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Moscow

Moscow saw a record level shopping centre completions in Q2 and H1 2014

​The capital accounted for more than 50% of all Russia’s new supply in the first half of 2014


​Moscow, 14 July, 2014 – According to JLL, Moscow’s retail market saw 183,000 sq m of new completions in Q2 2014. This is the highest quarterly level for 4.5 years. The previous record (280,000 sq m) was set in Q4 2009. This means that Moscow saw 242,000 sq m in H1, which is the highest H1 level since the 211,000 sq m record which was set in 2009.

Q2 Shopping Centre Completions in Moscow

Q2-Shopping-Centre-Completions-in-Moscow_14072014.png 

Source: JLL

Vegas Crocus City (GLA 112,500 sq m) and Vesna (GLA 56,000 sq m) are key shopping centres that opened in Q2 2014.  

‘’The Moscow market saw 242,000 sq m of new premises in H1 2014 which actually exceeds the total completions level of 2013. In 2013 completions on the Moscow market were 204,000 sq m.” – Tatyana Kluchinskaya, National Director, Head of Retail Department, JLL, Russia & CIS, commented. – “As of H1 2014 total stock in Moscow exceeds the level of 3.8m sq m (GLA).”

JLL anticipates 730,000 sq m of total completions by the end of the year (up from our previous forecast of more than 600,000 sq m) as we believe Columbus SEC (GLA 142,000 sq m) is now likely to come to the market in 2014. At the same time JLL expects that a number of several smaller projects are likely to be postponed until 2015.

Shopping Centre Completions in Moscow

Shopping-Centre-Completions-in-Moscow_14072014.png 

Source: JLL

H2 2014 to see the opening of such schemes as Kuntsevo Plaza (GLA 68,000 sq m), Avia Park (227,000 sq m), Centralny Detsky Magazin on Lubyanka (GLA 34,570 sq m) and Columbus (142,000 sq m). As a result total stock in Moscow will exceed 4 m sq m.

Moscow is catching up with other European capitals in terms of market density. As of H1 2014 total stock per 1,000 inhabitants achieved the level of 327 sq m and by the end of the year is likely to reach 368 sq m, according to JLL.

Retail Stock per 1,000 Inhabitants in Moscow

Retail-Stock-per-1000-Inhabitants-in-Moscow_14072014.png 

Source: JLL

“Russia’s retail market, on the contrary, demonstrated negative dynamics compared to 2013. Q2 2014 completions were at the level of 261,500 sq m which is 12% less compared to Q2 2013 and 55% more compared to Q1 2014. At the same time more than 50% of new Russian supply was in Moscow (traditionally the share of Moscow is no more than third). Moscow is a priority for retailers and demand in the regions is moderate.” – Tatyana Kluchinskaya said.

The Russian market saw 430,500 sq m of new completions in H1 2014 which is a 28% YoY fall. Total stock in Russia is at the level of 16.7m sq m as of H1 2014.

Shopping Centre Stock Distribution (GLA) in Russia

Shopping-Centre-Stock-Distribution-GLA-in-Russia_14072014.png 

Source: JLL

According to JLL forecasts, 2014 completions will reach the level of 1.7-1.8m sq m in Russia which will be  lower than the record figure of 2008 (1.85m sq m). Nonetheless, by the end of the year, total stock in Russia will exceed 18m sq m and Russia will become the second largest market in Europe after United Kingdom (18.2m sq m) and ahead of France (16.5m sq m).

Stock and completions in Russia

Stock-and-completions-in-Russia_14072014.png 

Source: JLL

“Regardless of the macroeconomic uncertainty, new international retailers continue to target the Russian market. Several fashion and footwear retailers (Deichmann, Harmont & Blaine, Moncler and Norma J Baker), children’s goods store (Prenatal Milano), cosmetics store (Tony Moly), sports bar (Hooters) and DIY store (Index Living Mall) are among the newcomers of Q2 2014. Index Living Mall opened its first store in Barnaul whereas others started their development from Moscow and St. Petersburg.” – Andrey Privezentsev, Head of Retail Research, JLL, noted.

Macroeconomic uncertainty and tenant’ rotation have led to an increase in the average vacancy rate in Moscow quality shopping centres. In Q2 2014 the vacancy rate went up from 2.5% to 3.5% and according to JLL forecast is likely to reach 4.5%-5% by the end of the year. At the same time rental levels remained fairly stable in Q2 2014. Due to economic uncertainty many retailers insist on downgrading the rents in regional schemes and under construction projects in Moscow. However, at the moment developers are ready to negotiate alternative measures instead of decreasing the rents. Prime rent in Moscow shopping centres is USD3,000-4,500/sq m/year whereas average rent is USD500-1,800/ sq m/year. 

“In our view, the large level of completions forecast for 2014-2015 should not lead to an oversaturation of the Moscow market. Quality schemes will be of greater demand whereas lower quality projects will have to find a new market niche, for example choose specialized format.” – Tatyana Kluchinskaya said.

Moscow Shopping Centre Market Balance

Moscow-Shopping-Centre-Market-Balance_14072014.png 

Source: JLL

About JLL

JLL (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 fee revenue of $4 billion, JLL has more than 200 corporate offices and operates in 75 countries worldwide. On behalf of its clients, the firm provides management and real estate outsourcing services for a property portfolio of 3 billion square feet and completed $99 billion in sales, acquisitions and finance transactions in 2013. Its investment management business, LaSalle Investment Management, has $48.0 billion of real estate assets under management. JLL is the brand name of Jones Lang LaSalle Incorporated.

In Russia and CIS JLL has offices in Moscow, St. Petersburg and Kiev. JLL, Russia & CIS was voted Consultant of the Year in 2004, 2006, 2007, 2008, 2009, 2010, 2011, 2012 , 2013 and 2014 at the Commercial Real Estate Awards, Moscow; Consultant of the Year at the Commercial Real Estate Awards 2009, St. Petersburg and The Best Real Estate Consultancy in Ukraine at the Ukrainian Property Awards in 2013.

For further information, visit www.jll.ru