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Developers plan a record 2.6m sq m of new shopping centre space in Russia in 2015

​According to JLL, many projects will be put on hold, hence JLL expect significant downward revisions from these plans

​Moscow, 22 January, 2015 – According to JLL, in 2014 1.63 m sq m of stock was added to the Russian shopping centre market, down 10% YoY. For the first time more than 35% of the total annual completion was located in Moscow, making a total of 602,000 sq m. This level is a record number for this market and is equal to the total result of the previous three years.

In Q4 the completion of retail space in Moscow equalled to 317,500 sq m, which is five times the level reached in the previous quarter, while the total amount in Russia was estimated at 800,000 sq m, which is 16% lower than the same quarter in 2013. In 2014 the largest completed shopping sentres in Moscow included Aviapark SEC (228,500 sq m) and Vegas Crocus City (112,500 sq m). In the regions, Ambar SC (90,000 sq m) in Samara, Grinvich Phase IV (85,000 sq m) in Yekaterinburg and Planeta SC (72,900 sq m) in Novokuznetsk were also completed.

Retail completion dynamics in Russia


Source: JLL

In 2015 more than 2.6m sq m of retail space are planned. According to JLL forecasts, however, no more than 1.9m sq m are likely to be delivered, nevertheless this result could become the record high for the Russian retail market. Moreover, about 900,000 sq m are announced for Moscow. However, according to JLL expectations, only 500,000 sq m are likely to be completed. JLL analysts noticed that the significant number of 2015 completions will be formed by projects that were originally planned to be completed in 2014.

​Retail completion dynamics in Moscow


Source: JLL

Among the largest shopping malls in Moscow that are expected in 2015 are Columbus (136,000 sq m), Kuntsevo Plaza (66,000 sq m), MARi (70,000 sq m), Riviera (100,000 sq m) and Butovo Mall (57,000 sq m). In the regions, Gudok SC (115,000 sq m) in Samara, Arena SC (95,000 sq m) in Barnaul and Almaz SEC (90,000 sq m) in Chelyabinsk are expected. 

“The construction dynamics and commissioning of new shopping centres will be affected by the current market situation. Some projects in Moscow, as well as many of them in regions, may be frozen due to the decrease of demand from retailers and unavailability of financing: developers will not start the construction of the newly planned projects, but will finish those ones that are at an advanced stage,” – Tatyana Kluchinskaya, National Director, Head of Retail Department, JLL, Russia & CIS, comments. – “At the same time, in several regional cities there is a possibility of the new projects launch in connection with the shortage of quality retail space in the local market and relatively high purchasing power. In cities, such as Perm, new shopping malls are likely to be in demand by retailers.”

According to JLL, rents in shopping centres in Moscow have decreased by 20% in 2014. The average rents are at USD400-1,450 per sq m per year, while the prime rents are ranging between USD2,400 and USD4,500 per sq m per year. Due to the negative forecasts for the Russian economy and the increased competition among new shopping malls JLL analysts expect that the rents will continue to decline further in 2015. The most successful shopping centres are supposed to be in stable demand and the prime rents are not to shrink significantly.

“In conditions when the decrease of buyers’ activity has been registered in Moscow shopping centres, retailers are optimizing their rental costs and closing unprofitable stores. In regions, purchasing power is lower, compared to the capital city, and they will obviously suffer more in this situation, which will also affect the rental rates.” - Tatyana Kluchinskaya notes.

The current situation will affect various tenant profiles differently. The rouble devaluation and macroeconomic uncertainly have led to the reorientation of consumer demand. Retailers in the medium plus price segment are experiencing the higher pressure; conversely, the companies in low price segment (mass market, discounters) are more attractive for buyers. The following profiles of tenants are expected to be less affected during the crisis: grocery, children goods stores and food courts (excluding the supermarkets and restaurants in high price segment, which are under pressure of sanctions and rouble depreciation).

In Q4 the vacancy rate in Moscow shopping centers remained at the level of last quarter at 6%. At the same time, this indicator has risen by 3.5 ppt since the beginning of the year. In the successful shopping centers with high traffic and conversion rates vacancy rate does not exceed 1%, which confirms they are in high demand.

“Nowadays, in conditions of increasing competitiveness and the decline of real personal incomes, shopping centres need more time for gaining their consumer audience and achieving forecasted footfall figure. This limits the retailer activity in the projects that are at an early stage. It also prevents them from opening their stores on the same day as the shopping centre. As a result, from the second half of 2014 there are no more than 30-45% of retailers operating of the shopping centre launch. The majority of them open three to nine months later, which has certainly become a trend today.” - Tatyana Kluchinskaya marks. However, new shopping centres are now able to offer flexible terms, and those who stand out with quality concept and good location will eventually become as effective and successful as long operating complexes.

Taking into account the fact that such a large pipeline has been announced and a number of retailers are revising their brand portfolios, while some of them are closing unprofitable stores or even exiting the Russian market, JLL analysts expect the overall vacancy rate in the Moscow retail market to reach 8% in 2015.

Moscow retail market balance


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 $4.0 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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