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News Release

​Moscow

The economic situation in the Russian market has led to a significant increase in Moscow shopping centres’ vacancy rates

JLL presents Q3 2014 Retail Market overview


​Moscow, 13 October, 2014 – According to JLL estimates, the Moscow shopping centres vacancy rate has increased significantly from 3.5% in Q2 to 6% in Q3 2014 due to the high volume of new supply added to the market from the beginning of the year and an active rotation of tenants.

The volume of new retail supply for 9M 2014 reached 285,000 sq m, which is almost 1.5x the FY2013 level, according to JLL estimates. In Q3 two shopping centres were delivered to the market – Vodny SEC (32,000 sq m GLA) and Alfavit SEC (11,000 sq m GLA). This figure is 20% higher than last year, when only 35,000 sq m was completed.

Tatyana Kluchinskaya, National Director, Head of Retail Department, JLL, Russia & CIS, comments: “The majority of developments for 2014 are expected in Q4 with another five shopping centres with total GLA of over than 450,000 sq m are planned to be delivered by the end of the year. If all announced projects will be opened in time, the volume of new retail space will exceed 750,000 sq m by the end of 2014, which is to hit the highest level ever seen.”

Shopping centres to open in Moscow in Q4 2014

shopping-centres-to-open-in-moscow-in-q4-2014_13102014.png

Source: JLL

Due to the volatility of the exchange rate, the period of tenants’ decision-making has been lengthened. JLL analysts forecast, that the vacancy rate will continue to growth in 2015 due to the significant volume of new completions, as well as the revision of retailers’ development plans resulting from the weakening purchasing power of Russians, and as consequence, the slowdown in retail sales growth.

“Rents in shopping centres generally remain unchanged, though tenants are increasingly insisting on a reduction in rental levels. For the moment developers, in turn, are ready to consider alternative commercial terms. For example, they are able to offer turnover rent for the short-term period (3-12 months) in newly constructed shopping centres.” Tatyana Kluchinskaya notes. – “The prime rent in shopping centres in Moscow is USD3,000-4,500/sq m/year, the average rent is ranging between USD500 and 1,800/sq m/year.”

​Real growth in retail turnover in Russia and the vacancy rate in Moscow SC’s

real-growth-in-retail-turnover-in-russia-and-the-vacancy-rate-in-moscow-scs_13102014.png

Source: JLL, Oxford Economics

Even though we have seen a significant increase in retail supply in Moscow by 9M2014 to 3.8 m sq m, taking into account the rapid population growth it is too early to speak about an excess of high-quality retail space in Moscow. According to JLL, Moscow with 319 sq m per 1,000 inhabitants is still undersupplied with quality retail space compared to St. Petersburg with 407 sq m.

International comparison of the retail area per 1,000 inhabitants

international-comparison-of-the-retail-area-per-1000-inhabitants_13102014.png

Source: JLL

Elena Zadorozhnaya, Head of Tenant Representation, Retail Department, JLL, Russia & CIS, comments: “The majority of well-known retailers are reviewing their plans and development strategies given the current economic situation. The decline in consumption has already negatively influenced company profits. Consequently, retailers are carefully evaluating their plans; some have even closed their stores as a result of significant losses in profits happen under unfavorable economic and political circumstances as well as currency fluctuations. It should be noted that these companies completed their restructuring plans in the beginning of the year when ruble depreciation was not so substantial. In our opinion, it would be wrong to state that the exit of certain retailers from the Russian market is a trend that will continue over the longer term. Foreign retailers do, in our view, continue to see the potential of Russian retail market though at the moment they have put their development plans on hold.”

TwinSet (Fashion), Unode50 (Jewelry), Crate&Barrel (Interior&Furniture), Penti (Lingerie&Underwear) and A.Lange&Sohne (Luxury watches) are among Q3 new entrants. The first confectionery of famous American chain Magnolia Bakery was opened in Moscow.

Q1-Q3 Shopping centres supply breakdown in Russia

q1-q3-shopping-centres-supply-breakdown-in-russia_13102014.png

Source: JLL

The Russian market increased by 272,000 sq m in terms of quality retail premises by the end of Q3, which represents an increase of around 1.5x compared to same period last year. The largest completed objects include Ambar SEC (90,000 sq m GLA) in Samara and Lotos Plaza in Petrozavodsk (62,500 sq m GLA).

The level of new deliveries over the first three quarters of this year has almost equaled 2013’s level (850,000 sq m) and reached almost 840,000 sq m. The majority of new supply in Russia is related to Moscow (34%) and cities with population less than 500k (33%). JLL anticipates, 2014 completions will reach the level of 1.7-1.8m sq m in Russia. 

“We see the decline of retail development in the regions. According to current conditions retailers prefer to complete their currently constructed projects but do not start new ones. This is due to both the moderate demand from retailers and very limited access to debt financing. In our opinion, in the short-term the construction of new shopping centres will not be started except the projects which have been financed already or self-financed. As a result we could see a similar dynamic to 2009 – a lack of new supply in the next years.” – Tatyana Kluchinskaya said.


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 $4.0 billion and gross revenue of $4.5 billion, JLL has more than 200 corporate offices, operates in 75 countries and has a global workforce of approximately 53,000. On behalf of its clients, the firm provides management and real estate outsourcing services for a property portfolio of 3.0 billion square feet, or 280.0 million square meters, and completed $99.0 billion in sales, acquisitions and finance transactions in 2013. Its investment management business, LaSalle Investment Management, has $50.0 billion of real estate assets under management. JLL is the brand name, and a registered trademark, 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