Moscow retail market Q2 2010
Content Moscow retail snapshot, Q2 2010 Demand: Retail market drivers Supply: Retail real estate development Rents Key trends 2
Moscow retail snapshot, Q2 2010 Stock Shopping centre stock Shopping centre stock per 1,000 inhabitants Completions, Q2 2010 2,815,000 sq m 268 sq m 167,000 sq m Number of shopping centres 72 Market balance Prime shopping centre base rent* Average shopping centre base rent Prime street retail base rent USD 2,700 4,000 sq m/year USD 400 1,000 sq m/year USD 3,500 4,000 sq m/year Prime shopping centre yield 11.0 11.5% Vacancy rate 11% * Rents are given for a single unit of 100 sq m GLA located on the ground floor of a retail gallery. Rents exclude VAT and OPEX. Source: Jones Lang LaSalle 3
Demand: Retail market drivers 4
Personal income and expenditures 16 Personal income and retail growth in Moscow Muscovites have one of the highest income levels in Russia: it averaged USD1,531 per capita per month in last 12 months* vs USD584 for the country. After the initial impact of the crisis, Muscovites real income began to recover, increasing by 3.7% YoY in January-April 2010. Muscovites spend approximately 70% of their incomes on consumption. This is helped by low income tax and debt levels (mortgages are still in their infancy). 12 8 4 0-4 -8-12 -16-20 Jan-08 Apr-08 Jul-08 Oct-08 Jan-09 Apr-09 Jul-09 Oct-09 Jan-10 Apr-10 Personal income real growth, % YoY Retail turnover real growth, % YoY Household expenditure structure, % 75 65 55 45 35 25 15 5-5 -15 Goods and services Obligatory payments Savings Currency purchases Cash increase/ decrease June 2008 - May 2009 June 2009 - May 2010 * May 2009-April 2010 Source: Rosstat, Jones Lang LaSalle 5
Consumer confidence in Russia Consumer confidence indicator Inflation dynamics, % YoY 110 100 90 80 18% 16% 14% 12% 10% 70 60 50 40 8% 6% 4% 2% 0% Consumer confidence continues to pick up after a sharp correction. The continued decline of inflation is providing support to consumer sector recovery. Source: Rosstat, Jones Lang LaSalle 6 Q4 1999 Q3 2000 Q2 2001 Q1 2002 Q4 2002 Q3 2003 Q2 2004 Q1 2005 Q4 2005 Q3 2006 Q2 2007 Q1 2008 Q4 2008 Q3 2009 Q2 2010 Jan-08 Mar-08 May-08 Jul-08 Sep-08 Nov-08 Jan-09 Mar-09 May-09 Jul-09 Sep-09 Nov-09 Jan-10 Mar-10 May-10 Q1 2008 = 100 Russia Moscow
Retailer development plans 100% Targeted cities* 80% 76% 75% 60% 50% 40% 30% 20% 0% Moscow St.Petersburg Millionniki Cities w ith 500,000 people Retailers interest is currently skewed towards Moscow and St. Petersburg. * The share of interviewed retailers interested in a particular city. ** The panel includes 420 retailers interviewed in August-September 2009. Source: Jones Lang LaSalle 7
Retailer development plans Grocery retailers Other retailers Four strategies of retail chains STABILIZE DOWNSIZE EXPAND Citystore, Spar Auchan, Magnit, O'Key, X5 Retail Group, Mosmart, Metro C&C, Seventh Continent, Dixy Group, Victoria Group Lenta, REWE Group, Matritsa Rive Gauche, Leroy Merlin, Eldorado, Media Markt, H&M, Inditex, Burger King, Traveler's Coffee IKEA, M.Video, Detsky Mir, OBI, Decathlon Shokoladnitsa, Technosila, L Etoile, Wild Orchid EXIT Carrefour, Paterson, Smak (Roznitzio-M), Grossmart, Alpi, Vester Mir, Shans, Arbat Prestizh, Banana Mama, Bookberry, Betalink, Tsifrograd Weakening demand has increased competition in the Russian retail sector. The financial strength of large foreign retail chains like Auchan, Metro C&C helps them to take advantage of the current situation and to continue their expansion. 8
Retailer strategies Anchor Retail gallery: Franchise Retail gallery: Direct Many international retailers are already operating in Russia, their number approaches 200. BEBE, New Look, IKKS, Kika, River Island, Coast, Oxette, H&M, Peter Murray, Uniqlo, Miss Selfridge, KIABI are among recent newcomers. 9
Supply: Retail real estate development 10
European shopping centre stock benchmarks Total stock** Stock per 1,000 inhabitants** Frankfurt Hamburg Budapest Prague London* Warsaw Stockholm Frankfurt Warsaw Prague Berlin Budapest St.Petersburg London* Stockholm St.Petersburg Berlin Hamburg Moscow 2,815 Moscow 268 0 500 1000 1500 2000 2500 3000 0 200 400 600 800 '000 sq m sq m Despite recent dynamic growth, supply of retail space in Moscow remains modest for the size of the city. * Excludes some projects beyond city limits. ** Data for European cities, except Moscow and St. Petersburg, are for Q4 2009. Source: Jones Lang LaSalle 11
35 Moscow existing shopping centres 36 16 22 33 29 9 3 24 17 53 32 62 65 55 40 69 61 28 57 21 47 15 19 12 48 6 54 20 1 4 2 46 26 37 41 31 50 25 34 30 27 70 49 59 14 42 39 64 8 7 44 52 56 neighbourhood 18 community 72 regional 10 71 super regional specialty 5 45 51 13 66 60 11 63 23 67 58 68 43 38 # Name GLA, sq m # Name GLA, sq m 1 Petrovskiy Passazh 23,000 37 RIO 35,100 2 GUM 30,000 38 XL III 20,000 3 Auchan City - Kuntsevo 11,000 39 MALL Gallery Brateevo 12,000 4 Okhotny Ryad 30,000 40 Festival 30,160 5 Auchan City - Mar'ina Roscha 23,000 41 Auchan City Sevastopolskiy 26,400 6 Druzhba 11,000 42 Retail Park 24,500 7 Auchan City - Kashirskaya 23,000 43 Gorod 62,000 8 Global City 36,500 44 Zolotoi Vavilon II 8,150 9 Rublevskiy 8,500 45 Chas Pik 25,000 10 Waymart 26,000 46 Evropeyskiy 63,000 11 Atrium 40,500 47 Auchan City Kapitoliy 40,000 12 Zolotoi Vavilon 24,700 48 MALL Gallery Otradnoye 6,000 13 Auchan Mytishy 16,000 49 MEGA Belaya Dacha 182,622 14 Auchan City - Belyaevo 29,350 50 Mosmart on Borovskoe shosse 28,000 15 XL I 22,000 51 Erevan Plaza 24,000 16 Crocus City Mall 30,000 52 Domodedovskiy 18,000 17 Auchan City - Leningradskiy 38,000 53 Schuka 43,000 18 MEGA Tyoply Stan 152,088 54 Lotte Plaza 22,700 19 Metromarket na Timiryazevskoy 6,500 55 Vremena Goda 28,170 20 TsUM 46,700 56 Oblaka 42,489 21 Gallery Aeroport 6,900 57 ZIG-ZAG 16,000 22 Auchan Marfino 24,000 58 Semenovskiy phase II 22,000 23 Mosmart on Yaroslavskoye shosse 12,500 59 Stolitsa, Solntsevo 8,200 24 Liga 27,200 60 Troika 80,000 25 Kaluzhskiy 17,100 61 RIO Grand 105,000 26 Vesna 5,700 62 Metropolis 80,000 27 Bum 20,000 63 Megapolis 44,000 28 Mosmart on Dmitrovskoe shosse 16,000 64 Spektr 35,000 29 Waypark 46,000 65 Filion 55,000 30 L-153 35,000 66 Zolotoi Vavilon Rostokino 170,000 31 Solnechniy Ray 6,200 67 Gorod II 110,000 32 5th Avenue 17,370 68 AST 15,000 33 MEGA Khimky 174,688 69 Rechnoy phase I 20,000 34 Varshavskiy 30,000 70 Azovsky 15,000 35 Ladya 13,379 71 VIVA! 21,900 36 Europark 38,000 72 Vegas 140,000 Quality high medium low 12
Moscow shopping centres under construction 13 6 2 Name Announced year of opening GLA, sq m 1 Kluchevoy 2010 13,000 2 Marcos Mall 2010 36,200 3 SEC on D.Donskogo Blvd. 2010 12,250 9 4 RIO, 2nd km of MKAD 2010 90,000 5 Gagarinsky 2010 70,000 6 Parus SEC 2010 17,150 7 Favorit Centre 2010 24,000 8 Mall of Russia 2010 114,000 8 10 4 9 Kaleidoskop 2010 35,000 10 Central Market (Tsvetnoy) 2010 22,000 11 GoodZone 2011 70,000 12 River Mall 2011 85,000 13 Fashion House Outlet Centre 2011 26,765 5 12 11 1 neighbourhood community regional super regional specialty 7 3 Source: Jones Lang LaSalle 13
Supply: Shopping centre stock The following shopping centres have been opened in Q2 2010: Vegas (140,000 sq m GLA) VIVA! (21,900 sq m GLA) Azovsky, 1 st floor (5,000 sq m GLA) Three large schemes will be delivered in Moscow until the end of 2010: Mall of Russia (101,000 sq m GLA) RIO on the 2nd km of MKAD (90,000 sq m GLA) Gagarinsky (70,000 sq m GLA) Moscow retail market evolution '000 sq m 4,500 4,000 3,500 3,000 2,500 2,000 1,500 1,000 500 0 Stock Completions Vacancy rate 2004 2005 2006 2007 2008 2009 2010F 2011F 2012F 2013F % 14 12 10 8 6 4 2 0 Source: Jones Lang LaSalle 14
Rents 15
European prime SC base rents* European prime SC base rents, Q2 2010 Prime SC rent dynamics USD/sq m/year Budapest 6000 Prague 5000 Warsaw Berlin Hamburg St.Petersburg 4000 3000 2000 Frankfurt London Moscow 0 1,000 2,000 3,000 4,000 4,000 1000 0 Q1 2007 Q2 2007 Q3 2007 Q4 2007 Q1 2008 Q2 2008 Q3 2008 Q4 2008 Q1 2009 Q2 2009 Q3 2009 Q4 2009 Q1 2010 Q2 2010 USD/sq m/y ear Frankfurt Budapest Paris Moscow London Moscow prime rents are one of the highest in Europe. In Q1 2010 they increased by 5%, and remained stable in Q2. * Rents are given for a single unit of 100 sq m GLA located on the ground floor of a retail gallery. Rents exclude VAT and OPEX. Source: Jones Lang LaSalle 16
Shopping centre rents Turnover rents are becoming more common in Moscow. Possible options include: fixed rent, fixed + turnover rent kicking in when a specified revenue level is reached, turnover-based rent. Incentives for tenants may include: rental holidays or rental discounts for the first two years, full or partial fit-out, relocation to a lower floor without rental increase, lower deposit 1 month instead of 3, lower prepayment, rents for anchor tenants are denominated in RUB, for others in USD or EUR with an option to fix the exchange rate. Minimum Maximum Profile Area (sq m) (USD / sq m / year) (USD /sq m / year) Hypermarket >5,000 120 300 White & brown >2,500 220 300 <2,500 280 380 >3,000 180 320 Sporting goods 1,200-3,000 220 380 <1,200 400 600 Cinema >2,500 150 200 Entertainment 1,500-7,000 100 120 Perfume and cosmetics Goods for children 300-500 >1,500 1,300 150 2,000 220 <300 <300 1,600 600 2,400 1,300 DIY 8,000 15,000 140 200 Food courts 40-90 1,000 2,200 Restaurants 250 600 250 600 <250 400 650 40-200 900 4,000 Fashion and apparel 200-1000 500 1,000 >1000 % or turnover 700 Source: Jones Lang LaSalle 17
Key trends Personal incomes and retail sales extended the positive trend in the beginning of 2010. Consumers prefer cheaper or non-branded goods, they became more value oriented. Facing financial problems, many retailers have downsized their chains to improve operational efficiency. However, some still have ambitious expansion plans especially in Moscow. Developers were more active in Q2 and announced the start of several project developments. The vacancy rate in Moscow increased to 11%, as a large volume of new shopping centre premises entered the market. Rental rates for the majority of shopping centres tenants in Moscow remained unchanged. 18
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