Brief review of the retail real estate market in populous cities of Russia

Transcription

1 Brief review of the retail real estate market in populous cities of Russia March Prepared by GVA Sawyer 1

2 Retail real estate market in populous cities 1 of Russia Operating data The year of has not brought new tendencies to the retail real estate market so far. The number of new projects is growing, rental rates gradually increase, though pre-crisis indicators have not been reached yet. The market sees a boom in projects construction of regional and even super regional scale, realization of which was delayed due to the crisis. Now as the market recovers, a total volume of new construction grows. We expect great demand for retail space on the part of retailers. But in comparison with pre-crises years when retailers were extensionally developing, now operators choose more clearly the most quality and conceptual retail centers. Among recent key events we note the establishment of Distressed assets Fund in the amount of $100 mln with investments into retail real estate in Russian populous cities by the company Avantgard-Management in January. At present the company holds negotiations with future team of the Fund. We also note that regional real estate markets are characterized by the rate of return, which is higher by % on average than in Moscow, where the rate of return for RC is %. Macroeconomic indicators At the end of 2011 Russia comprised 12 cities with population the number of which exceeds 1 million of people. Moreover only in Moscow and St.Petersburg the number of citizens exceeds 1.5 million of people. Table 1. The number of people in populous cities of Russia Source: Rosstat Population in urban districts, thousand/people (as for January 1, 2011) Moscow St.Petersburg Novosibirsk Yekaterinburg Nizhniy Novgorod Samara Omsk Populous cities a group of cities on the territory of Russia with population of more than 1 million of people who reside in administrative-territorial borders. The most populous cities (Moscow and St.Petersburg) are considered in this research only in comparison with main indicators of the retail real estate market. You may look for a more detailed information about the Moscow and St.Petersburg retail real estate markets on our site: In this review the retail real estate market comprised quality retail premises, including retail and entertainment centers with a gross area of more than 3 thousand sq.m, and large big-box complexes as well. Prepared by GVA Sawyer 2

3 Population in urban districts, thousand/people (as for January 1, 2011) Kazan Chelyabinsk Rostov-on-Don Ufa Volgograd As it was expected retail turnovers (either by absolute indicators or per head) in Moscow and St.Petersburg considerably exceed indicators in populous cities (see Table 2). Gaps in average rate of wages are smaller; however we should take into consideration all expenses on utility payments and etc., i.e. expenses which do not concern retail segment. Obviously within these terms conditionally available funds of the population, which consumers would like to spend on goods and services, will be substantially higher than in other populous cities. Table 2. Indicators of retail turnover and average monthly wages Source: Rosstat, Indicators of socially-economic development of Russian cities Prepared by GVA Sawyer Retail turnover, mln, rub 2010 Retail turnover per head, rub/year, 2010 Average monthly nominal accrued wage Rub/month, 2010 Moscow St.Petersburg Novosibirsk Yekaterinburg Nizhniy Novgorod Samara Omsk Kazan Chelyabinsk Rostov-on-Don Ufa Volgograd The population incomes and purchasing power as the main indicators which retailers are oriented to, demonstrated their increase in 2011 on average in big cities. Moscow was the only exception, reduction of real disposable income was by 2.5% (January- November 2011). However we would remind that the year of 2008 saw the greatest drop since 2000 in the population money incomes by 13.6 % in Moscow. A maximum increase in the population real incomes was registered in Chelyabinsk 14.1 % as compared to the year of 2010, in Kazan 11.4 % and Yekaterinburg 11.3%. General characteristic of supply Among regional Russian cities, the population of which exceeds 1 million of people, Yekaterinburg has a majority of retail space (see Chart 1) 530 sq.m of GLA per 1000 people. Volgograd has a smaller number of retail premises only 250 sq.m of retail 3

4 space are meant for people. The entertainment and retail center KomsoMall was commissioned in Volgograd in February ( / sq.m) this fact led to the growth of availability of retail space in the city from 200 sq.m to 250 sq.m per people; one more important entertainment and retail center Akvarel ( sq.m- GBA/ sq.m-gla) is planned to be commissioned this year; as a result availability of quality retail real estate may increase up to 350 sq.m per people by the end of, however the city will be the last in the list among other cities, according to the rate of availability of quality retail real estate Table 3. Number of people in Russian populous cities, availability of retail space (GLA) per people Source: GVA Sawyer, Rosstat Population in Availability of Rating of cities urban districts retail space according to Thousand of (GLA) per 1000 availability of people (January people, March retail space 1, ) Moscow St.Petersburg Novosibirsk Yekaterinburg Nizhniy Novgorod Samara Omsk Kazan Chelyabinsk Rostov-on-Don Ufa Volgograd Prepared by GVA Sawyer 4

5 Picture 1. Availability of quality retail space (GLA) per people, March. Source: Research made by GVA Sawyer Vol gograd Ufa Rostov-on-Don Chelyabi nsk Kazan Omsk Samar a Nizhniy Novgorod Provi si on of 1000 resi dents with retail premises (GLA), January Yekaterinburg Novosibirsk St.Petersburg Moscow It should be noted, that retail turnover per capita and provision with retail premises are closely interrelated if we separately consider the clusters of Siberian and South Volga cities (see picture 2 below). Prepared by GVA Sawyer 5

6 Picture 2. Relation between retail turnover and provision with quality retail premises Source: GVA Sawyer South Volga cluster Retail turnover per capita Vol gograd Rostov-on-Don Nizhniy Novgorod Ufa Omsk Chelyabi nsk Kazan Samar a Novosibirsk Yekaterinburg Siberian- Ural cluster Provision of 1000 residents with retail premises, sq.m. The cities have both quantitative and qualitative differences. Thus, following the results of 6 CRE Federal Awards (for ) Yekaterinburg has the greatest number of nominees (5 centers): REC Grinvich (nominated for 2 times, in 2007 Phase 1, in 2010 Phase 3, when the complex became the winner), REC Park House, REC Karnaval, Gringo, and REC KomsoMall. Other cities such as Rostov-on-Don, Chelyabinsk, Nizhniy Novgorod and Ufa, had 3 nominees in each city. Only Omsk and Samara have not had nominees since the foundation of the award. Picture 3. REC Grinvich, Yekaterinburg. Winner of CRE Federal Awards 2010 in the category Large shopping center Prepared by GVA Sawyer 6

7 Picture 4. REC Fantastika, Nizhniy Novgorod. Winner of CRE Federal Awards 2009 in the category Large shopping centre In 2011 the following cities were the leaders in increase of quality retail real estate: Samara ( sq.m. GLA), Chelyabinsk ( sq.m. GLA) and Novosibirsk ( sq.m. GLA) (see Picture 5 and Table 4). Last year two largest MEGA complexes were opened in Samara ( / sq.m. GLA) and Ufa ( sq.m/ sq.m). IKEA has no plans to build new retail centers outside the Moscow Region. Picture 5. Volume of quality supply in , GLA, thousand sq.m. Source: GVA Sawyer Vol gograd Ufa Rostov-on-Don Chelyabi nsk Kazan Omsk Samar a Nizniy Novgorod Yekaterinburg Novosi birsk Total supply, Q Commissioned in 2011 To be commissioned in Among the major trends of 2011 there are the following: extension of the construction period; increase of REC s share in the total volume of quality retail real estate. More than 95% of quality retail premises in RECs will be constructed in the nearest 1-2 years. In 2011 the proportion of commissioned retail premises in RECs amounted to 88%; Prepared by GVA Sawyer 7

8 redevelopment/reconception of existing projects due to strengthened competition. For instance, RC Gringo, REC Yekateriniskiy and RC Dirizhabl will be redeveloped in Yekaterinburg; renewal of construction of frozen RCs, notably: REC Legenda in Nizhniy Novgorod, REC ( sq.m) in science campus of Novosibirsk, REC RIO (earlier RC Shokolad ) in Rostov-on-Don and others. 1.1 million of retail projects ( sq.m. GLA) are announced for commissioning in populous Russian cities in, among them there are 3 super regional complexes: REC Akvarel ( sq.m/ sq.m. - GLA) in Volgograd, REC Planeta in Ufa ( sq.m/ sq.m) and REC Nebo ( sq.m. / sq.m) in Nizhniy Novgorod. If all announced projects are carried out, the maximum increase of quality supply will be observed in Nizhniy Novgorod, Volgograd, Yekaterinburg and Ufa (See Picture 2). As of March three RECs have been commissioned in the analyzed cities: RC Soyuzniy (12 000/ sq.m - GLA) in Nizhniy Novgorod, REC Iyun (42 000/ sq.m ) in Ufa and REC KomsoMall ( / sq.m) in Volgograd. Table 4. Major projects of RCs/RECs in highly populated cities, Source: GVA Sawyer City Name of RC/REC Total/leased area, sq.m RCs/RECs, commissioned in 2011 and at the beginning of Novosibirsk REC Aura / Novosibirsk SunCity / Yekaterinburg RC Kalinka / 3 500* Nizhniy Novgorod RC Ganza / Nizhniy Novgorod RC Soyuzniy / Samara MEGA-Samara (IKEA) / * Kazan REC Yuzhniy (Phase 2) / Chelyabinsk REC Gagarin park / Chelyabinsk REC Fiesta / Chelyabinsk REC Rodnik / * Chelyabinsk RC Koltso / * Rostov-on-Don Mebel Mall / Ufa MEGA-Ufa (IKEA) / Ufa REC Iyun / Volgograd RC Diamant Zatsaritsinsky / Volgograd REC KomsoMall / Announced for commissioning in RCs/RECs Novosibirsk REC Crystal / n/a Yekaterinburg REC Raduga Park / Yekaterinburg REC Prizma / Nizhniy Novgorod REC Nebo on Lyadova Pl / Nizhniy Novgorod REC RIO / Nizhniy Novgorod REC Sedmoye nebo / n/a Nizhniy Novgorod REC Indigo / Omsk RC Mayak, Phase / * Kazan RC Bahetle 6 100/ 4 300* Rostov-on-Don REC RIO / Prepared by GVA Sawyer 8

9 City Name of RC/REC Total/leased area, sq.m Ufa REC Planeta / Volgograd REC Akvarel / *Estimation Structure of supply High rates of provision with retail premises in Russian cities do not always mean high rates of provision with certain types of real estate. Thus, Chelyabinsk has high rates first of all due to regional and circuit retail complexes 2, however Yekaterinburg shows high provision of its residents with retail premises due to the presence of regional and super regional shopping centers. Picture 6. Provision of 1000 residents with quality retail real estate (GLA) by the cities, Q1 Source: GVA Sawyer Vol gograd Ufa Rostov-on-Don Chelyabinsk Kazan Omsk Samar a Nizhniy Novgorod Yekaterinburg Novosibirsk St.Petersburg Moscow Super regional Regional Ci rcu i t Di stri ct It should be noted that super regional retail centers are not presented in Volgograd. This year commissioning of the first super regional REC Akvarel is expected ( / sq.m - GLA). Yekaterinburg, Nizhniy Novgorod and Kazan are leaders in the provision of quality RECs. Omsk has most of retail spaces within MUCs (MUC Millenium ( sq.m. trade GLA), MUC Continent ( sq.m. retail premises) and MUC Kaskad ( sq.m. retail area). 2 See Appendix 1. Classification of shopping centers according to the coverage area. Prepared by GVA Sawyer 9

10 Picture 7. Provision of 1000 residents with retail real estate (GLA) according to the projects types, Q1 Source: GVA Sawyer Vol gograd Ufa Rostov-on-Don Chelyabi nsk Kazan Omsk Samar a Nizhniy Novgorod Yekaterinburg Novosibirsk RC REC within TUC within MUC In 2011 average vacancy rate declined in all analyzed cities without exception and did not exceed 10%. Table 5. Average vacancy rates, end of 2011 Source: GVA Sawyer City Average vacancy rate Moscow 4% St.Petersburg 5-6% Novosibirsk 4-5% Yekaterinburg 3-4% Nizhniy Novgorod n/a Samara 6% Omsk 7-8% Kazan 5% Chelyabinsk 6-7% Rostov-on-Don 3-4% Ufa n/a Volgograd 3-4% Due to slowdown in economic growth in RF caused by reduction of consumption growth in the country, and taking into account considerable volume of new premises planned to be commissioned, GVA Sawyer predicts increase in vacancy rates by 2-4% in the cities where many retail premises are to be commissioned (see Picture 5). Moreover, strengthened competition may lead to tenants outflow to new more qualitative and conceptual RCs/RECs. Prepared by GVA Sawyer 10

11 Demand Beginning of showed no significant changes in the main trends of retail real estate. In most retailers keep to their development plans. Many retailers consider the increase in number of shops located in the most quality retail centers and correctly selected cities as the most effective way of retail business. Grocery retailers are most active in the market. This year their plans on opening stores correlate with volume of new supply, provision with quality retail real estate and retail trade turnover. Nizhniy Novgorod has the greatest potential among other analyzed cities, it is the only city where most federal chains have announced opening of their stores, including: Ashan, Eldorado, M-video, Media Markt-Saturn and others. It should be noted that sq.m. (GLA) are expected to be commissioned in Nizhniy. In 2011 Kazan had the lowest rate of retail commissioning, nevertheless, the city is well provided with quality retail real estate and many large retailers will open their stores here in. (See Table 6). Table 6. Major retailers which intend opening their stores in Source: Research made by GVA Sawyer City Major retailers intending opening their stores in Novosibirsk Eldorado Yekaterinburg Eldorado, Media Markt-Saturn, Leroy Merlin, Ok, H&M Nizhniy Novgorod Ashan (2 stores), Eldorado, Mvideo, Media Markt- Saturn, 7 th Continent, H&M Samara H&M Omsk Lenta, Eldorado Kazan Perekrestok (X5 Retail group), Metro, Leroy Merlin, Bahetle Rostov-on-Don Ashan Ufa H&M, Сoncept Club Volgograd Ashan, Media Markt-Saturn 2011 showed increase in rental rates by 10-12% in the analyzed cities. The most common changes in already running or just coordinating lease agreements include the following: The percent of tenant s turnover has become more frequently used for rental rates calculation. Thus some retailers are ready to pay small fix rent and percent of turnover. Some tenants confirm only percent without payment of small fix rent. Many tenants, especially branded network department stores, force the owner to perform finishing in the leased premises according to their requirements. Many tenants of newly opened retail centers set the rental rate depending on the number of leased premises, i.e. the rental payment is raised or lowered by agreed in the contract percent according to the vacancy rate. At the present time the significant increase in rental rates in the medium term is hardly ever expected due to unstable market situation. According to our estimations, rental rates in quality retail centers may increase by around 5% per year. Prepared by GVA Sawyer 11

12 Increase in rental rates in the old RCs with high vacancy rates is hardly ever expected. Taking into account tenants demands, in the nearest future such RCs may be redeveloped. Prepared by GVA Sawyer 12

13 Appendix 1. Classification of shopping centers according to the coverage area Type of the shopping centre Microdistrict/ District shopping centre Circuit shopping centre Regional shopping centre Super regional shopping centre Concept Total area, sq. m Accessible for local residents Main groups of goods are presented, accessible for local residents Main groups of goods are presented, fashionable clothes and footwear ( usually mall) Similar to the regional centre, but presents more brands and has wider choice of goods Area of the land plot, ha Standard anchor tenants Quantit Type y and more and more and more > and more Share of anchor tenants in total area the Primary covera ge area, km Minimum required number of residents in primary area, people the Supermarket 30-50% thousand Discount store, supermarket, cosmetics and perfumery, household goods, large specialty discounters, selling household appliances Department store that provides all types of goods; department store discounter, fashionable clothes, popular brands Department store that provides all types of goods, fashionable clothes, popular brands 40-60% thousand 50-70% 8-25 From 150 thousand 50-70% From 300 thousand Travel time by car, minutes Prepared by GVA Sawyer 13

14 GVA Worldwide Australia Austria Belgium Bulgaria Great Britain Hungary Germany Hong Kong (PRC) Greece Denmark India Ireland Italy Cyprus China Lithuania Netherlands New Zealand Poland Portugal Russia Rumania USA Finland Switzerland Sweden Estonia Аналитический документ по исследованию рынка недвижимости по исследованию рынка недвижимости Аналитический 56 сентября GVA Sawyer contacts: Head office (Moscow) Bernikovskaya Embankment House Nikoloyamskaya Ul. 13, Str.17 Tel: +7 (495) Fax: +7 (495) Office in St. Petersburg: BC Mir, Efimova Ul. 4а, office St. Petersburg, Russia Tel: +7 (812) Office in Krasnoyarsk Diktatura Proletariata Ul. 32 Office 4-4, Krasnoyarsk, Russia Tel: + 7 (391) info@gvasawyer.com Office in Krasnodar: Tel: +7 (495) info@gvasawyer.com Подготовлено GVA Sawyer 14