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​Moscow

JLL analyzed vacant premises structure in Moscow shopping centres

​13% of premises are vacant on average in shopping centres opened in 2013-2014, and not more than 3% are vacant in schemes opened before 2013


​​Moscow, 19 May, 2015 – JLL presents Moscow shopping centre market research analyzing major factors affecting success and vacancy rates.

The vacancy rate in shopping centre is influenced by fundamental factors, such as location and technical specifications, type and size of shopping centre, tenants types depending on the size, shopping centre management, as well as crisis factors, including financial position of retailer, landlord’s flexibility, rental discounts and date of completion (before or during the crisis).

The period of shopping centre opening significantly influences the vacancy rate in it. According to JLL research the vacancy rate in Moscow shopping centres1 opened during crisis period is three times higher than the same indicator in objects opened before 2013. The vacancy rate for shopping centres opened before 2013 does not exceed 3%, while availability for objects commissioned in 2013-2014 is much higher and amount to 13% (6% in average). JLL observed the same situation during the previous crisis: according to the Q3 2009, vacancy rate for the retail objects which were opened in 2008-2009 was around 10%, and only 3.5% - in schemes delivered earlier.

“High vacancy rate in recently opened shopping centres is logical – completions were high during last two years, whilst the macroeconomic situation worsened,” - Olesya Dzuba, Deputy Head of Research, JLL, Russia and CIS, comments. – At the same time, in malls opened before 2013 the situation is significantly better – they have less vacant premises, and this is explained by their gained popularity and target audience. It is worth noting that newly opened shopping centres with a backdrop of higher competition and lower purchasing power need more time to earn their target footfall level and to reach a stabilized rental income than shopping centres opened in more favorable economic environment.”

Vacant premises in Moscow shopping centres depending on opening period 
Vacant premises in Moscow shopping centres depending on opening period_19052015.png 

Source: JLL

Shopping centres opened before 2013 are also affected by the macroeconomic situation: retailers are optimizing their business, leasing less new premises, as well as closing some of the stores. According to JLL analysis2, it is mainly smaller tenants (less than 100 sq m) that are closing their stores in shopping centres. Their share of total closed stores accounted for 52%. The second largest share (36%) of tenants that are leaving are stores leasing 100-300 sq m. Fashion brands of clothes, footwear and accessories have been hurt most of all. The share of this tenant type accounted for 61% of the total number of closed stores in shopping centres.

g

g ​​Closed stores by leasing areas_by retail profile_19052015.png

Source: JLL

 


Share of vacant premises by floors

Share of vacant premises by floors_19052015.png

Source: JLL

“Despite the fact that fashion brands are mainly located on the ground and first floors of retail galleries, the vacancy rate on these levels amounts to 4% and 10% respectively. This is explained by the dominant position of small tenants (88% are of less than 300 sq m size) leaving shopping centres which does not significantly influence the vacancy rate. Nevertheless, their exits create a perception of emptiness and high vacancy in the shopping centre,” - Olesya Dzuba noticed.

According to JLL data, the lowest vacancy rate has been recorded in the Western (2.2%) and in the South-Western (2.4%) administrative districts of Moscow, where the population income level is above the city’s average. In the North-Western administrative district the consumer income is about the same as the city’s average and vacancy rate is lower than average on the Moscow market, despite last year’s relatively high completion levels in this area.

Market balance by Moscow districts*

gMarket balance by Moscow districts_19052015.png

*The Moscow districts analysis excludes Central Administrative District, as the centrally located objects are less linked to living places of the target audience, thus they are better to analyze separately

Source: JLL

Nevertheless, every shopping centre is individual and there are factors affecting the vacancy rate of each. For example, location and accessibility of a shopping centre are important ones. According to JLL's research, the average vacancy rate of shopping centres near metro stations is 4%, for objects located away from the metro the vacancy rate is almost twice as high (7%).

Developers and property managers can improve some disadvantages of a shopping centre location. For example, by providing a free shuttle bus from the nearest metro station to the shopping centre, if there is no metro station near the shopping centre or pedestrian accessibility is poor, as well as by organizing convenient access routes to the shopping centre (construction of transport junctions, etc.). The effect of these measures on vacancy rates is clear: a free shuttle bus could help to decrease vacancy rate to 5% compared to 9% in for shopping centres without them.

Shopping centres of various formats affected differently by the crisis. It is logical, that the most popular neighborhood (5-15 thousand sq m) and community (10-35 thousand sq m) shopping centres which are oriented to local consumers and focused on meeting basic needs less affected by the crisis, rather than regional shopping centres (40-75 thousand sq m). Their areas don’t allow them to offer the most diverse set of services in comparison with superregional shopping centres (over 75 thousand sq m). This is why regional shopping centres have been the most affected by the crisis, with their vacancy rate increasing to 9.7% at the end of 2014.

Availability in Moscow shopping centres, by type

Availability in Moscow shopping centres, by type_19052015.png

Source: JLL

“On the back of declining footfall and increasing competition among shopping centres the flexibility of landlords while negotiating rental rates has become an important factor. Among the possible scenarios for keeping existing tenants could be reduction of a store size or relocation to another floor - perhaps with a fit-out compensation. If vacant areas appear, there are options to fill in empty areas in order to save footfall levels,” - Aldynai Yumbuu, Head of Commercialization, Retail Property Management Department, JLL, Russia & CIS, says. – “Among examples are temporary exhibitions, children’s zoos, pop-up stores, showrooms, online stores going offline, educational workshops and co-working space, conference room for training, food markets, as well as active fill in with non-retail formats (master class on healthy diet and way of living, concerts, dances, children studious, and etc.).”

Moreover, landlords should be flexible when offering lease terms; they should do their best to keep tenants if they perform well. Short-term discounts and fixing the exchange rate band offered for the period of 3 to 12 months, rental rate in the form of combination of minimum rent plus percent of turnover or pure percent of turnover are the possible options for the compromise.

1Research is based on Q4 2014 data
2The analysis is conducted using the data on 40 Moscow shopping centres


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 $4.7 billion and gross revenue of $5.4 billion, JLL has more than 230 corporate offices, operates in 80 countries and has a global workforce of approximately 58,000. On behalf of its clients, the firm provides management and real estate outsourcing services for a property portfolio of 3.4 billion square feet, or 316.0 million square meters, and completed $118 billion in sales, acquisitions and finance transactions in 2014. Its investment management business, LaSalle Investment Management, has $55.3 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, 2014  and 2015 at the Commercial Real Estate Awards, Moscow; Consultant of the Year at the Commercial Real Estate Awards 2009, St. Petersburg; Consultant of the Year at the RCSC Awards in 2015, and The Best Real Estate Consultancy in Ukraine at the Ukrainian Property Awards in 2013.

For further information, visit www.jll.ru