Colliers retail market overview, Moscow (RU)

Aggravation of the financial crisis in 2009 (freezing of projects, defaults of retail operators) revealed weaknesses of the market and its players, as well as mistakes made in project development during the years of extensive development. The most attractive and high quality properties managed to avoid both an increase in vacancy rate and a decrease in rental rates.

In 2009, the total supply in the retail property market increased by almost 900,000 m². Commissioning of most of the properties became landmark events for the market. Metropolis shopping center opened later than expected (initially, its opening was planned for Q4 2008) and introduced to the market many new international brands (H&M, River Island, Bebe, Gap, Ipekyol, and others); in Filion SC, the first Carrefour hypermarket in Moscow was opened, which later, affected by the crisis situation, made a decision to stop the chain's development in the country and close its operating stores.

In December, Babylon, the first children's entertainment center, opened its doors to visitors in this shopping center. Shopping centers Golden Babylon on Prospekt Mira and Gorod, being among the largest in Moscow, opened in Q4 2009, as well. Golden Babylon is the largest shopping center in Europe located within the city boundaries. It includes the largest and the first Moscow hypermarket of St. Petersburg's chain O'KEY, Fun City entertainment center, also developed by a St. Petersburg operator, and Castorama DIY hypermarket.

It is noteworthy that despite their quite considerable floor space, these properties are practically completely leased out to tenants. Meanwhile, a general market trend has been opening of properties with 40-60% occupancy of the arcade with subsequent opening of shops in course of the property's operation. The reason is that the tenants begin finishing work late, or lack sufficient financing to perform it.

As of the end of the year, the total supply amounted to 4,857,000 m² (total area); 2,538,000 m² (GLA).

It is worth noting that, despite the difficult situation, 2009 brought new brands to the retail property market. These include furniture and household goods hypermarket Kika, department store H&M, as well as such brands as River Island, Ipekyol, New Look, Bebe, Gap, Nucleo, Centro, and Fun City. Besides, a number of operators plan to enter the retail property market, including department stores Debenhams and Harvey Nichols, British supermarket Sainsbury's, fast food chain Burger King, clothing brands Tally Weijl and Li Ning, as well as economy footwear chain Payless Shoes.

Decathlon is going to introduce its new brand Koodza (a hard discounter with smaller area selling mainly Decathlon stores' best-selling goods); Castorama is launching its City Format operator which occupies smaller premises; and Auchan plans to introduce its new Raduga brand represented by goods of the economy price segment in supermarket format. Nike plans to open its first own shops in Russia along with franchise stores.

One can notice an active expansion of regional chains into space being vacated in Moscow shopping centers. These include St. Petersburg children's goods chains Zdorovy Malysh and Deti, DIY operator Start, as well as Lipetsk Uyuterra chain.

The situation on the regional cities' retail property markets remains very complicated: the demand on the part of retail operators is low (even for the operating properties). This is related to general scaling down of development plans caused by a decrease in purchasing power in the regions, as well as by the lack of low-cost loans required for active expansion. Besides, bankruptcy of a number of retail chains in Moscow, vacation of some space in operating shopping centers, and a certain decrease in rental rates have allowed regional chain operators to lease premises in the capital's properties.

Rental rates
Decline in rental rates in the retail property market began as early as late 2008 and reached its maximum by mid-2009, amounting to 30-50% in US dollars in Mos

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