20. November 2012     Print Print 

Retail Real Estate Market in Russia - sustainable growth in Main Regional Cities

Cushman & Wakefield has published today “Retail Space Across Russia” – a report exploring retail real estate of the largest cities of Russia. “The economic situation is stable and the retail sector is one of the key drivers of the Russian economy” according to Cushman & Wakefield’s report launched at MAPIC.

The second edition of “Retail Space Across Russia”, following the first report published in 2010, explores the retail real estate market in 30 Russian cities, with information including retail trade turnover, shopping center supply, pipeline and presence of key international and Russian retail chains.

Currently Russia is the largest market in Europe with the third largest retail turnover in EMEA after France and Germany according to GFK Geomarketing. Meanwhile according to Cushman & Wakefield the average supply per 1000 inhabitants in Russia totals 95 sq m, well below the European average of 247 sq m.

“If retail turnover will keep at current levels of 5% annual growth, we expect Russia to become the largest consumer market in Europe by the end of 2013 according to Cushman & Wakefield Research in Moscow. Quality retail developments are steadily replacing low quality retail space, and the Russia retail property market develops in terms of intensity, with a growing number of projects in the pipeline” comments Maxim Karbasnikoff, Head of Retail Services, Cushman & Wakefield.

According to Cushman & Wakefield quality retail stock consists of more than 500 shopping centers, with a total GLA of 15,4 ml sq m (1st October 2012). Close to100 projects are currently under construction, with the retail pipeline totalling 4,6 ml sq.m.

International and domestic retailers already present in Russia are seeking new regions with demand for quality space rather than location. Further expansion is limited by a shortage of quality retail stock. New quality shopping centers typically open in new cities and regions where retailers are eager to expand.

In 2012 Krasnodar (a city in the South of Russia) is leading in terms of retail stock per 1000 inhabitants (763 sq m per 1000 inhabitants). The city has kept this position for two years, with constantly growing retail stock. Recently opened projects include Krasnaya Ploshad (3rd Phase, 50 000 sq m GLA) and OZ Mall (169 000 sq m GLA). In contrast to Moscow, which contains 13 high streets and 107 quality shopping centers and where the retail stock for 1000 inhabitants equals 303 sq m. Cushman & Wakefield estimate that future potential of Krasnodar as moderate, due to oversupply of quality stock and few reasons for active growth of consumer demand.

Retail quality stock significantly rose in Samara, pushing the largest city of the Volga region into second place by supply (442 sq.m. per 1000 citizens), with MEGA Samara grand opening in 2011 (GLA 102 000 sq m). St. Petersburg continues keep its leading positions in terms of quality retail stock (437 sq.m. per 1000inhabitants) with large openings in 2011-2012 including Leto (GLA 80 000 sq m ) and RIO (GLA 52 500 sq m). According to the report, Irkutsk and Tula have substantial retail pipelines, while there is potential demand for quality retail space in Kemerovo and Novosibirsk subject to stable consumer activity. Khabarovsk and Vladivostok have made their first steps to the quality retail market. The smallest new openings were recorded in Kazan and Chelyabinsk. The latter market was actively developed in 2011; with 3 shopping centers totalling 150,500 sq.m of GLA opening within a year. Thereafter the market was largely saturated and there are currently no new projects announced.

“We see that cities where the retail property market was booming for the last 2 years has reached saturation point and new development has slowed down – comments Lada Belaychuk, Deputy Head of Research at Cushman & Wakefield - the next few years retail growth will move to cities of Sibiria and the East of Russia”

The Russian retail property market is still emerging but gradually moving into a developed one. This is supported by new formats, including outlets and retail parks which are being introduced and launched not only in Moscow, but also in other cities. As an example the development of retail parks has been announced in the Moscow region, Chelyabinsk, Yekaterinburg, Perm and Tyumen.

“Despite the turbulent economic situation, Russia shows positive GDP growth and consumer spending, which results in positive retail turnover – adds Maxim Karbasnikoff, Partner, Head of Retail Services at Cushman & Wakefield - Russia is a big country and each city has its own retail development path. What we see now is the growing importance of cities which previously had never been on the developers’ radar”.