Shopping within walking distance – Newspaper Kommersant No. 232 (7433) dated 12/14/2022
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The departure of foreign brands was most acutely felt by the largest shopping centers – their attendance decreased by 25% over the year. This situation is forcing developers to abandon the implementation of new projects, so by the end of 2022, the commissioning of retail real estate will be minimal. Market participants do not expect the restoration of Russian interest in shopping centers until the middle of next year.
As follows from Focus Technologies data, from January to November 2022, the Mall Index (number of visitors per 1,000 sq. m) in the largest shopping centers (more than 80,000 sq. m) in Moscow and the Moscow region decreased by 25% year-on-year and 39% compared to the same period in 2019. The traffic of large shopping centers (40,000–80,000 sq m) decreased less, by 7% yoy and 24% compared to 2019. Attendance at medium-sized facilities (20,000–40,000 sq m) remained at the level of last year, but 26% lower than before the pandemic. Small-format shopping centers (5–20 thousand sq.m.), on the contrary, increased traffic by 1% over the year, but compared to 2019, the reduction was 8%.
Alexey Vanchugov, managing partner of Vanchugov & Partners, confirms that for many high-quality large objects, the losses turned out to be significant, while a waiting list of potential tenants was formed in regional shopping centers. Mikhail Vasiliev, head of research and consulting at Focus Technologies, connects the stability of small-format shopping centers with a focus on consumer goods. There has always been a minimal presence of Western brands on such sites, while in large-scale facilities such operators were anchor tenants, he adds. According to NF Group, 20 players have announced their exit from the Russian market this year. Mr. Vasiliev notes that large shopping centers have also suffered greatly from the reduction in the purchasing power of the population.
The current situation has also affected the decline in developer activity. According to Magazin Magazin, in Russia this year only 122,000 sq. m. m of retail space. This is a record low. For comparison: in 2021, 6.5 times more were introduced. NF Group expects that by the end of the year 148,000 sq. m. m of retail space, which is 38% lower than the original forecast.
It is unprofitable to build new malls, and the new offer is formed mainly by regional shopping centers with an area of up to 20 thousand square meters. m, says Ivan Tatarinov, Executive Director of Glincom. In Moscow, according to Nadezhda Tsvetkova, director of CORE.XP, the average area of shopping centers being commissioned now is 14,000 sq. m. m, in the regions – 17 thousand square meters. m. “New large shopping centers are considered only in cities with low availability of space,” says Evgenia Khakberdieva, regional director of the retail real estate department at NF Group. Nikoliers partner Anna Nikandrova points out that developers are now selling 47% of leasable space in the format of district objects, 41% – as part of complex residential development, 12% – at transport hubs.
The share of vacant space in Russian shopping centers increased by 3 percentage points over the year, to 12%, according to the calculations of Magazin Magazin. Growth occurs despite the active exit of local brands. Thus, according to Evgenia Khakberdiyeva, 27 department stores and multi-format concepts with clothes of Russian brands have opened in the shopping centers of Moscow and the Moscow region this year. In the street retail segment, 17 local players entered the market, which is twice as high as last year, she notes. Difficulties with occupancy may force developers to adjust their plans in the future. Ms. Tsvetkova points out that for 2023, developers are still announcing the construction of 274 thousand square meters. m, but these plans are not final.
Mikhail Vasiliev does not expect a noticeable recovery in shopping center attendance in the first half of next year. Nadezhda Tsvetkova also speaks about this, explaining that the retail real estate segment has gone through several waves of transformation: the development of online retail, a pandemic, a geopolitical crisis. The market is changing and will not return to its previous configuration, most of the owners and managers of objects are in search of new concepts, Ms. Nikandrova says. Although Mr. Vanchugov believes that it is advisable for operators not to force things and wait out the difficult period. As a negative example, he cites situations where the owners of shopping centers rent space to retailers from Turkey at the price of warehouse space. But such stores, the expert warns, are managed accordingly and are inefficient in terms of attracting traffic and generating cash flow.
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