gy is required: Unlike multiple-floored multi-level building. redevelopment projects in existing
shopping centers, power centers are Slater said although there are industrial buildings, Gasiyev pointed
typically a single level, and feature already several malls in Russia that out. Thus, construction costs can
easy-access, no-frills design and are “pretty close to a power cen- be kept low — $300 to $500 per
frame construction. As Slater put it, ter,” there are no full-fledged power square meter — when developing a
“it’s retail warehousing.” centers here. multi-level center.
Although traditional shopping “Even Retail Park [shopping cen- However, Slater noted that such
centers traditionally make higher
profits than power centers, it can
Consultants expect to ter on V arshavskoye Shosse] you centers could be hard to fill, since
can’t describe as a retail park or currently in the electronics, furni-
be difficult to attract fashion brands see new formats like power center,” he said. “It has some ture and sporting goods categories
— which are vital for the success of anchors, but then it also has a con- in Russia, “there is n’t much depth
a traditional center — to a mall out- the convenience cen- siderable gallery.” in terms of operators selling these
side the city, Gasiyev said. On the ter, which is geared Nonetheless, soon proper power goods.”
other hand, retailers like superstores centers will crop up, he expects. Financing also poses a chal-
and sporting goods, do-it-yourself toward nearby Again, retailers are behind the phe- lenge for all new types of shopping
and furniture stores don’t worry so
much about how central a location
residents, and the nomenon. centers due to high lending rates,
“There are a number of develop- Gasiyev said. “If you build some-
is, as long as it’s easily accessible specialty center, which ers looking at creating retail parks, thing unusual, the bank will value the
by car. As a result, shopping center
developers working on such plots
has retailers selling and there is a demand from big-box risks higher and offer more expen-
retailers for this type of develop- sive financing,” he explained.
outside the city will likely start build- in similar segments. ment,” Slater said. But he stressed Nonetheless, developers and
ing retail parks or power centers, that the appearance of power cen- brands won’t be able to create
he said. ters in Russia will be less revolution- appealing retail destinations without
According to Gasiyev, a few ary than outlet centers, since the taking inspiration from new forms
power-center prototypes already former are simply full-price retail in a of retail.
exist in the Moscow region: The slightly different format. “Customers are always look-
Liga Shopping Center in Khimki On the more distant horizon, ing for something new, and that’s
has several large anchor tenants, consultants expect more new formats exactly why there are these different
including a 6,000-square-meter to appear. These include the conve- formats of retail,” Slater said. “There
Karusel superstore and a 3,000- nience center, a mall located in the has to be that new experience.”
16Q4 2011 IN THE REGIONS
Regional Malls Pick Up Pace
The capital of r etail space isn’t Moscow. Instead, it’s found much farther south, in
Krasnodar. Surgut, Barnaul and other cities also lead the way in retail development.
K
rasnodar resident
Liza Shishkina By Alexander Bratersky
recalls that during
the unbearable
heat two sum-
mers ago, the malls in her south-
ern city offered an air-conditioned
haven. “They turned out to be a
getaway place of sorts during the
hot weather,” the forty-something
lawyer said.
She had lots of cool shopping
options to choose from. Her native
Krasnodar, a city of about 750,000
COURTERSY OF FINSTROI
people close to the Black Sea,
is Russia’s foremost city in terms
of retail real estate compared to
its population. That’s according to
research into 22 cities done by the
A computer-generated image of
INFOline market research agency opers of retail real estate are look- The cities with fewer than 1 mil-
the Vesna shopping center in the
earlier this year. central Siberian city of Barnaul. ing for new markets and trying to lion inhabitants are a lucrative mar-
Krasnodar has 937 square expand into cities with populations ket. According to data provided by
meters of retail space per 1,000 of 300,000 to 500,000 people, or INFOline, cities with populations
people, more than Voronezh, which even fewer. “When a new shopping ranging from 100,000 residents to
comes in second with 884 square mall is opened in a small city, the 500,000 residents currently possess
meters. St. Petersburg is next, with competition among retailers to get only 13 percent of the country’s retail
858 square meters per 1,000 peo- into the mall is high,” even if the pur- space. St. Petersburg-based INFOline
ple, while Moscow is fourth, with chasing power of local consumers said developers will be looking to get
580 square meters. isn’t a lot, said Galina Maliborskaya, into cities, such as Stavropol and Perm,
With consumer spending picking head of the retail real estate depart- that have a large amount of purchas-
up after recent down years, devel- ment at Colliers International. ing power but lack retail space.
realestate.themoscowtimes.com 17VLADIMIR FILONOV / MT
IN THE REGIONS Q4 2011
A shopping center in Surgut.
Maliborskaya said the cities of smaller than those in Moscow and
eastern Siberia are the most under- St. Petersburg. “There is no single
developed in terms of retail real pattern that can be good every-
estate, giving as an example Irkutsk, where,” Fedyakov said.
a city that until recently had just IKEA has already opened 10 of its
one shopping center, a Soviet-era Mega superstores in or near Russian
TsUM department store with vendors cities. By some accounts, the Swedish
packed in like sardines. Now the city discount furniture retailer changed
has two large malls, with another mall Russia’s long-standing approach
boasting 105,000 square meters to to retail real estate. Alexander
be completed by 2014. Nazarov, head of Novosibirsk real
Real estate market conditions estate company Nazarov & Partners,
FOR REQ
have changed since the economic said IKEA raised eyebrows when it
crisis, however. Developers have decided to open a store in 2007 in The interior of the modernistic
become more cautious, since they both the industrial part of the city and Vershina mall in Surgut, a city in “Gostiny Dvor does n’t have a
have to wait much longer for shop- its business hub. a region with major oil resources cinema or an entertainment center,
ping centers to begin turning profits. But the strategy paid off, with and wealth. but those are the things that the buyer
“The biggest problem today is that the Mega center near Novosibirsk is looking for,” Fedyakov said.
the payback period has increased,” becoming a popular spot for local Giving a mall an unusual design
said INFOline general director Ivan shoppers, who can reach it easily is another way to attract consumers,
Fedyakov. “Before it might be three by car. analysts said, pointing to V ershina,
years. Today it can be five, seven or An accessible, convenient loca- a shopping mall in Surgut, a major
even 10 years or more. The time for tion is generally the most important city in Siberia’s Khanty-Mansiisk
easy money has passed,” he said. factor where retail real estate is autonomous district. The mall’s post-
Banks, too, have started to exam- concerned, Fedyakov said, but that A unique design modern exterior looks like a giant
ine project proposals more carefully. rule doesn’t carry as much weight can attract customers, stack of boxes, while the multi-story
Getting loans for the construction when the developer is operating in interior has lots of curves and sleek
of new commercial real estate has a saturated market. “Then concept analysts said. surfaces.
become tougher, as banks now want becomes most important,” he said. When it opened in 2010, the
the borrower to put down at least 30 St. Petersburg’s oldest shopping Vershina, a shopping 36,000-square-meter mall teemed
percent of the loan. That compares arcade, Gostiny Dvor, provides an mall in the Siberian with customers like in the heyday of
with 10 percent in previous years. example of the significance of con- Soviet department stores.
Fedyakov added that long-term cept in the retail real estate battle. city of Surgut, offers Following Vershina’s success,
payback conditions make more sense Built on Nevsky Prospekt about 250 local developers are planning to
for foreign investors in the regions. years ago, the modern-day mall ver- one such example. build another even bigger retail trade
“Russian business is less interested in a sion of Gostiny Dvor began to lose center, the Surgut mall. “It is being
five-to-seven year period,” he said. clients when Stockmann, a Finnish built fast, and the size of construction
Investors themselves also must retail chain that sells clothes, home is enormous,” said Stanislav Bukhlov,
adjust to varying conditions, building goods and cosmetics, opened a mall a local sports promoter who lives
retail outlets in the regions that are further along Nevsky Prospekt. near the construction.
18Q4 2011 IN THE REGIONS
A even larger center is expected government, told Rossiiskaya Gazeta cities include Rostov-on-Don, Nizhny Rodin said developers like Finstroi
to be launched by the third quarter in August. Novgorod and Volgograd. are interested in cities with fewer
of 2012. T o be called the Surgut The representatives for Invest- The federal and regional gov- than 300,000 inhabitants if they are
City Mall, It will take up more than Development, the owner of WOTT, ernments are expected to complete located in regions rich with natural
154,000 square meters. Its devel- declined to comment for this article, major infrastructure projects in the resources. “The income level in those
oper is Surgutgazstroi. but the company has said that it now host cities: In its winning proposal, the cities is above the average, but qual-
The company has already attract- will launch a similar chain of super- Russian FIFA delegation pledged that ity shopping centers are non-exis-
ed a couple of anchor tenants such stores in the Rostov region in 2012 the Russian government and private tent,” he said.
as the O’Key superstore chain and rather than this year, as it had initially companies together would spend a Regarding the 2018 World Cup,
Sportmaster athletic goods chain. planned. total of $11 billion on infrastructure Rodin doesn’t see a direct corre-
“Anchor retailers are one of the Sergei Mitrofanov, the Invest- in preparation for the football cham- lation between the event and the
most important part of a project’s Development executive in charge pionships. But the official announce- construction of malls. He noted that
success, since [their presence] allows of the project, told Kommersant in ment of host cities will be made only Vladivostok’s hosting of the 2012
investors to create long-term relation- July that construction is postponed in October 2012. Asia-Pacific Economic Cooperation,
ships,” said Fedyakov. because of various administrative The Finstroi Holding developer or APEC, Summit has n’t increased
Along with Surgut Mall, the Aura barriers. “As a result, we had to has recently built a 31,500-square- demand for malls in that Pacific city.
Surgut shopping project is also under spend three years to deal with issues meter mall in Barnaul, a city in the “The emergence of retail centers
way in oil-rich Surgut. A Russian affili- related to land in various areas of the Altai region with 670,000 residents. depends on the regional plans for
ate of Turkey’s Ronesans Gayrimenkul region,” Mitrofanov said. “The main advantage was the long-term development,” Rodin said.
Yatirim is developing the project using Mall developers are often reluc- absence of modern trade centers,” A good example of such a center is
a 70 million euro loan from the tant to speak about the bureaucrat- said Sergei Rodin, head of Finstroi’s the Black Sea resort city of Sochi,
European Bank for Reconstruction ic difficulties they face in building public relations and analytics depart- which “will remain a tourist mecca
and Development. and opening their shopping cen- ment. He added that the construction even after” the 2014 Winter Olympics
“Although Surgut’s economic ters because of political pressure of the V esna, or Spring, mall has are held there, he said. “That makes
development and above-average from local authorities. Fedyakov from allowed the company to invite a num- developers to invest money into retail
household income are attractive for INFOline said governors of some ber of major retailers into the city. real estate,” he added.
retailers and investors, it has long regions ask developers to create
been under-served in terms of mod- infrastructure projects in the area of
ern retail space,” the bank said in a construction. “Those demands can
press release in September. increase the duration and financial
With substantial oil prices help- cost of construction,” he said.
ing the country’s macroeconomics, Enlarging retail real estate in
Russia is currently a world leader the regions is n’t without its troubles
when it comes to constructing new — or even scandals. In September,
retail space. Cushman & W akefield the regional arbitration court in
estimated that companies built Krasnoyarsk halted the construction
404,000 square meters of retail real of a shopping center and a surround-
estate in Russia in the first six months ing townhouse village. The court
of this year and that they will have stated that the Inkom Nedvizhimost
built a total of 2.9 million square company that had developed the
meters in 2011. site had no documents that actually
In the Smolensk region, located allowed it to begin construction.
a five hours’ drive west of Moscow Also in Krasnoyarsk, the construc-
near the Belarus border, the WOTT tion of a two-storey shopping mall was
superstore chain is planning to invest stopped by the city’s mayor following
about 3 billion rubles to build a chain protests by citizens who complained
of superstores in the region. that construction would ruin a local
In addition to the money from park. In fact, the central Siberian city
St. Petersburg-based WOTT, the has the fewest high-quality shopping
regional government is planning to centers, according to INFOline.
invest about 3 billion rubles to build In the European part of Russia,
the Galaktika shopping and enter- the opposite trend is poised to take
tainment center in the region, Olga hold, since it is home to the potential
Kirilets, head of the economic devel- host cities for Russia’s hosting of the
opment department in the regional 2018 FIFA W orld Cup. Those 13
realestate.themoscowtimes.com 19MARKET UPDATE Q4 2011
The Big Squeeze: Developers
Battle Moscow Parking Woes
By Ezekiel Pfeifer
With parking in M oscow at a pr emium, office developers are using park-
ing garages and lot s to giv e their buildings a mar ket advantage.
I
n the late 1950s, the
French capital began to be
paralyzed by a grave new
affliction: the mass-market
automobile. Parisian roads
built for far fewer cars became park-
ing lots — in part, ironically, because
of a lack of garages and other spac-
es devoted to parking. Sometimes,
backups stretched so far that they
lasted more than 24 hours.
The Paris city government of the
1960s took some action. It passed a
raft of reforms that included an ambi-
tious plan of highway construction,
expansion of public transportation,
and, crucially, parking restrictions in
the downtown.
There is evidence that Moscow
authorities will attempt a similar Marr Plaza keeping its parking out
approach. In a recent interview on of view. The business center has
FOR REQ
radio station V esti FM, Moscow three underground parking levels.
Mayor Sergei Sobyanin hinted that
street parking in the city’s center will Already, it is more difficult to sell or begin to move until free [parking] is
no longer be gratis, saying parking lease a building with limited park- banned,” he said.
near housing and on the city outskirts ing, and developers are shelling Blinkin believes that although the
should be “free,” while parking in out money for costly underground Moscow government is unlikely to
the city’s center should be “regu- parking lots because of the return on Mayor Sergei pass a measure before this winter’s
lated.” And this past summer, the investment they receive. federal elections — because of the
State Duma finally passed the req- There is no question that finding
Sobyanin hinted in concept’s unpopularity among vot-
uisite federal legislation for allowing a legal parking spot in downtown a recent interview that ers — the city will introduce new
municipalities to restrict parking on Moscow is a nightmare, and the regulations come spring.
city streets. situation will not resolve itself. street parking in While some welcome the idea
Whatever solutions are handed “When Moscow begins to have the city’s center will of parking police and pristine side-
down by local or federal authorities, jams that last for days like they had walks, others envision a new kind
the capital’s office real estate market in Paris, then they’ll make chang- no longer be gratis. of pandemonium. On the heels of
will feel the effects. Adequate park- es,” said Mikhail Blinkin, a trans- Sobyanin’s comments in September,
ing for employees and visitors is a port expert and the scientific direc- Penny Lane Realty published an anal-
major selling point for office proper- tor at the Moscow-based Scientific ysis of potential consequences that a
ties in Moscow and especially in Research Institute of T ransport and street-parking ban would have on
its jammed central business district. Road Maintenance. “Traffic will not office properties, stating in its report
20Q4 2011 MARKET UPDATE
that one possible outcome would ness center along Ozerkovskaya
be a “collapse” of the public tran- Naberezhnaya, with 33,000 square
sit system. The main consequence, meters and 643 parking spaces.
however, will be a closer connection The number of centrally located
between how quickly office proper- projects with parking is actually
ties sell — regardless of their price expected to stall for the foreseeable
— and what parking options those future, despite Muscovites’ grow-
offices have, the report said. ing passion for the motorized life.
Even in the current market, build- Given Sobyanin’s stringent restric-
ings with fewer parking spaces tend tions on development announced
to sit empty longer, complicating the in May — partly a bid to control
equation for developers seeking to traffic problems — the construction of
pack in profitable square meterage. new offices has been banned within
DENIS GRISHKIN / VEDOMOSTI
“There have been projects where the Third Ring Road, leading some
the owners, trying to maximize prof- analysts to estimate that construction
its, cut down on the expense of will continue to be pushed outside
building a parking garage and at the Third Ring and even beyond
the same time made more rentable the MKAD highway that encircles
area,” said Mikhail Ioannesyants, the city.
Traffic passing Voyentorg in the
associate director of the corporate oper. “A garage was essential in this Arbat. The office complex has 540 “There are office parks begin-
client group at Knight Frank Russia. case — you would never find parking parking spaces, a high number. ning to be built around MKAD, and
“Those properties generally take a on the street in the area where Marr many companies are starting to say
lot longer to fill,” he said. “Building Plaza is located.” that they prefer to rent offices not in
underground parking does not pro- Patrin would not reveal the con- the center but on the outskirts,” said
vide an immediate windfall to the struction cost for the project, but he Ioannesyants of Knight Frank. “I per-
developer, since it’s very expensive noted that 1 square meter of space sonally think that decentralizing the
to construct such facilities, but they below ground cost twice as much
win in the end by having it.” to build as 1 square meter above
Evidence of this new para- ground. Such a difference makes
digm can be seen in the success an underground lot a huge ancil-
of the recently opened Marr Plaza lary cost.
business center in the Kras naya Regardless of whether potential
Presnya neighborhood just west of tenants actually consider a garage
the Garden Ring. The project had to be essential, city regulations
leased 95 percent of its space by the require a ratio of almost 1:50, or
time construction ended in February, one parking space per 50 square
Alexei Bogdanov, director of office meters of rentable space, for new
real estate at S.A. Ricci, which han- office projects, Patrin said.
dled marketing for Marr Plaza, said Many developers find a way
in a press release earlier this year. around the official norms, however,
The lessees include such promi- and there are scores of older devel-
nent multinationals as Unilever, opments without as high a ratio as
Philips and Mars, whose employ- Marr Plaza’s. In fact, a 1:100 ratio of
ees likely never need to fight for a parking space to rentable space for
parking spot: Below the building’s an office site within the Garden Ring
21,000 square meters of rentable is considered sufficient for a Class A
space is a three-level garage with property, Ioannesyants said.
spots for 395 cars, making for one The figure varies widely from
of the best ratios of parking space building to building. The proper-
to square meters of rentable space ties in the city center with the best
in the city. ratios include the Voyentorg business
“It was worth it for us to build complex in the Arbat neighborhood,
a lot of parking, without a doubt,” with close to 30,000 square meters
said Pavel Patrin, general director of rentable space and 540 parking
of Marr Capital, the project’s devel- spaces, and the Akvamarin-3 busi-
realestate.themoscowtimes.com 21MARKET UPDATE Q4 2011
city and moving businesses outside
the Third Ring will do more to solve
the parking problem than building
garages.”
Indeed, few are optimistic that
enough parking garages could be
constructed in central Moscow to
actually accommodate demand.
Part of the problem lies in the sheer
number of motor vehicles already
accumulated by city residents and
businesses: More than 4 million cars
and trucks had been registered by
GIBDD, the Moscow traffic police,
as of October. Just weeks after that
number was reached, Sobyanin
boasted of the city’s efforts during
his first year as mayor to increase the
number of parking spaces in the city
by 50 percent to 1.5 million.
MAXIM STULOV / VEDOMOSTI
For Blinkin, this discrepancy is
not necessarily a problem. He sub-
scribes to the approach taken by cit-
ies such as New Y ork and London,
where the city not only severely
restricts street parking, but limits the Car owners finding spaces in the
number of parking lots in central middle of a Moscow road. Creative development plans and the difficulty Inkonika claims to be looking to
districts — an effort to drive home the parking is the norm in the capital. of making the business profitable, the long-term, expecting that there
idea that downtown is not a place said Capital Group spokeswoman will be a shortage of parking in the
for cars. As a result, commercial Dinara Lizunova. The city has been city for some time to come.
garages charge high prices, ranging aggressively courting investment in “Our garages will be there indefi-
typically from $20 to $50 per day the sector, holding negotiations with nitely, and it will only become more
or $400 to $800 per month in parts developers interested in erecting difficult to park in the center,” Yelena
of Manhattan and in central London. garages and beginning a series of Ponomaryova, associate general
If free parking is eventually banned, special land auctions for use by director of Inkonika, told REQ in an
then expensive rates could become garage builders. interview at the company’s Moscow
standard in central Moscow, both At least one company that is will- office. “We’re playing the long
Blinkin and real estate analysts said. ing to work with the city to edge the money,” Ponomaryova said, noting
That change would curtail the num- number of parking spaces higher has that Inkonika plans to operate the
ber of people who can afford to
drive into the city rather than use
If free parking is out- emerged: the developer Inkonika,
whose sole activity is building under-
garages itself after construction is
complete.
public transit. lawed, high parking ground lots. The company is partly Inkonika will be well-positioned
Such a shift could make owned by Natalya Kobzon, daugh- if the city does eventually clear the
Moscow’s commercial garages
prices could become ter of well-known singer and federal streets of parked autos, but such
profitable, which they currently are the norm in central Duma Deputy Iosif Kobzon, report- a ban will not fill up their garages
not, some market players insisted. ed to be a close friend of former instantly. Drivers in other European
Part of the problem is low demand: Moscow, a number Moscow Mayor Yury Luzhkov. cities certainly did not obediently file
Despite the city’s 4 million cars, of analysts said. Inkonika has eight underground onto buses and metro trains when
you can almost always find a free garage projects under development curbs were declared off-limits for
parking spot on the street — or in Moscow, including a 300-car cars there. A Paris reporter for the
sidewalk. Local developer Capital lot under T urgenevskaya Ploshchad New York Times wrote in 1970 that
Group considered investing in that is expected to open this month double-parking “is often inevitable,
garage projects earlier this year but and another under Khokhlovskaya because both curbs are completely
tabled the idea because of what it Ploshchad in the Kitai Gorod neigh- occupied by cars parked in defiance
considered uncertainty in the city’s borhood. of regulations.”
22You can also read
