Overview of the commercial real estate market for June 2023

Given the stabilization of consumer traffic, the dynamics in the retail real estate market remains positive. Despite the continuing high level of vacancy in large facilities, consultants note the desire of businesses to fill the vacant niches. In the street retail market, the main demand is concentrated on small premises in top locations: it is their cost that is showing growth. Demand for offices is now noticeably higher than last year, the trend is more pronounced in the case of buying rather than renting space.

The Mall Index (reflects the number of visitors per 1,000 sq. m of retail space) in Moscow in the week of June 26-July 2 turned out to be 2% lower than the value for the same period last year, in St. Petersburg – comparable. The gap with the pre-crisis 2019 was 26% and 25%, respectively. Such data are provided by Mikhail Vasiliev, head of research and consulting at Focus Technologies, pointing to the stabilization of consumer activity. “Over the past five weeks, the average deviation of the Mall Index in Moscow from 2022 and 2019 was minus 2% and 24%, respectively, in St. Petersburg – plus 1% and minus 25%,” he explains. Given the global negative factors that continue to put pressure on the Russian economy as a whole, the expert perceives these dynamics as positive. Mr. Vasiliev does not rule out that in the second half of the year the Mall Index will exceed last year’s values ​​by 2-3%.

Store reopening

Vacant in shopping centers in Moscowaccording to the estimates of the regional director of the department of retail real estate NF Group Evgenia Khakberdieva, now 14.2% of the area remains, in St. Petersburg – 9.1%. By the end of last year, the figures fell by 0.3 and 1.5 percentage points, respectively. The expert expects a decrease in values, speaking about the adaptation of the market, the active development of brands from Russia and friendly countries on it. Thus, in St. Petersburg, by the end of the year, the vacancy rate may reach 6%. Commonwealth Partnership partner Olga Antonova adds that the proportion of vacant premises in large facilities is still slightly higher: about 16%, compared to the average for the Moscow market of 13%. The expert calls this gap normal, noting that the desire of business to fill the vacant niches plays a more important role.

According to Mrs. Khakberdiyeva’s calculations, 11 new foreign brands entered the Moscow market in the first half of the year, and 7 in St. Petersburg. For the entire last year, the figures were two and eight, respectively.

Among the possible risks in the future, Olga Antonova calls the incomplete absorption of the declared volume of space by large Russian networks and the general pressure on the consumer market.

“We have been seeing an increase in retail turnover since April, but this is more of a pent-up demand — there are no fundamental factors contributing to an increase in consumption now,” she notes. The average cost of renting retail space, according to Ms. Antonova, decreased by 10-13% compared to 2021. The expert expects this trend to continue.

Tenants on the streets

In the street retail segment, according to the CEO of SimpleEstate Nikita Kornienko, about 10% of the premises are empty, although they are unevenly distributed throughout the market. Marina Markova, head of street retail at Magazin Magazin, calls the vacancy rate stable, not expecting significant fluctuations in the third quarter of the year. And Irina Burenko, Deputy General Director of R4S Group, speaks of a shortage of quality supply against the backdrop of limited commissioning of new facilities and the realization of pent-up demand.

18% of the volume of transactions with street retail premises in the first half of the year formed catering establishments: from street food eateries to premium restaurants, Ms. Burenko notes. According to her, the concepts of “coffee to go” (11%), financial organizations (10%) and tobacco shops (8%) remain quite active. The share of the latter, according to her, was blurred against the backdrop of the active opening of such stores last year: now the segment is being optimized. Marina Markova speaks about the activity of chains of accessories and jewelry.

Nikita Kornienko notes the decrease in the cost of initially overvalued street retail premises to values ​​that are comfortable for potential tenants. At the same time, rental rates for budget premises, according to him, on the contrary, are growing due to the high competition of tenants. Ms. Burenko believes that in top locations, the cost of rent has increased by 15-20% since the beginning of the year. At the same time, in some cases, the owners, according to her, are ready to meet potential tenants halfway: we can talk about providing discounts for premises with an area of ​​200 sq. m. m at the start of commercial activity. “But this does not apply to small formats located in heavy pedestrian traffic,” the expert warns.

office stability

On the Moscow office market the share of vacant space for the quarter decreased by 10%, to 9.3%, says Kirill Babichenko, head of the CORE.XP office real estate department. “The postponement of the commissioning of previously announced objects restrains the growth in the share of free space, and the continued activity of tenants contributes to its decrease,” the expert argues. Thus, the volume of transactions with office space in Moscow in January-June, according to his calculations, amounted to 865 thousand square meters. m, an increase of one and a half times against the low base of last year. Of these, 195 thousand square meters. m – transactions for the sale of space, this is the highest figure since 2016, says Mr. Babichenko. He talks about the active takeover of offices by manufacturing, near-state and IT companies.

Veronika Lezhneva, Director of Research at Nikoliers, also noticed a growing volume of absorption of office real estate, also pointing to the pronounced dynamics in the sale and purchase segment. The expert expects the positive trend to continue if Russian business continues to grow. In the second half of the year, according to Kirill Babichenko’s forecasts, the volume of realized demand for offices may be comparable to the figures for the same period last year, when it reached 635,000 sq. m. m. At the same time, the rental rate remains stable, amounting to 22.5 thousand rubles. for 1 sq. m a year, he says.

On the market of St. Petersburg according to the results of the second quarter, the vacancy rate was 10.2%, having decreased by 10.3% compared to the figure for the first quarter, says Alena Volobuyeva, director of the Maris market research department. In the third quarter, according to expert forecasts, this trend will continue: the activity of tenants remains stable. 34% of the absorption of offices in St. Petersburg, according to her, was formed by financial institutions, 17% by IT companies, 10% by construction companies. Mrs. Volobuyeva sees no prerequisites for lowering rental rates for offices.

Alexandra Mertsalova