In Q3 2015 the vacancy rate in Moscow shopping centres remained at the level of last quarter at 7.5%. Taking into account the ongoing rotation of tenants as well as a number of projects forecasted in Q4, JLL analysts expect the overall vacancy rate to reach about 8% by the end of 2015.
“The estimated vacancy rate is much lower than the record level of 11% registered on the Moscow retail market in 2010. We do not expect either a significant vacancy rate or exceeding of this record in the near future due to the gradual absorption of recently opened shopping centres by tenants and decrease in coming new supply.”– Tatyana Kluchinskaya, National Director, Head of Retail Department, JLL, Russia & CIS, explains. – “It’s also important to note that the dialog between landlords and tenants has changed with the increased shopping centres’ competition. Nowadays developers are more flexible in negotiations and try to achieve the minimal vacancy rate in their objects in order to save and boost their attractiveness for consumers.”
At the same time, positive dynamics were observed in key shopping centres: the vacancy rate has decreased since the beginning of the year by 50 bps - up to 1%, returning to the level of last year. It should be noticed that before the economic downturn in the country leading to fall in consumer demand, the rotation in key shopping malls was minimal, and the amount of vacant space was close to zero.
“At the present, an active tenant rotation and exhibited spaces have been seen in top objects as well. It provides an opportunity for retailers which are currently expanding. At the same time, landlords of even most demanded objects are forced to renegotiate the terms with tenants,” - Maria Shpakova, Retail Market Analyst, JLL, Russia & CIS, notes.
According to JLL, the volume of new retail supply in Moscow for 9M 2015 comes to 387,500 m², which is 36% higher than the same period last year. As a result, Moscow overall retail stock has reached 4.57 million m². In Q3 2015 only RIO on Kievskoye Highway was delivered in Moscow with 45,300 m², grew by 5% y-o-y. Although relatively significant volume of new supply JLL experts anticipate a 25% fall in annual volumes versus 2014 with 450,000 m² coming to the market.
Despite the economic instability and lower margins of retailers on the back of ruble depreciation, new players still come to the market. Some of them placed their stores in newly opened shopping centres. For instance, several brands such as H&M Kids and Silver Cross – British manufacturer of pushchairs and prams – set up their first stores at Centralny Detsky Magazin on Lubyanka. Japanese watches brand Orient has chosen Aviapark SC to be the first location, while Italian children clothes brand Original Marines opted for Columbus SC.
“However, these openings can’t be regarded as a background for substantial demand increase on retail premises. Overall activity trend of international retailers on the Russian market went down; some brands left the market, and the new ones rarely open their stores directly. Almost 70% of newcomers that entered the market for the last 12 months opened just a single store, basically interested in small premises. It has to be mentioned that the resting 30% of new entrants opened three stores in average, includes openings in Russian regions.” - Elena Zadorozhnaya, Head of Retail Tenant Representation, JLL, Russia & CIS, comments. – “That confirms that retailers are capable and willing to develop on the Russian market even in current circumstances, with favourable conditions and minimal risks.”
Source: JLL
