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News Release

Moscow

The vacancy rate on the Moscow street retail market reverted to a three-year minimum


Moscow, April 24, 2018 – According to JLL analysts, the vacancy rate on the main Moscow high streets declined to 8.4% in Q1 2018, down by 0.6ppt QoQ. The indicator returned to the level at the beginning of 2017, a minimum that was followed by the reconstruction of central Moscow streets.

Overall vacancy rate dynamics
Overall vacancy rate dynamics_2404.png
Source: JLL

The northern section of the Garden Ring (from Mayakovskaya metro station to Kurskaya metro station) was the leader in improving occupancy in Q1 2018, with the vacancy rate down by 6.9ppt, to 13.2%. Small-format supermarkets (АВ Daily, VkusVill), beauty salons and banks were among the new tenants on this section. The overall vacancy rate on the Garden Ring declined from 11.7% to 9.5% in Q1 2018. Apart from the Garden Ring, which had posted occupancy improvements after the completion of summer renovations, Tverskaya and Maroseyka streets showed the best occupancy dynamics, with the vacancy rates there declining by 2.5ppt and 2.2ppt, to 5.8% and 10.0%, respectively.

“The main trend on the Moscow high street retail market is a rising share of foodservice tenants (to 33.5% in Q1 2018), while the presence of fashion operators is declining. The share of fashion and footwear stores has been gradually decreasing over the past years, from 15% in 2015 to 10.5% in March 2018. At the same time, fashion retailers continue to explore available opportunities on the street retail market. This mainly includes openings of flagship stores on streets with a significant share of such operators in the tenant mix. The largest Max Mara flagship store on 19 Novy Arbat Street is among notable debuts in Q1 2018,” – comments Yulia Nazarova, Head of Street Retail in Moscow, JLL.

“High streets profiles have been completed due to the end of street reconstruction and the arrival of new operators. A gradual streets occupancy rise has been observed since the completion of renovation works, which also leads to a growing share of quality retail chains. Thus, main restaurant locations in Moscow have already been established, and are being frequented by local residents and tourists. Top high street retail locations preferred by the foodservice outlets have already reached low vacancy rates, at around 3% on Myasnitskaya, Pokrovka and in the Patriarshie Prudy district, while there are no vacant premises on Kamergerskiy Lane. Overall, there is a lack of vacant space in developed locations. Therefore, a current tenant mix can be hardly affected by such short-term events as the 2018 FIFA World Cup. Nevertheless, temporary retail outlets, such as pop-up stores, can be launched to catch up high tourist flows,” – notes Oksana Kopylova, Head of Retail and Warehouse Research, JLL, Russia & CIS.

Breakdown of Moscow street retail tenant mix
Breakdown of Moscow street retail tenant mix_2404.png
Source: JLL

Meanwhile, new vacant space appeared on a few central streets in Q1 2018. For example, the vacancy rate increased from 11.4% to 13.3% on Stoleshnikov Lane. This, in turn, influenced the level of the average rent, which declined to RUB205,000 per sq m per year . A decline was also observed on Novy Arbat Street due to higher vacancies. Tverskaya Street saw a decrease in rates as the tenant mix had adjusted towards lower priced operators. The rental rates on both streets reached RUB105,000 per sq m per year. This contrasted with Maroseyka Street, where a decline in the vacancy rate triggered rental growth, from RUB85,000 per sq m per year in Q4 2017 to RUB90,000 per sq m per year in Q1 2018.

Average rents on main Moscow high streets
Average rents on main Moscow high streets_2404.png
Source: JLL

On the demand side, restaurants & cafés remained the leaders on the Moscow street retail market, with 46% of leasing inquiries in Q1 2018. Fashion operators traditionally were the second most active with 17%, followed by supermarkets and grocery stores (9% of total inquiries).

Rotation on the Moscow retail streets remained flat at 8% in Q1 2018.  The highest levels were observed on the renovated northern section of the Garden Ring and on Stoleshnikov Lane, where the indicators reached 18% and 16%, respectively.


About JLL

JLL (NYSE: JLL) is a leading professional services firm that specializes in real estate and investment management. A Fortune 500 company, JLL helps real estate owners, occupiers and investors achieve their business ambitions. In 2017, JLL had revenue of $7.9 billion; managed 4.6 billion square feet, or 423 million square meters; and completed investment sales, acquisitions and finance transactions of approximately $170 billion. At the end of 2017, JLL had nearly 300 corporate offices, operations in over 80 countries and a global workforce of 82,000. As of December 31, 2017, LaSalle had $58.1 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, 2006-2017 at the Commercial Real Estate Awards, Moscow; Consultant of the Year at the Commercial Real Estate Awards 2009, 2016, St. Petersburg; Consultant of the Year at the RCSC Awards in 2015.