РЫНОК ТОРГОВОЙНЕДВИЖИМОСТИМосква, 2013–2014

TSUM15,000 sq m

Grinvich (IV phase)100,500 sq m

Raduga 25,000 sq m

Avrora23,000 sq m

Selgros Cash&Carry8,500 sq mVita

4,100 sq m

South gallery (II phase)19,700 sq m

RIO46,000 sq m

Torgovy park #163,000* sq m

Reutov Park90,000 sq m

Moskvorechie29,750 sq m

VolgogradKrasnodar

Simferopol’Tambov

Moscow

Tver’

Kostroma

Ekaterinburg

Kemerovo

KrasnodarKrasnodar

Kaleidoskop na Marksa52,500 sq m

Novosibirsk

Shopping centres opened in Q1 2014

10 shopping centres with a total area of about 337.3 thousand sq m were delivered in Russia (with exception of Moscow) in Q1 2014, which is comparable to the same period in 2013 (364.2 thousand sq m). This fi gure represents about 12% of the total space announced for delivery in 2014.

Depending on the profi le, the share of lease payments within the operator’s turnover can vary in the range of 2% to 22%. The ratio of turnover and the amount spent on lease for the tenants of the same profi le remain virtually unchanged in various regions of Russia. For example, when it comes to retail operators of goods for children, 11–16% of turnover go to the owner of the facility regardless of the degree of market development in a city.

Q1 2014RETAIL REAL ESTATE MARKETRUSSIA

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300

400

500

sq m/1,000 citizens

Retail space per 1,000 citizens

Profi leThe lease payments

share within theoperator’s turnover

Apparels 11–18%

Goods for children 11–16%

Lingerie 8–14%

Footwear 13–16%

Bags 18–20%

Sporting goods 11–13%

Accessories 18–22%

Gifts 20–22%

Jewelry 7–10%

Health and Beauty 12–16%

Restaurants 8–15%

Food court 8–10%

Electronics 3–8%

Home appliances 12–15%

Entertainment 12–15%

Cinema 8–12%

Grocery 2–5%

Source: Knight Frank Research, 2014

Key events• Russian FMCG-company X5 Retail Group announced its withdrawal from the

market of Ukraine (the sale of 13 Perekryostok stores is in the fi nal stage).

• Several major federal-level operators (Russian representatives of Metro Group, Detskiy Mir, Obuv Rossii) at a time delayed their entry to IPO.

• Construction of two Big-Box hypermarkets has started in Saint Petersburg (14 hypermarkets of the chain are planned for delivery by 2018).

• Negotiations resumed between the administrative structures of the Volgograd region and the Swedish concern IKEA to acquire land plot for the construction of a shopping centre.

Source: Knight Frank Research, 2014

Main trends

Although economic conditions (shaken trust in banks, high volatility of the ruble) and the changes in political situation did not result in a signifi cant drop in demand for retail space with tenants, they brought on a signifi cant slowdown of lease agreements negotiation process.

In Q1 2014, the commercial terms remained relatively stable, and the annual indexation of lease contracts was carried out without confl icts. Operators insist on fi xing the "currency corridor" in the lease contracts, while the owners of retail facilities prefer to compensate their tenants for foreign currency rates growth by indirect methods (for example, by refusing to carry out annual indexation in case of exceeding some fi xed rate).

Retailers adhere to a more careful development strategy: they choose the most attractive shopping centres with high traffi c.

* GВA

РЫНОК ТОРГОВОЙНЕДВИЖИМОСТИМосква, 2013–2014

The total supply stock in the shopping centres of Moscow in Q1 2014 has grown by 119.7 thousand sq m (GLA – 57.7 thousand sq m). The total volume of space has reached 7.52 mln sq m (GLA – 4.01 mln sq m).

By the end of 2014, more than 20 shopping centres with a total area of 1.92 mln sq m (GLA – 0.96 mln sq m) are announced for delivery. Such a significant supply growth will lead to an increase in vacancy rate, which by 2015 may reach 7%.

Key events

• AFI Development company plans to open a large showrooms centre for manufacturers and distributors in Moscow, the Gallery showrooms Expolon (GBA – 110 thousand sq m).

• The first stores of Spanish fashion-chain Lefties will open in Russia.

• House of Fraser stores chain (UK) plans to expand to Russia.

Rental rates in modern shopping centres in Moscow

Profi leFixed rental

rate $/sqm/year

Share paid based on turnover

Hypermarket (>7,000 sq m) 100–250 2–4%Urban hypermarket (3,000–7,000 sq m) 150–350 2–4%Supermarket (1,500–3,000 sq m) 250–500 4–6%DIY (>5,000 sq m) 200–350 4–6%White&Brown (1,500–3,000 sq m) 250–500 2.5–5%Sporting goods (1,500–2,500 sq m) 350–1,000 4–5%Goods for children (1,000–2,500 sq m) 250–450 9–12%Apparels (50–300 sq m) 800–2,500 11–16%Footwear (50–300 sq m) 900–3,000 12–16%Accessories (10–70 sq m) 2,500–4,500 11–14%Cinema 150–250 7–11%Entertainment centre (100–1,500 sq m) 220–500 8–12%Entertainment centre (2,000–5,000 sq m) 100–200 4–7%

Source: Knight Frank Research, 2014

Shopping centres,GLA

Space for rent in shoppingcentres relative to population(sq m/1,000 citizens)

more than 450

350–450

250–350

less than 250

more than 40 thousand sq m

Shopping centres openedin Q1 2014

Largest shopping centresplanned for commissioningin 2014

20–40 thousand sq m

less than 20 thousand sq m

Reutov Park

Columbus

Mozaika

Butovo MALL

Avia Park

Vodny

Vesna!

Vegas Crocus City

Moskvorechie

Kuntsevo Plaza

Yasenevo

NADN-EAD

N-WAD

CAD

EAD

WAD

S-WAD S-EAD

SAD

Commercial terms

When signing new lease contracts, retail operators strive either to fi x the exchange rate or to enter into “ruble” contracts. It should be noted that the purchases of the majority of retailers, collaborating with international and domestic brands, are made in hard currency, which means that in the near future the retail price of their purchased goods is likely to grow.

At fi rst glance, this may lead to growth in the ruble revenues for the developers from cooperation with the operators, whose rates are tied to turnover. On the other hand, the growth of commodity prices, as during the preceding periods of devaluation, is likely to lead to reduction in consumer demand and turnover shrinkage for the operators.

Source: Knight Frank Research, 2014

Q1 2014RETAIL REAL ESTATE MARKETMOSCOW

This overview is published for general information only. Although high standards have been used in the preparation of the information, analysis, view and projections presented in this report, no legal responsibility can be accepted by Knight Frank Research or Knight Frank for any loss or damage resultant from the contents of this document. As a general report, this material does not necessarily represent the view of Knight Frank in relation to particular properties or projects.

Reproduction of this report in whole or in part is allowed with proper reference to Knight Frank.

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