Rental rates for street retail premises in Moscow have stabilized

After a noticeable reduction in rental rates for street retail properties in Moscow in the first and second quarters of this year, the situation stabilized slightly in July-August. The cost even increased slightly compared to pre-crisis 2021, which led to an influx of investors into the segment who are now deprived of a wide choice of financial instruments. However, market participants themselves cannot predict the further development of the street retail market.

In the third quarter of 2023, rental rates for street retail premises with an area of ​​up to 300 sq. m in Moscow amounted to 3.2 thousand rubles. for 1 sq. m, and larger objects – 1.8 thousand rubles. for 1 sq. m, which is less by 1% year on year, follows from SimpleEstate data. The average sales price of such real estate is up to 300 sq. m. m for the same period amounted to 486 thousand rubles. for 1 sq. m, which is also 1% less year on year, consultants add. Analysts claim that the situation in July-September has stabilized compared to the first and second quarters, when the cost of renting street retail facilities in the capital decreased by a cumulative 13% year-on-year.

However, a year ago, despite the onset of the economic crisis caused by the Russian military operations in Ukraine, the situation in the segment was somewhat better. Kommersant’s calculations, based on data from SimpleEstate and other consultants, showed that in the third quarter of 2022, rental rates for street retail premises up to 300 sq. m. m showed an average growth of 4% year-on-year, to 3.5 thousand rubles. for 1 sq. m, and the sales price – by 8%, to 491 thousand rubles. for 1 sq. m. DNA Realty CEO Anton Belykh explains this by saying that a year ago, after the departure of some Western brands, the most liquid properties were vacated, which local operators of supermarkets, alcohol markets and pharmacies were ready to rent without much bargaining.

But in the third quarter, rental rates for premises up to 300 sq. m. m turned out to be 2% higher than in the pre-crisis 2022, objects over 300 sq. m. m – by 12%. Over the same period, the average sales price increased by 7%.

According to NF Group estimates, in September 2023, the share of restaurants and cafes in street retail on the central streets of Moscow reached 40% compared to 32.4% in December 2022. This summer alone, 28 new restaurants were opened on the central streets of Moscow, analysts add. Among the major tenants of street retail properties are also retail chains, adds SimpleEstate CEO Nikita Kornienko.

According to the expert, investor demand for street retail properties in the summer of 2023 increased by 30–50% year-on-year. But he acknowledges that interest in such properties is being driven by a decline in other available private investment vehicles. Many of those whose savings were denominated in foreign currency, having received a noticeable profit after another weakening of the ruble exchange rate, reinvested it in the purchase of street retail properties, explains Anton Belykh.

Investors are mainly focused on purchasing premises of this format in residential complexes under construction due to the relatively small purchase budget, adds independent expert Ekaterina Podlesnykh. According to her, a number of developers, seeing high demand, began selling space on the first floors at auctions. According to Mr. Belykh, in this segment the average purchase budget does not exceed 30 million rubles. per object and less than 20% of transactions are concluded using a mortgage on commercial real estate. The reason is the high rates of such loans, which exceed 11% per annum.

In the fourth quarter, rent for street retail properties in Moscow will rise in price by another 3–5%, predicts Denis Bobkov, head of marketing and analytics at Asterus. So far, Russian companies have a demand for such premises, adds Marina Markova, head of the street retail department of the Magazin Magazin company. However, none of the experts interviewed by Kommersant could predict the market situation for next year. They refer to the fact that plans for opening new points of sale and catering establishments for retailers and restaurateurs may change at any time due to the unstable situation in the economy.

Daria Andrianova