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Retail Real Estate Market Shows Signs of Stability Amidst Challenges

The retail real estate market in Russia is experiencing a shift, with a slowdown in the shift towards online shopping providing a positive impact, according to Pavel Lyulin, Vice-President of the Union of Shopping Centers.

Despite this positive trend, the development of new super-regional shopping centers (over 80,000 sq.m) is limited, with only two such projects planned for the near future - "Zolotoy" in Yekaterinburg and Hollywood in St. Petersburg.

Fashion retailers are responding to this market situation by launching promotions and pop-up stores during key shopping periods, aiming to attract consumers. However, developers' activity in building large-format shopping centers may not increase significantly, as per Pavel Lyulin's statement.

This shift in consumer behaviour is reflected in the traffic patterns, with target traffic gradually moving from small-format to large-format objects. Pavel Lyulin believes that the decline in consumer interest in small-format shopping centers has stopped.

This trend is supported by the data, with nationally, the growth in footfall being 1%, but large shopping centers being the only format showing an increase in traffic. The Director of Research and Consulting at Focus Technologies, Mikhail Vasilyev, states that consumer interest is primarily focused on large-format objects, where there are more stores, and thus a wider assortment.

Large-format shopping centers require significant investments with a long payback period, as per Pavel Lyulin. However, these projects are showing promising results, with clothing and footwear purchases increasing by 2% year-on-year from August 20-31, after a 7% decrease in the first half of the year.

Moreover, traffic and sales this year have been better than expected, according to Fashion House Group's Marketing Director, Konstantin Anisimov. During this period, many visitors are accompanied by children who actively use entertainment zones and food courts.

Large-format shopping centers are losing visitors less frequently compared to small-format ones. The Mall Index in large shopping malls (over 40,000 sq.m) in Moscow increased by 5% year-on-year during the week of August 25-31. Vacancy rates in large-format shopping centers remain minimal.

Local objects less frequently update their concepts than large-format shopping centers. The period before September 1st is a key indicator for the retail real estate market, with shopping center footfall typically increasing by 10-15% during this period.

However, large shopping malls have faced challenges due to popular foreign brands leaving the Russian market, often occupying up to half of the space. No specific companies have been announced in recent months regarding plans to open larger shopping centers in Yekaterinburg or Saint Petersburg.

Despite these challenges, the retail real estate market is showing signs of stability, with the decline in consumer interest in small-format shopping centers and the shift towards large-format objects providing a positive outlook for the future.