MOSCOW | RETAIL
Mid-Year 2015
Retail market review
Real income, retail sales and consumer price
growth, %
Market outlook
15
10
The economic and political events of 2014 resulted in a
slowing down of growth in the Russian economy, and in
2015 GDP is expected to decline. Uncertainty among
consumer increased, while real income and retail sales
decreased. In particular, the closing of external capital
markets and Central Bank’s monetary policy have led to an
increase in financing costs, a weakening of the rouble and
a significant growth of inflation; these have led to a
slowdown in development activity and a fall in consumer
demand. These factors became key in forming the retail
market in H1 2015.
5
0
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015F
2016F
2017F
-5
-10
Real disposable income growth
Real retail turnover growth
Inflation
Source: Ministry of Economic Development
According to the Ministry of Economic Development, the
inflation will start to decline from its current 15.8% no
sooner than autumn 2015. On the other hand, the reduction
in companies’ turnovers and their financial difficulties are
putting pressure on wages and raising the unemployment.
Therefore, in the short term consumer purchasing power
may continue to decline until prices and the financial
climate in the country stabilize. The Ministry of Economic
Development expects a visible growth in real disposable
income (2.6%) to start not earlier than 2017.
Consumer confidence index and its
components, %
Q1
Mar 13 May 13 Jul 13 Sep 13 Nov 13 2014
Q2
2014
Q3
2014
Q4
2014
Q1
2015
Q2
2015
Q2
2014
Q3
2014
Q4
2014
Q1
2015
Q2
2015
0%
-5%
-10%
-15%
-20%
-25%
-30%
-35%
-40%
The results of the regular survey conducted by Sberbank
CIB Investment Research show that the consumer
confidence index reached -14% at the end of H1 2015. This
is a considerable improvement over the figure at the end of
2014, when the index was at -24%. However it is still too
early to speak about the complete restoration of consumer
confidence to the levels of mid-2014.
-45%
Consumer confidence index
Big purchases index
Source: Sberbank CIB Investment Research
Q1
Mar 13 May 13 Jul 13 Sep 13 Nov 13 2014
15%
10%
Among the components of the index, consumers’
assessment of national wealth for the next 12 months
showed the most positive improvement: the Q2 figure was
up to 5% from -7%, which reflects positive macroeconomic
expectations. Likewise, there was a positive move in the
big purchases index which rose to -29% from -39% during
Q2 2015. This may indicate the potential return of the nonfood segment to growth after the fall in Q1 2015.
5%
0%
-5%
-10%
-15%
-20%
-25%
Personal wealth index for next 12 months
Country wealth index for next 12 months
Source: Sberbank CIB Investment Research
Key market indicators in H1 2015
INDEX
Supply
In H1 2015, six shopping centers with a total GLA of
343,000 m² opened in Moscow. This is an all-time record
for completions in the first six months in the history of the
capital’s retail market. 80% of all new areas are located in
three super-regional shopping centers: Columbus SEC
(140,000 m² GLA), MARi (70,000 m²) and Kuntsevo Plaza
mixed use centers (65,000 m²).
VALUE
Total stock, including specialized SC, m² (GLA)
5,884,525
Total stock, m² (GLA)
5,235,285
Completions, m² (GLA)
343,240
Number of shopping centers opened in Q1 2015
6
Vacancy rate, %
7
Retail stock per 1,000 capita, m² (GLA)
443
Source: Colliers International
In the current situation, many projects open with a high
level of vacancy – only about 30-40% of retail space is
occupied on the day of launch. In most cases, about 7080% of space is already leased, with either an agreement
or BTS being signed. Such a difference arises because of
the financial difficulties of retailers, who are not starting fitout work on time.
At the end of the H1 2015, the total retail stock in Moscow
amounted to 5.8 million m², thus, there is 443 m² of retail
space per 1,000 capita.
According to our estimates, total completions by the end
of 2015 will reach 498,000 m². At the same time, the
current uncertainty in the retail market is affecting projects
at the beginning of their construction cycle: we estimate
that 14 projects that were announced for 2015 will be
postponed to the following years. Among projects that are
at the design stage, many have been frozen until demand
from both retailers and consumers recovers.
The Central administrative district is the most penetrated
with retail space per capita (645 m² per 1,000 capita),
while the lowest figure is still observed in the Eastern
administrative district (65 m² per 1,000 capita). The
largest increase was recorded in the Southern (+27%),
South-Western (+17%) and Western (+17) administrative
districts.
Completions, thousand m² of GLA
1000
900
800
700
600
500
400
300
200
100
0
2007 2008 2009 2010 2011 2012 2013 2014 2015F
Q1
Q2
Completions by the end of 2015
(Colliers International expert prognosis)
Source: Colliers International
Retail stock per 1,000 capita by administrative districts
of Moscow, m² (GLA)
NAD
423
NWAD
GBA, M²
140 Varshavskoye
277,000
Highway
Columbus
GLA, M²
DEVELOPER
140,000
MIRS
10 Porechnaya
Street
135,000
70,000
Lider
19 Yartsevskaya
Street
245,000
65,000
ENKA TC
Centralny Detsky
5 Teatralny Way
Magazin
72,220
36,490
HalsDevelopment
Klen
37 Eniseyskaya
Street
33,000
24,750
PATEKSTROYA
RSENAL MG
Tiara
27 Michurinsky
Avenue
15,000
7,000
Global
MARi
Kuntsevo Plaza
Source: Colliers International
CAD
645
302
SWAD
65
EAD
340
SEAD
405
SAD
Source: Colliers International
Retail stock per 1,000 capita, m² GLA
422
296
208
303
321
339
443
360
236
165
2006 2007 2008 2009 2010 2011 2012 2013 2014
Source: Colliers International
2
NEAD
468
185
Shopping centers opened in Moscow in H1 2015
ADDRESS
Q4
Completions by the end of 2015 (developers’ plans)
WAD 320
PROPERTY
Q3
Retail market review | H1 2015 | Moscow | Colliers International
H1
2015
International brands entering Moscow, units
Demand
In H1 2015, eleven international operators entered the
Moscow market, while a further thirteen plan to open their
first stores by the year end. Despite favorable leasing
terms offered by the market, the number of international
retailers who are ready to enter the Moscow market has
decreased.
59
41
13
21
12
2011
Since the start of the year, six international brands have
announced their withdrawal from the market: Carl’s Jr.
(USA), Arnold Bakery & Coffee Shop (Finland), Lindex
(Finland), Flormar (Italy), Hervé Léger (France) and
Hauber (Germany). Moreover, DIM (France) has decided
to close all stores and move to a franchising model.
2012
2013
12
11
7
2014
2015F
Brands scheduled to open stores in Moscow by the end of 2015
Brands that have entered the Moscow market
Brands that have withdrawn from the Moscow market
Source: Colliers International
Turnover decline and rouble devaluation continue to affect
the market. Since the beginning of the year, many retailers
have adopted various measures to optimize their chains,
such as closing or cutting the size of inefficient stores. The
most notable reductions of chains have been made by
Incity and Melon Fashion Group; other networks that have
decreased the number of stores include Stockmann,
Adidas, M.Video, Sportmaster, LPP group stores, Burger
King and others. Nevertheless, many retailers have
declared their readiness to enter the market and develop
their chains in the event of economic stability and a return
to growth.
International brands scheduled to open in
Moscow in 2015
BRAND
COUNTRY
PROFILE
SuperDry
United Kingdom
Clothing
F&F
United Kingdom
Clothing
Mexico
City of professions
Plus
Germany
Grocery
Seiko
Japan
Accessories
Eataly
Italy
Catering
KidZania
Source: Colliers International
In the first half of the year, the food and DIY segments
were the most stable sectors in terms of consumer
demand. Particularly robust development was shown by
grocery discounters such as Dixy, Pyaterochka and
Magnit, which is typical during crisis periods. In contrast,
the sharpest decrease in consumer demand and turnover
occurred in the fashion, restaurant and entertainment
segments. This is a result of real disposable income
decline and consumers’ efforts to economize on the least
essential goods.
Structure of new international brands opened
and scheduled to open before the end of 2015 by
profile, % of number of stores
10%
Grocery
8%
38%
Clothing and shoes
13%
Restaurants and café
Accessories
At the same time, in Q2 many chains announced plans for
active development, among them Leroy Merlin, Uniqlo,
KFC and METRO. This demonstrates that some market
players have adapted to the new situation and are
prepared to use it to strengthen their position. Retailers
remain very selective in the choice of venues and prefer to
open new stores only in successful shopping centers or on
retail streets with high footfall and traffic.
Most large retail chains have introduced active measures
to cut costs since the beginning of the year, such as
ensuring the most favorable lease terms, adjusting the
choice of suppliers and reducing advertising costs. Thus,
they avoided the need for significant increase in prices. At
the same time, some of the smaller chains have not been
able to adapt to the new situation and have been forced to
revise prices up to a two-fold.
Source: Colliers International
Growth* in LFL sales of X5 Retail Group,
YoY %
Discounter
Supermarket
Hypermarket
22
16
14
8
5
-6
Average ticket
Source: X5 Retail Group
* For Q1 2015
3
Other
31%
Retail market review | H1 2015 | Moscow | Colliers International
9
8
-1
Number of customers
Volume of LFL sales
Rental rates in shopping centers in Moscow,
for a shopping gallery tenant*, thousands of
USD
Rental rates
Market power has shifted from landlords to tenants, and
many owners have been forced to agree to various
incentives. The most widely spread forms of compromise
were:
5.4 5.4
3.9
3.4 3.5
3.1 3.1 3.3
3.1
3.8
4
3.5
3.5
3
2.5 2.5
• a discount rate for a short period (usually 3 to 12
months) with a revision afterwards
• fixing of the exchange rate or an exchange rate band
• step-rent – a low rate for the first year with annual
increase in the next years (usually over 3 years) until
the scheme achieves the declared level of footfall
• rental rate as a percentage of turnover for a short
period (3 to 12 months), the value of the rental
payment is then used as a base to establish a fixed
rate that is comfortable for both parties
• cap – a rental rate with a limit in the form of a
percentage of turnover, the lower of the fixed rental
payment and the value of payment as a percentage of
turnover is paid
• reimbursement of fit-out costs by the owner (previously
fit-out was only compensated to some anchors and
mini-anchors).
H2
H1
H2
H1
H2
H1
H2
H1
H2
H1
H2
H1
H2
H1
H2
H1
2007 2008 2008 2009 2009 2010 2010 2011 2011 2012 2012 2013 2013 2014 2014 2015
* For tenants leasing premises of 50-100 m²
Source: Colliers International
Percentage of turnover levels reasonable for
tenants of various profiles
Profile
GLA, m²
Food hypermarket
Food supermarket
Home appliances &
electronics
Cinema
Entertainment
>5 000
1 500–5 000
>2 000
<2 000
>3 000
1 000–8 000
% of
turnover
0,9–3%
3–5%
0–4,5%
2,5–4,5%
8–11%
4–6%
In H2 2015, we do not expect to see a significant increase
of rental rates and their return to pre-crisis levels.
DIY hypermarket
8 000–15 000
3–4%
Vacancy rates
Children’s goods
By the end of H1 2015, the vacancy rate had risen to 7%.
A big part of this increase can be attributed to the MARi
mixed use center, which opened with a large proportion of
vacant space (approximately 85%, according to estimates
by Colliers International). Other large shopping centers
that were opened in 2015 include Columbus and
Kuntsevo Plaza, which also opened with few shops but
are populating with tenants successfully. As a result of low
demand from retailers coupled with a relatively large
volume of completions, we expect the average vacancy
rate to rise to 8%.
Shopping gallery
tenant
>1 500
<1 500
<300
>800
70–200
200–1 000
>1 000
300–1 000
<300
250–800
40–120
0–4%
5–7%
10–12%
6–11%
10–15%
10–15%
5–12%
The first half of the year also saw an increased rotation of
tenants in functioning shopping centers. Retailers closed
unprofitable and inefficient stores in less successful
shopping centers and opened new ones in projects that
offered more traffic or more flexible lease terms.
Sporting goods
Cosmetics and
perfume
Restaurant
Food court
8–12%
10–15%
10–15%
Source: Colliers International
The vacancy rate in Moscow, %
8.0 7.8
7.0
6
6
6.0
5.0
2.8 2.8 2.8
2.5 2.5 2.6
Q1
2013
Q2
2013
Q3
2013
Q4
2013
Q1
2014
Q2
2014
Source: Colliers International
4
Retail market review | H1 2015 | Moscow | Colliers International
3.1
Q3
2014
Q4
2014
Q1
2015
Q2 2015F 2016F 2017F 2018F
2015
Market balance, million m² GLA
10
Trends and Forecast
9
8
According to developers’ plans, another 11 shopping
centers and phases with a total GLA of 434,000 m² are
expected to be completed by the end of 2015. We
estimate that 280,000 m² (5 projects) will be postponed to
2016, so completions in H2 2015 will not exceed 154,000
m².
7
To get to an 8% vacancy rate by the end of the year new
projects should open with or below a 25% vacancy rate.
As new shopping centers open, this forecast may be
revised upwards.
1
6
5
4
3
2
0
2011
2012
2013
2014
2015F
2016F
2017F
2018F
Total stock at the beginning of the year
New completions for the year
The development of new shopping centers in H1 2015
has slowed down and practically halted: new major
projects are not being announced, and construction work
is not starting on planned projects. This means that in a
two and three-year term the volume of new completions
will be reduced and as a result the vacancy rate will
decrease as well.
New completions, prognosis at the end of the period
(developers’ plans)
New completions, prognosis at the end of the period
(Colliers International expert prognosis)
Vacancy rate at the end of the year, %
Major projects announced to be completed in
2015-2016
Zelenopark
NEAD
NAD
Major shopping centers to be completed in H2 2015
NWAD
PROPERTY
ADDRESS
GBA, M²
Yaroslavskoye
175,000
Highway, Mytishchi
RIO
Zelenopark
Gallery
Kutuzovsky
Leningradskoye
Highway, 17 km
3 Slavyansky
Boulevard
140,000
GLA, M²
DEVELOPER
115,000
Tashir Group
100,000
Pascalis Gardner
& Partner; Russia
Development
Fund
137,000
60,000
TPS Nedvizhimost
Butovo Mall
Ostafevskaya
Street/ Chechersky 143,000
Way
57,000
MD Group
Rio
Kievskoye Highway,
70,000
1.5 km
45,000
Tashir Group
Avenue
(South-West)
Pokryshkina
Street/Vernadskogo
Avenue
70,000
40,000
Tashir Group
16 Nagatinskaya
Street
50,000
37,500
Imagine Estate
112 Oktyabrsky
Avenue, Lyubertsy
60,000
27,000
Brack Capital Real
Estate
Konfetti, phase
2
Vykhodnoy
RIO
EAD
Otrada, phases 4-6
Abramtsevo
June
Riga Mall
Vegas
WAD
Polezhaevsky
Green Mall
ЦАО
Smolensky Passage, phase 2
Riviera
Gallery Kutuzovsky
Kosino Park
SEC on Aminyevsky
Konfetti, phase 2
Vykhodnoy
Avenue
SEAD
RIO
SWAD
SAD
Source: Colliers International
5
Yaroslavka Mall
Retail market review | H1 2015 | Moscow | Colliers International
Butovo Mall
Projects expected to be completed in 2015
Projects expected to be completed in 2016