Download - Q3 2011 RETAIL REAL ESTATE MARKET - Knight …...Q3 2011 RETAIL REAL ESTATE MARKET Moscow Knight Frank MAIN TRENDS • Developers activity in Moscow remained at high level in Q3 2011.

Q3 2011 RETAIL REAL ESTATE MARKET Moscow

Knight Frank

MAIN TRENDS• DevelopersactivityinMoscowremainedathighlevelinQ32011.

• Growthofsupplyinninemonthsof2011wasthelowestsince2003:only263,000sqmofmodernretailspacewasbroughtintooperation.

• InterestofbothdevelopersandretailoperatorswasfocusedontownsinMoscowRegionanddormitorydistrictsinthecity.

• ThevacancyrateatMoscowshoppingcentresdecreasedandrentalratesincreased,partlyduetorotationoftenants.

OVERVIEW


2

Main events

• YITMoskovia,asubsidiaryoftheFinnishconcernYITConstruction,announcedplansforconstructionofseveralshoppingcentresinMoscowRegion.ThefirstcomplexwillbebuiltaspartofanewresidentialdistrictinthetownofPushkinoandafurthertwoprojectswillbedevelopedinRamenskyandKrasnogorskydistricts.

• RekstalGroupispreparingtoopenthe19,000sqmSolnechniyshoppingcentreinthetownofSolnechnogorsk.ThefirstphaseiscommissioninginDecember2011andthesecondphase-inFebruary2012.KnightFrankisanexclusiveconsultantforconceptdesignandleaseofretailspaceintheproject.

• AlargenumberoftransactionswithretailrealestatewerecompletedinQ3.Thelargesttransactionswereasfollows:

· InAugustRomanovPropertyHoldingsboughttheDreamHouseshoppingcentrewithtotalareaof13,000sqmlocatedontheRublevo-Uspenskoehighway,6kmfromMKAD(theMoscowringroad).

· TashirGroupannouncedacquisitionofA.I.RaikinshoppingandentertainmentcomplexintheMar’inaRoshchadistrictofMoscow.Thecompanyplanstoinvest

morethan$200millioninordertocompletetheproject.

• Theinvestmentfund,UFGRealEstate,agreedtobuyanumberofassetsfromCapitalGroup:twobusinesscentres(ConcordandPushkinskyDom)aswellasthe9,000sqmMetromarketshoppingcentre.

• Rostelecomplanstodevelopitsownretailchainof2,500salons.Thecompanyintendstoput80%oftheoutletsundermanagementofoneoftheexistingRussianmobiletelephoneretailers,basedontheresultsofatender.

RETAIL REAL ESTATE MARKET. MOSCOW

Main indicators. Shopping centres Trends

Totalsupplyatoperatingcentres(totalspace/GLA),mlnsqm

7.77/4.18

OpenedinQ1-Q32011(totalspace/GLA),mlnsqm 0.26/0.15

ScheduledtoopeninQ42011(totalspace/GLA),mlnsqm

0.24/0.16

Vacancyrate,% 2.5

Baserents,$persqmperannum(notincludingoperatingexpensesandVAT)

anchortenants 100-500

retailgallerytenants 700-4,000

Operatingexpenses,$persqmperannum 80-260

GLAinqualityshoppingcentresper1000population(Moscow),sqm

363

*Thetableonlyshowsdataforprofessionalshoppingcentres(aprofessionalshoppingcentreisdefinedasonebuildingoragroupofarchitecturallyconnectedbuildingswithtotalspaceinexcessof5,000sqm,unitedbyasingleconceptandundersinglemanagement)

**Ratesforstoreswithspaceofabout100sqmonthegroundfloor

Source:KnightFrankResearch,2011

Sergey GipshRegionalRetailDirector,Partner,KnightFrank

TheretailpropertymarketofRussiacanbedeterminedatthemomentbyhighlevelofinvestmentsanddevelopmentandalsobytheshifttowardsthetownsinMoscowRegionandtocitiesinotherregionsonbehalfofdevelopersandretailersalike.

Thisyearpromisestosetnewrecordsforretailinvestmenttransactions.Currentlytotalsegmenttransactionsareinexcessof$1.5billion,representingabout40%oftotalcommercialrealestatetransactionsontheMoscowmarket.

www.knightfrank.ru

3

Supply

OpeningsofanumberofMoscowshoppingcentres,whichhadbeenscheduledforthirdquarter,werepostponed.OverallspaceatmodernshoppingcentresinMoscowincreasedby3.3%(263,000sqmwith146,000sqmGLA)inninemonthsof2011andreachalevelof7.8millionsqm(4.2mlnsqmGLA)*.

LimitationsonconstructionofretailobjectsinsidetheThirdTransportRing

conditionedbytheauthorities’policyonrevisionofinvestmentprojectscausedfocusofdevelopersattentioninthethirdquarteronprojectsindormitorydistrictsofMoscowandtownsinMoscowRegion.TheGrenadashoppingcentrecommissionedinAugust2011inthetownofLubertsyjustoutsideMoscow(3kmfromMKADontheNovoryazanskoeHighway),andseveralmoreopeningsinMoscowRegionareexpectedbytheendoftheyear,includingthefirstphaseoftheSolnechnyshoppingcentreinthetownofSolnechnogorsk.

It’sworthnotingthatnewretailprojects’sizeisnottypicalforMoscowstandards.Annuallysince2006fourormoreshoppingcentresofregionalorsuper-regionalscalehavebeenbroughtintooperationinMoscow.

Butthisyearonlyonesuchcentre(Afimallcity)wascommissioned.Financingdifficultiesandconcernsoneconomicuncertaintyareshiftingdevelopersinteresttosmaller-scaleprojects.

Growthofsupplyinstreetretailisinsignificantincomparisonwithshoppingcentres.Mostofstreetretailexpansionislinkedtoopeningofnewretailpremisesinmixed-usedcomplexes.Forexample,theBahetleopenedastoreintheSummitmixed-usecentreduringthethirdquarter.

SeveralMoscowresidentialdevelopershaveannouncedplanstoinstallretailpremisesonthegroundfloorofnewresidentialdevelopments,whichmaygiveasubstantialboosttostreetretailinthemedium-term.

*WeincludeintheMoscowmarketlargeretailcentreslocatedoutsidecitylimitsbutclosetotheringroad(MKAD),whichservecityresidents.

Shopping centres brought into operation Q1-Q3 2011

Name Address Total space (thousand sq m) GLA (thousand sq m)

ShoppingcentreaspartoftheMonArchmixed-usecomplex

Bld.1,31Leningradskyav. 16 10.7

PlanernayaInterchange Planernayametrostation 50.3 11

AfimallCity 2Presnenskayaemb. 179.4 114.2

SevernoyeSiyaniye 1DmitriaDonskogoblvd. 17 10


Rates of supply growth slowed down in 2011, causing further decrease of the vacancy rate Thousand sq m

4%

34%

14%

1 000

800

600

400

200

02008 2009 2010 2011

%

10

8

6

4

2

0

Q1 Q2 Q3 Q4 Vacancy rate, %

Sourse: Knight Frank Research, 2011


4

Demand

SeveralprominentclothingbrandsenteredtheMoscowmarketinQ32011,includingDesigual(Spain),Victoria’sSecret(US)andBananaRepublic(US),whileotherretailchainsexpandedtheirpresence.RetailersarefollowingdevelopersintothetownsofMoscowRegion:AzbukaVkusasupermarketsopenedafourthstoreintheRegionandthefootwearchain,Obuv’RossiiopenedthreestoresinMoscowRegionduringthesummerandplansfurtheropeningsbytheendoftheyear.

Limitedopportunitiesforexpansioninthecapitalandincreasingcompetitionhaveencouragedmainretailchainstofocusonqualitativedevelopment.Thebiggestconsumerelectronicschains–EldoradoandM.Video–carriedoutrebrandingduringthesummerandpresentednewstoredesigns.

Fornowthenewdesignshavebeenimplementedonlyatafewstores,buteventuallyallstoreswillbeupdated.AzbukaVkusaisrebuildingitsoldeststores.

Severaloperatorsplantoopenstoresinnewformatsinthenearfuture.ForexampleStarikKhottabychplanstodevelopchainofmini-stores,whicharehalfthesizeofthecompany’spresentstandards.SvyaznoyplanstodevelopinMoscowdepartmentstores“SvyaznoyMarket”,offeringarangeofeverydaygoodsinadditiontoitstraditionalcellular-relatedproducts,whileMetroC&Cisconsideringnewopeningsinthecorner-shopformat.

Shortsupplyinshoppingcentrescontributesretailersdevelopmentonstreetretailmarket.DuringQ3growthrateofclothingretailersisapproachingtotraditionalleadersofthesegment–restaurantsandbanks.

Commercial conditions

ThecurrentsituationontheMoscowretailrealestateisdeterminedbyretailerslarge-scaledevelopmentplansandveryslowgrowthofsupply.AsaresulttherewasfurtherdecreaseofvacantpremisesinMoscowshoppingcentresduringthethirdquarter.Thevacancyratedecreasedby2.5%duringtheperiodandapproachedhistoriclows.Thevacancyrateofpremisesinoutdatedcomplexeswithpoorlocationand/orwithunsatisfactorydesignremainssignificantlyhigherthanthemarketaveragerateandreaches7-10%.

Intensecompetitionbetweenretailoperatorsisenablingpropertyownerstorotatetenantsprovidingasaresultrentalratesincrease.

Rental rates at Moscow shopping centres, Q3 2011

Type of premises Area, sq m Retail profile Rate, $ per sq m per annum*

Anchortenants >5,000 Foodhypermarkets 100-250

Otherretailers 150-250

1,500-5,000 Foodsupermarkets,otherretailers 250-400

500-1,500 Foodsupermarkets,otherretailers 300-600

Anchortenants 300-500 Children’sgoods 400-1,000

Clothing,footwear(groundfloorandfirstfloor) 600-1,200

100-300 Clothing,footwear(groundfloorandfirstfloor) 800–2,500

50 Leathergoods,bijouterie,gifts,jewellery,mobilephones(groundfloor)

1,500–4,500

*NotincludingoperatingexpensesandVAT(18%)


Otradashoppingcentre,

2Pyatnitskoyehighway

www.knightfrank.ru

5

AsawholeMoscowshoppingcentresrentalratesdemonstratemoderatelypositivetrend:duringQ3rentalratesgrewby7%onaverage.Operatingcostsremainedunchangedingeneral,althoughtherewereincreasesatsomeshoppingcentres.

Therewasasmallincreaseofrentalratesinstreetretailduringthethirdquarter.Sincethebeginingoftheyearrentalratesinthesegmenthaveincreasedbyabout15%.

Forecast

Sixshoppingcentreswithtotalareaof250,000sqm(165,000sqmGLA)arecommissioningbytheendoftheyear.TheWaymartshoppingcentre,locatedinMoscowRegion26kmfromMKAD,isnowredevelopingintoanoutletcentre.

Asfarassincelast2-3yearstheconstructionofthemostnewprojectswaspostponed,ashortageofretailspacecanbeexpectedinthenearfuture,whichwillprobablycausefurthergrowthofrentalrates.

Average rental rates in main street retail areas of Moscow Q3 2011

Location $ per sq m per annum

MostexpensivestreetsinsidetheGardenRing(Stoleshnikovln.,Tverskayast.,Petrovkast.,Kamergerskyln.) 2,500-7,000

OtherstreetsinsidetheGardenRing(KuznetskyMostst.,Pyatnitskayast.,Arbatst.,BolshayaYakimankast.,etc.) 1,500-3,000

GardenRing 1,000-3,000

Mainroadarteries(Leningradskyav.,Leninskyav.,Komsomolskyav.,Kutuzovskyav.) 1,000-2,500

Dormitorydistricts 500-1,500


Shopping centres commissioning in Q4 2011

Name Address Total space (thousand sq m) GLA (thousand sq m)

Kaleidoscope 7-23Khimkinskyblvd 66.2 41

Parus 1Novokurkinskoyehw. 35.5 25.8

Aventura Bld.2,1SevernoyeChertanovomicro-region 35 20

Confeti 7Venevskayast. 30 23

EGOMall 23Dezhnevapassage 11.2 5.5

Otrada 2Pyatnitskoyehw. 66.2 49.6

*NotincludingoperatingexpensesandVAT(18%)


OVERVIEW

EuropeAustriaBelgiumCzechRepublicFranceGermanyIrelandItalyMonacoPolandPortugalRomaniaRussiaSpainSwitzerlandTheNetherlandsUKUkraine

AfricaBotswanaKenyaMalawiNigeriaTanzaniaUgandaZimbabweZambiaSouthAfrica

Middle EastBahrainUAE

Asia PacificAustraliaCambodiaChinaIndiaIndonesiaMalaysiaNewZealandSingaporeSouthKoreaThailandVietnam

Americas & CanadaBermudaCaribbeanCanadaUSA

Office Real EstateStanislav [email protected]

Warehouse Real Estate, landViacheslav Kholopov [email protected]

Retail Real EstateSergey Gipsh RegionalRetailDirector,[email protected]

Professional Consulting ServicesKonstantin RomanovPartner,[email protected]

Elite Residential Real EstateElena [email protected]

Financial Markets and InvestingEvgeniy [email protected]

Valuation ServicesOlga Kochetova [email protected]

Saint PetersburgNikolai Pashkov

[email protected]

KyivMikhail [email protected]

Marketing, PR, and Market ResearchMaria [email protected]

EstablishedinLondonmorethanacenturyago,KnightFrankistherenownedleaderoftheinternationalrealestatemarket.TogetherwithNewmarkCompany,KnightFrank’sstrategicpartner,thecompanyencompasses243officesin43countriesacrosssixcontinents.

KnightFrankhasbeenasymbolofprofessionalismfortensofthousandsofclientsallovertheworldfor116years.After16years,KnightFrankhasbecometheleadingcompanyinthecommercial,warehouse,retailandresidentialrealestatesegmentsoftheRussianrealestatemarket.Morethan500largeRussianandinternationalcompaniesinRussiahavealreadymadeuseofthecompany’sservices.

ThisandotherKnightFrankoverviewscanbefoundonthecompanywebsitewww.knightfrank.ru.

© Knight Frank 2011

Thisoverviewispublishedforgeneralinformationonly.Althoughhighstandardshavebeenusedinthepreparationoftheinformation,analysis,viewsandprojectionspresentedinthisreport,nolegalresponsibilitycanbeacceptedbyKnightFrankResearchorKnightFrankforanylossordamageresultantfromthecontentsofthisdocument.Asageneralreport,thismaterialdoesnotnecessarilyrepresenttheviewofKnightFrankinrelationtoparticularpropertiesorprojects.

ReproductionofthisreportinwholeorinpartisallowedwithproperreferencetoKnightFrank.

MOSCOW

Russia,119021,11Bld2TimuraFrunzeStr.Phone:+7(495)9810000Fax:+7(495)9810011

ST. PETERSBURG

Russia,191025,3BMayakovskogoStr.Phone:+7(812)3632222Fax:+7(812)3632223

KYIV

Ukraine,04071,39-41HoryvaStr.Phone:+380(44)5456122Fax:+380(44)5456122