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New Malls Boost City's Retail Real Estate Sector

5 Декабря 2012, 11:57
Investments in the Russian commercial real estate market could reach $6.5 billion by the end of the year, according to data published by consulting company Knight Frank. Although that figure is less than that seen in 2011, experts note that the market's dynamic is positive in comparison with previous years

"The St. Petersburg market has become calmer and the general development of the real estate market is leading to an increase in quality projects that can stake a claim to being 'investment products,'" said Nikolai Pashkov, general director of Knight Frank St. Petersburg.

The majority of investment transactions in Russia (49 percent) take place in the retail sector, while second place is occupied by office real estate, which accounts for 30 percent of the overall commercial real estate market in Russia.


The end of 2012 has been an active period for the St. Petersburg retail real estate market. During the third quarter of the year, four new shopping malls were opened in the city, the same number as during the first six months of 2012, according to Knight Frank. Among the most notable launches are the Elektra shopping center on Moskovsky Prospekt, the multi-functional Mezhdunarodny center adjacent to the new metro station of the same name that is due to open Dec. 27, and the reopening of the historic DLT department store, which opened after renovation as a branch of Moscow's upscale TSUM department store.

There are more than 900,000 square meters of retail space currently under construction in St. Petersburg and scheduled for launch before the end of 2014, according to consulting company Maris, part of the CBRE Affiliate Network.

At the same time, other retail sites are closed for reconstruction or rebranding. According to Knight Frank, during the last two years six major shopping malls have closed for renovation work, four of which have already reopened their doors to visitors.

"Taking into account the high level of saturation of the St. Petersburg retail market, we are seeing a trend toward rebranding existing shopping centers and the construction of new ones in the zones of large-scale development projects near new metro stations and transport hubs," said Yelena Prozorova, a consultant at Maris's consulting and valuation department.


Most shopping malls in St. Petersburg are located in suburban districts, where 86.2 percent of all the city's retail space is located, according to Maris. The biggest number of shopping centers is in the Primorsky and Vyborgsky districts in the north and in the Moskovsky district in the south of the city.

As a result of the opening of new retail space, the city's Tsentralny (Central) district, which two years ago wasn't included in the top five districts in the provision of leasable quality retail spaces, now occupies third place in this ranking, according to Knight Frank research.

"The Vasileostrovsky and Petrogradsky districts remain less provided for when it comes to retail space," said Prozorova. "The reasons are the restrictions on construction and the absence of available space for building," she added.

"While the Tsentralny district has 849 square meters [of quality retail space] per 1,000 people, the Vasileostrovsky and Petrogradsky districts have just 73 and 0 square meters per 1,000 customers respectively," said Veronika Lezhneva, head of research in St. Petersburg at Jones Lang LaSalle Russia & CIS, which specializes in investment and real estate management.
In order to be considered "quality" retail space, a shopping mall must occupy more than 10,000 square meters and be home to recognized international brands.


Food stores have shown the most active expansion on the retail market in 2012. Finnish supermarket chain Prisma and the premium-class supermarket Lend have opened a number of new outlets this year, contributing to the active development of the premium segment of the city's food retail market. The Lend supermarket chain has a share of 50 to 54 percent of the St. Petersburg premium food market, according to the company's data.

According to Jones Lang LaSalle's Cross-Border Retailer Index - Destination Europe 2013, St. Petersburg ranks 8th on the list of the cities with the biggest number of international retailers. The company's new report analyzes the presence and expansion plans of 250 international retailers. Of these, 142 international retailers now operate in St. Petersburg, about half of which belong to the mass-market segment, said analysts at Jones Lang LaSalle Russia & CIS.


Space in shopping malls is in high demand compared with street retail. Experts observe a growth in occupancy levels even in poorly located malls and those with high rental rates and other disadvantages.

The average minimum rental rate for anchor tenants is from 4,500 rubles ($145) to 12,000 rubles ($390) per square meter per year (excluding VAT and maintenance fees), according to Maris data for the third quarter of 2012. The rental rates depend on the size of the rental space and the class and location of the shopping mall.

The highest rates are found at the largest malls, and can vary from 20,000 rubles ($650) to 45,000 rubles ($1,455) per square meter per year.

According to forecasts by consulting company experts, the retail market in St. Petersburg will maintain a stable pace of development. The provision of retail space by the end of 2012 could reach 452 square meters per 1,000 people, Colliers International experts predict.

Among the largest projects due for launch by the end of the year are the Continent On Bukharestskaya multi-functional retail center located in the same building as the new Bukharestskaya metro station that is due to open Dec. 27, and the 12 Stulyev (12 Chairs) furniture center in the Balkania Nova shopping and entertainment center next to Kupchino metro station.

Both projects are being realized by the Adamant corporate holding company. If they are opened on schedule by the end of the year, a third of retail space launched this year will belong to Adamant, said Knight Frank analysts.

Another company with a strong market position is the Fort Group investment company. Together with Adamant, it owns half of all retail premises currently under construction in St. Petersburg.

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Компания Maris с 2011 года является лидером среди международных консультантов по сдаче офисных помещений в аренду.