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Moscow, 20 November, 2014 – To coincide with the MAPIC, JLL conducted research on international retailers’ expansion in Russia between Q1 2011 and Q3 2014. The results of the research confirm that the majority of international retailers (79%) chose Moscow as the preferred location for their first store.
The St. Petersburg market was chosen by 12% of all operators for the first opening; only 9% prefer Russian regional cities for entry (including Sochi, Rostov-on-Don, Kazan, Chelyabinsk and others).
The research analyzed geography and the preferred way of market entry as well as the structure of new retailers by the country of origin and profile.
New entrants’ breakdown by geography (2011 – Q3 2014)
Most retail chains started their operations in Russia in shopping centres – 70% of the total number of openings in the responding period. The leader in terms of number of new entrants’ first stores is AFIMall City, Vremena Goda and MEGA Belaya Dacha shared the second place, together with Galereya of St. Petersburg, in third place there are Metropolis, GoodZone and Kapitoliy on Vernadskogo. 29% of new brands appeared in street retail premises.
“Unlike Europe, Russia has the “mall” market model where the main income is generated in shopping centres. The main reasons for this are the climate of country and also the absence of touristic retail areas, as ordinarily understood by foreigners, at least until recently.” − Elena Zadorozhnaya comments. – “The objectives of retail chains typically require the “correct” platform for the market entrance. Street retail is interesting for luxury brands, catering segment and other chains, which have a plan to open a flagship store. At the same time the development of companies in retail corridors has been limited by the lack of supply of quality premises, therefore it has been simpler for retailers to find suitable space in shopping centers with strong operating results, clear audience target and predictable footfall.”
The most active Russian market newcomers this period were European retailers with 61% share, including Italy (13% of total number), France (11%) and UK (10%). American retailers comprised 27% of the total number of new entrants in the Russian market since 2011. According to JLL forecasts, in the long term the share of Asian newcomers will increase.
New entrants’ breakdown by country of origin
More than half of brands that entered the Russian market since 2011 have been related to fashion, footwear, accessories segment (55%, including Michael Kors, H.E. by Mango, Twin-Set, Debenhams, The North Face, Moncler and others), 21% of the total number of openings are restaurants and cafes (including Marugame, Max Brenner, Wetzel’s Pretzels, Shake Shack and others), goods for children and furniture & interior comprised 6% each (including Mamas&Papas, Imaginarium, Hamleys, Prenatal Milano, H&M Home, Pentik, Crate&Barrel and others).
New entrants’ breakdown by profile
2013 was the most active period in terms of newcomers’ activity, due to the level of the market maturity, positive economic forecasts, high volume of the shopping center deliveries and redevelopment of pedestrian retail areas in the centre of Moscow. According to Oxford Economics, Russia leads Europe in total retail turnover in 2013, a total of about USD 742.2bn, making Russia a key target for many international retailers.
New entrants’ activity dynamics
“Newcomers’ activity was driven mainly by fashion and restaurant segments. However, the combination of exchange rate volatility and declining consumer activity in 2014 has put pressure on international operators, particularly this group, but few have left the market.” − notes Elena Zadorozhnaya. – “Taking into account the high level of retail turnover, the possibility of territorial expansion and the consumer spending patterns of Russians, international retailers maintain interest in the country. For the moment they are momentarily pausing their development plans and relying on other emerging markets. Some international retail chains are looking to take advantage of depressed prices and lease high quality premises, which were inaccessible to them earlier due to high rental levels or the absence of good efficient space. The combination of the record level of new quality retail supply and enhanced competition could be a good opportunity for new international entrants to occupy their niche in the Russian market.”
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.
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