The commissioning of shopping centers in the regions may triple before a recession

The low activity of recent years and the accumulated volume of shopping centers not completed on time may lead to a significant increase in the supply of retail real estate in the regions this year. More than 1 million sq. m. are expected to be commissioned. m of area, which exceeds the 2023 level by 3.3 times. But developers are in no hurry to announce new projects. The potential profitability of properties is below the key rate, construction costs are rising, and large brands are in no hurry to enter the regions.

In 2024, in the regional markets of Russia (excluding Moscow, St. Petersburg and adjacent areas), the commissioning of 1.03 million square meters is announced. m of retail space, including 561.7 thousand sq. m. m suitable for rent, calculated by NF Group. According to consultants, this is 3.3 times and 2.6 times, respectively, higher than the input at the end of 2023. The volume of rentable space delivered may be the highest since 2016, after which the indicator began to decline. NF Group warns that the delivery dates for approximately 30% of objects may still be postponed. CORE.XP expects that 357.4 thousand square meters will be commissioned in regional markets this year. m of rentable space. The “Store Store” expects actual commissioning in the regions this year of up to 250 thousand sq. m. m of rentable space.

Regional shopping centers form 60% of the total declared input in Russia, indicate the NF Group. In total, the country plans to commission 1.67 million square meters. m of retail space, four times more than a year earlier. The director of the retail real estate department of NF Group, Evgenia Khakberdieva, associates the dynamics in the regions with the prospect of opening shopping centers, the commissioning dates of which in 2022-2023 were postponed to a later date. She includes the Druzhba shopping centers in Ussuriysk (52.5 thousand sq. m), Daf in Kursk (64.4 thousand sq. m), and TochkaCity in Samara (50 thousand sq. m). etc. At the same time, according to the expert, it is planned to commission shopping centers as part of multifunctional facilities and transport hubs.

Traffic in regional shopping centers shows better dynamics than in Moscow. In January 2024, the Mall Index (reflects the number of visitors per 1 thousand sq. m of retail space) in Moscow remained at the level of last year, in the regions it increased by 1%, as calculated by Focus Technologies. The gap with 2019 is estimated at 27% and 21%, respectively. Commonwealth Partnership senior director of retail real estate Anna Mankova says regional retail real estate markets are less responsive to global shocks.

Mikhail Vasiliev, head of research and consulting at Focus Technologies, notes that the penetration of departed global brands in regional markets was lower; shopping centers here are located closer to locations with natural traffic generation and are more focused on fast-moving consumer goods (FMCG). The basic set of tenants of the regional shopping center, according to Ms. Mankova, consists of a large food retailer and Russian non-food chains. Andrei Surkov, head of the research and consulting department of the Magazin Magazin company, adds that in Moscow shopping centers there is a higher share of restaurants among tenants.

But since 2020-2021, new projects of shopping centers in the regions have hardly started, as difficulties in finding tenants persist, says Ekaterina Nogai, head of the research and analytics department at IBC Real Estate. Anna Mankova predicts that developers, due to the high key rate, will be more likely to commission previously planned objects and carry out reconceptions.

Mikhail Rogozhin, co-director of the retail department at CORE.XP, estimates the average profitability of shopping centers at 11–12%. According to him, “nobody is ready to build new facilities,” especially since new brands are in no hurry to enter the regions. Ms. Nogai clarifies that only five new foreign brands entered regional markets in 2023 – about 25% of those that began operating in Russia. And new properties, she says, are rarely the focus of potential tenants. An additional risk for business is the growing cost of construction of commercial facilities, which has increased by 15–30% over the past year (see Kommersant on February 16).

Alexandra Mertsalova