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Moscow, 3 July 2013 – Jones Lang LaSalle presents the research on the street retail development on key avenues in Moscow. About 20 streets in Moscow are usually referred to as prime high streets, most of them are located in the city centre. Kutuzovskiy Avenue, Prospekt Mira Avenue, Leningradskiy Avenue, Leninskiy Avenue and Komsomolskiy Avenue could also be considered as prime retail corridors. These avenues benefit from the most developed street retail and the largest share of chain and international brands compared to other thoroughfares in the city.
The demand on avenues is different from that in the centre of the city. Premises on central streets are sought after by banks, restaurants and cafes, and fashion stores whereas premises on avenues are more of interest for mass market fashion and footwear shops, supermarkets, retail banks, furniture stores and beauty salons.
Tenants’ distribution on key Moscow avenues
‘Other retail’ includes the tenants with a less than 7% share, incl. supermarkets, W&B, sportswear
Source: Jones Lang LaSalle
Tenants’ profiles and price segment differ from one avenue to another:
• the main tenants on Leningradskiy Avenue are fast food, cafes and restaurants (16%) as well as service entities (17%);
• on Kutuzovskiy Avenue fashion and footwear premium-class stores prevail (18%);
• on Leninskiy Avenue core tenants are household and furnishing shops (20%)
• service entities (15%), fashion and footwear shops (15%) and retail banks (15%) dominate Prospekt Mira Avenue;
• household and furnishing shops (19%) and retail banks (18%) are the major tenants on Komsomolskiy Avenue.
Svetlana Yarova, Head of High Street Retail, Jones Lang LaSalle, Russia & CIS: “A certain informal ‘zoning’ is observed on major avenues. The evolution of these streets can be put down to supplanting of tenants from other segments that do not create synergy with the general profile of the street. What is more, within the frame of already existing clusters, a tenant may be substituted by another retailer of a similar profile.”
Another vital difference of street retail on highways from that located in the city centre is greater density of the ‘evening side’. However, banks and mobile operators are often located on both sides of the street. Successful street retail premises on the ‘morning’ side of the street can usually be found closer to metro stations.
Tenants’ strategies on avenues usually vary depending on profile. For instance, retail banks choose premises at the beginning of avenues in order to fully benefit from car traffic. As for premises at the end of avenues, they are preferred by furniture and household stores and DIY retailers in order to make use of proximity to areas of residential development as well as suburban settlements under construction.
The major supply of high-quality street retail real estate is concentrated on the avenues within the Third Ring Road and on the Garden Ring itself. In the areas close to metro stations the demand exceeds the supply. At present the average share of vacant spaces on highways is 5%. Prospect Mira has the highest level of vacant spaces (6%). As for Kutuzovskiy, Leningradskiy and Komsomolskiy Avenue, vacancy is below 1%.
For the last few years the rental rates on main highways have remained broadly stable. The upturn is marked only for premises located close to the metro stations. At present, the highest rental rates are seen on Kutuzovskiy Avenue (USD2,000 – 3,700 per sq. m per year), and the lowest rental rates are observed on Leningradskiy Avenue (USD1,500 – 3,000 per sq. m per year).
Svetlana Yarova added: “We do not forecast any considerable fluctuation of vacancy and rental rates on highways in the near future. However, a 5-7% rise of rents on premises located close to the metro stations is likely. Premises located close to metro stations generating the highest pedestrian traffic along with the premises located at the beginning of the key avenues will be sought after by retailers and investors. Additionally, premises located close to metro stations benefitting from highest traffic are considered to be the least risky option on the street retail investment market.”
High percentage of street retail deals on highways accounts for purchase. While premises in the city centre are mainly bought by private investors, a significant share of demand for premises on highways (along with private investors) is placed by retailers, mainly banks and grocery stores.
Jones Lang LaSalle has identified the most promising avenues in Moscow.
Andrey Privezentsev, Head of Retail Reseach, Jones Lang LaSalle, Russia & CIS: “Leninskiy Avenue, Komsomolskiy Avenue and Kutuzovskiy Avenue should be considered as the most promising thoroughfares for further development of street retail. This is due to a considerable amount of quality residential real estate (which generates the demand for street retail at both sides of the street) and the existence of retail clusters. The planned reconstruction of Kutuzovskiy and Leninskiy Avenues will enhance their traffic capacity which is one more competitive advantage. At the same time, the establishment and expansion of several quality retailers generating additional pedestrian traffic near Sokol and Aeroport metro stations could boost street retail development on Leningradskiy Avenue as well.”
About Jones Lang LaSalleJones Lang LaSalle (NYSE:JLL) is a professional services and investment management firm offering specialized real estate services to clients seeking increased value by owning, occupying and investing in real estate. With annual revenue of $3.9 billion, Jones Lang LaSalle operates in 70 countries from more than 1,000 locations worldwide. On behalf of its clients, the firm provides management and real estate outsourcing services to a property portfolio of 242 million square meters and completed $63 billion in sales, acquisitions and finance transactions in 2012. Its investment management business, LaSalle Investment Management, has $47.7 billion of real estate assets under management.In Russia and CIS Jones Lang LaSalle have offices in Moscow, St. Petersburg, Kiev and Aktau. Jones Lang LaSalle, Russia was voted Consultant of the Year in 2004, 2006, 2007, 2008, 2009, 2010, 2011, 2012 and 2013 at the Commercial Real Estate Awards, Moscow and Consultant of the Year at the Commercial Real Estate Awards 2009, St. Petersburg.For further information, please visit www.jll.ru
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