According to JLL, with no new shopping centres delivered to the market in Q1 2017, the vacancy rate in existing properties declined from 7.5 percent to 7.2 percent. Over the course of the year, JLL analysts expect this indicator to decline further, to 6.5 percent, the lowest level since the beginning of 2015.
Some 217,500 sqm of new quality shopping centres are announced for delivery in 2017, which is 52 percent lower than the 2016 volume and the lowest level in the past four years. The main properties expected later this year are Vegas Kuntsevo (113,400 sqm) and Vidnoe Park (27,500 sqm).
“The volume of new shopping centre supply in Moscow has been declining since 2015. Developer activity moderated considerably during the recession; projects were frozen at various completion stages,” said Ekaterina Zemskaya, Regional Director, Head of Retail Group, JLL, Russia & CIS. “This year started with an announcement of realization of such previously suspended projects as Salaris (105,000 sqm) and Galeon (14,000 sqm), as well as construction plans of brand-new projects, in particular Vegas on Kievskoe highway. As economy stabilises, we expect further recovery of development activity that will restore positive completion dynamics in 2018-2020.”
“The focus of developers is changing with a gradual market saturation by traditional shopping centres and rising competition. There is a growing interest in neighbourhood shopping centres, which not only focus on the daily needs of residents, but also offer cultural and leisure components. The share of such projects in the future supply will increase mainly as a result of ADG Group’s reconstruction and reconception of 39 Soviet era cinemas (324,000 sqm),” said Polina Zhilkina, National Director, Head of Retail Advisory, JLL, Russia & CIS. “At the same time, construction of transport interchange hubs incorporates shopping complexes. For instance, Seligerskaya (145,000 sqm), Cherkizovo (120,000 sqm), and Park Pobedy TPUs. Such projects will form the bulk of the new retail supply from the beginning of 2019.”
The Russian market continues to attract new international retailers: seven new brands appeared in Q1 2017, Aquazzura, Zanellato, Peter Kaiser, Japonica, Giorgio Armani Beauty, Eglo, and Ahimsa. Most of the newcomers represent the premium segment. The most notable event among the first quarter debuts was the first European opening of Italian cosmetics boutique Giorgio Armani Beauty in Atrium. The only brand opening in street retail – on Petrovka Street – was that of Italian luxury shoes store Aquazzura. Street retail traditionally attracts flagship stores of global brands, with Q1 marked by such launches as flagship Nike store (the third overall and the first in Europe new concept store); a Massimo Dutti store appeared on Kuznetsky Most Street; H&M opening on Tverskaya Street was announced for Q2 2017.
“It is too early to call a start of the consumer sector recovery,” Margarita Shebanova, Retail Market Analyst, JLL, Russia & CIS, added. “Although consumers, along with other market players, adjusted to the current conditions, their incomes continue to decline. Nevertheless, the expected improvement of retail turnover and real disposable income dynamics (by 2.3 percent in 2017, according to Oxford Economics) will support further improvement in retail leasing activity.”