Retail Sector - Colliers International

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supermarkets not just in large cities, but also in towns with a population of at least 50 thousand people. Maxidom (the first DIY operator in Russia; opening of its first store took place in St. Petersburg in October 1997) is entering Moscow’s market of construction and finishing materials. Entertainment Entertainment operators are also seeing a certain revival. National cinema chains have resumed development, while regional operators have become more active. For example, KINO CITY, having started its development in St. Petersburg in 2002, entered the Moscow market at the end of 2007, and in the last two years has been designing and building properties in Orenburg, Novosibirsk, St Petersburg, and Maykop. VERY VELLY, a Perm chain (currently including three multiplex cinemas, two of which are located in Perm and one in Izhevsk), and Charly, a Rostov chain (consisting of two multiplex cinemas) are also planning development. Happylon, a chain of entertainment parks, which started its development in 2006 under the Babylon brand in Kazakhstan, opened its first entertainment center in Moscow in 2009. The second project of the chain was opened in VEGAS shopping and entertainment center; while at the end of April, opening of an entertainment center in Galeria shopping and entertainment center in St. Petersburg is planned. At the same time, the company continues to search for premises for its parks. KidZania, a Mexican chain of family entertainment centers, has found a partner for development in Russia using the franchising concept. The Corporation for the Development of Territories (KRT) has presented its new project, The Worlds of Captain N, to the market, and is planning to establish a chain of entertainment centers, N-Terra, in 33 cities in Russia and non-CIS countries. Shopping gallery operators are also active: foreign companies are making decisions regarding independent entry into the market and signing partnership agreements with strong local players regarding development using the franchise model; active development of the existing chains is planned. Fashion <strong>Retail</strong>ers Hermes is entering the market independently (prior to May 1, 2011, JamilCo was developing them under a franchise agreement). Prada also plans to start operating independently at the end of this year. Coach, Coty, and Desigual are planning to join them in the near future. Guess?, an American apparel manufacturer, having taking distribution in Russia in its own hands, is planning to expand its chain of stores (previously, JamilCo was developing the chain): during the spring and summer of 2011, opening of 10 new stores in Moscow, St. Petersburg, Rostov-on-Don, Yekaterinburg, and Tatarstan is planned. Moneks Trading has obtained the right to develop one of the most well-know lingerie brands, Victoria’s Secret, in Russia. JamilCo plans to open first Jaeger (one of the British luxury fashions’ manufacturing and design leaders) stores in Russia in Q2 2011 at Vremena Goda and Metropolis shopping centers. Jimmy Choo, a British fashion house, has signed a franchise agreement to open its stores in Russia. According to the company’s announcement, the first boutique with an area of 50–60 sqm will open in Stoleshnikov Pereulok, Moscow, in September 2011. Opening of the first Banana Republic store is planned for September at Afimall City shopping center. Other retail operators announcing large-scale development plans include Monro, a Siberian footwear chain, which plans to expand the chain by 40–60 stores; Gloria Jeans, which has announced expanding store trading floors and closing small stores; and Obuv Rossii, with plans to open 50 stores in 2011. Mango, a Spanish operator, will launch 25–30 own and franchise stores in Russia (Irkutsk, Kazan, Moscow, Novy Urengoy, Orenburg, St. Petersburg, Stavropol, Stary Oskol, and Yuzhno-Sakhalinsk). Bosco di Ciliegi plans to open 31 Bosco Sport stores of sports fashions in Russia in 2011 (in 2010, 28 stores were opened in Russia), expanding its presence by approximately 10 cities. Douglas Holding, a German company, has sold its Douglas Rivoli chain to competitors, the owners of Rive Gauche chain. The acquisition will not allow Rive Gauche to surpass its largest competitor, L’Etoile chain, in terms of the number of stores; nevertheless, it will expand its geography and strengthen its presence in Moscow and a number of cities in the regions. Public Catering Operators Foreign companies are making decisions regarding independent entry into the market and signing partnership agreements with strong local players regarding development using the franchise model; active development of the existing chains is planned. The public catering operators’ segment did not stand back, either. Having opened the first coffee shop in Moscow in 2010, the famous Dunkin’ Donuts chain, considering Russia to be one of the largest and most promising European markets, plans to increase the number of coffee shops to 20 in the very near future, and to 100 – in the long term. Other foreign chains – Chili’s, which operates in the same format as T.G.I. Friday’s, Burger King and its regional franchisee, Ginza Project, have already been actively expanding and plan to continue development. Traveler’s Coffee, a Siberian chain, opened the doors of its first coffee shop in Moscow at the end of April. In addition, several international operators are considering the possibility of entering the Russian market, including Wendy’s/Arby’s Group, an American fast food operator, which plans to open 180 fast food restaurants in Russia in the next 10 years.
SUPPLY Unlike most retail operators, expansion of supply of retail space in all formats will be lagging behind the demand for them for quite some time still. In Q1 2011, the retail property market of Moscow saw addition of two shopping centers, Afimall City (MIBC Moscow City, site No. 8, GBA – 179,000 sqm, GLA – 101,000 sqm) and TPU Planernaya (transportation terminal near Planernaya metro station, GBA – 50,400 sqm, GLA – 14,800 sqm). As of the end of Q1 2011, the GBA of retail properties opened in Moscow amounted to 6,048,400 sqm (GLA – 3,026,800 sqm). About 300,000 sqm of retail space has been announced to enter the market by the end of the year (GBA indicator; GLA is about 150,000 sqm); at the same time, most of them have already been leased under preliminary agreements. This is why their opening, as well as the new projects, numbering in single digits, will hardly be able to satisfy all of the expected demand. This situation is characteristic of most Russia’s cities. VACANCY AND RENTAL RATES The situation described above leads to a reduction in vacancy rates (for many properties, they have reached the pre-crisis levels). According to our projections, growth of rental rates, denominated in USD, may amount to 10–20% in 2011 (the latter value may be achievable for some properties highly sought after by operators). STREET RETAIL The situation in the street retail property segment is similar to the one that could be observed at shopping centers. Taking into account the extremely limited new supply and higher activity of retail operators, a heated competition for premises can be expected. Even now, rental rate increases can be observed; at the same time, they happen both in the main retail streets and in the periphery districts of the capital. Also, the rates for the most attractive locations have reached the pre-crisis levels. On Tverskaya Ulitsa, Moscow’s main retail street, the current rates are USD 8,000–9,000 per sqm per year (given that as recently as in the middle of 2010 asking rates there did not exceed $5,000/sqm/year). TRENDS AND FORECASTS • Active increase in demand for premises on the part of all retail profiles • Unfreezing of previously suspended projects • Higher development activity, especially in the regional cities • Increasing imbalance between demand and supply • Reduction of vacancy rates • Growth of rental rates Galina Maliborskaya Director, <strong>Retail</strong> Property Department galina.maliborskaya@colliers.com
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Retail Sector - Colliers International

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