Developers are forced to refuse to place cinemas in new shopping centers

Due to the departure of foreign majors from the Russian film distribution market after the start of Russian military operations in Ukraine, developers are forced to refuse to place cinemas in new shopping centers. Now the share of such halls in designed or newly built facilities does not exceed 0.5%, although in the 2010s it was 60%. Cinema theater operators have become unreliable counterparties for commercial real estate owners, who also pay less for rent than retailers, experts confirm.

The share of cinema halls in shopping centers planned in Russia from the beginning of 2023 accounts for only 0.5% of the space, according to a report by the Commonwealth Partnership (CMWP). This situation has been developing since 2020, consultants note, emphasizing that this is in marked contrast to what happened in 2015–2019. At that time, cinema halls were designed in 20% of new facilities. The popularity of this format peaked in 2010–2014, when film screenings were provided in 60% of shopping malls.

The film industry has been unlucky for the past three years. In 2020-2021, due to the pandemic, rentals were seriously affected due to restrictions on the work of halls and the postponement of premieres, and last year, against the backdrop of the geopolitical crisis, foreign majors left Russia, states Olga Lesina, director of facilities management and commercialization at Nikoliers. Many cinema chains are reducing the number of screens they use due to a decrease in traffic, and developers are considering alternative leisure options in place of cinemas, confirms Olga Parshikova, director of projects at ADG Group (reconstructing Soviet cinemas in Moscow). Due to the lack of foreign premieres, the number of cinema halls operating in the country in 2022 decreased by more than a third (see “Kommersant” dated June 30, 2022).

Head of the CMWP Research and Analytics Department Tatyana Divina believes that another reason is a change in the concepts of construction of shopping centers.

Now, according to her, fewer large malls are being built, and more – small regional format shopping centers at transport hubs and even the stylobate part of large residential complexes. Such small-format objects physically cannot have a cinema, confirms Evgenia Khakberdieva, director of the retail real estate department at NF Group.

According to her, cinema operators are considered a financially less stable category of tenants, especially in the face of increasing competition with online platforms – this can create risks for developers. In addition, adds Sergei Platitsyn, director of MALLPIC, rental rates for cinema halls in shopping centers are significantly lower than those of retailers and depend on a percentage of turnover.

Cinemas, in turn, also refuse to participate in the development of sites due to uncertainty in the market and a short planning horizon, notes the chairman of the Association of Cinema Owners, Alexey Voronkov. At the same time, the state actively sponsors the opening of new cinema halls in the regions. Thus, on August 18, Vladimir Putin instructed the government to develop and implement a program for opening cinema halls in settlements of up to 50 thousand inhabitants by September 30.

However, today the opening of new halls and chains, according to cinema market participants, is “absolutely useless” against the backdrop of falling box office receipts.

According to them, Russian films can still collect the same box office as foreign blockbusters only during the New Year holidays or in long-term release.

However, according to CMWP, the film distribution industry has a future in Russia – it lies in the development of new small format cinemas, which can be located in small retail facilities and even as part of the infrastructure of residential complexes. According to Olga Lesina, until 2022, Russia was among the top ten countries in the world in terms of the number of cinema visits. This, in her opinion, suggests that film exhibition services are in demand by the audience and the industry should not be abandoned.

Daria Andrianova, Yulia Yurasova