Fashion retail: time ahead?
The expected breakthrough of purchasing power in the regions did not take place. This circumstance forced developers and retailers to reconsider their development plans: now even the most active ones are cautiously going beyond Moscow and St. Petersburg.
According to Colliers International estimates, the trend of low expansion of retailers and limited bank lending continues in regional markets. The most active network players are retailers of the low price segment, mainly fashion operators and grocery chains. Moreover, among the fashion players in the first half of 2017, such Russian brands as Sela, Familia, Gloria Jeans were most actively opened. Against the background of low growth dynamics of the real solvency of the population, the company expects that the most prosperous regions (with high per capita income and low availability of retail space) will become a priority for the construction and commissioning of new shopping centers. Such cities include, for example, Kazan, Ufa, Rostov-on-Don.
According to analysts at Colliers International, in the regions, the key sites for the opening of new stores by chain retailers or for the brand to enter the city market are still shopping centers of network developers (shopping center "Maxi", shopping center "Planet", "MEGA" and others). Along with them are new large-format projects that offer high-quality retail premises that meet the current requirements of retailers, such as the SEC "Silvermall" in Irkutsk, the SEC "Riviera" in Lipetsk and others. In turn, CBRE highlighted the Sunrise City shopping center in Naberezhnye Chelny among the openings of shopping centers that "most influenced the city". The company notes that, in fact, the project became the first high-quality shopping center in the city and attracted international brands not previously represented here, including H&M.
According to the results of the first half of the year, among the Russian million-plus cities, the greatest provision of high-quality retail space was recorded in Samara
(682 sq. m per 1,000 people), Yekaterinburg (661 sq. m. m per 1,000 people) and Nizhny Novgorod (522 sq. m. m per 1,000 people). It is noteworthy that since 2014 Samara has held the leadership in terms of the availability of retail space among the cities of millions.
A steady trend remains the qualitative renewal of outdated shopping centers in the face of growing competition and the struggle for the consumer.
Among the most promising Russian cities, Yekaterinburg, Krasnodar, Krasnoyarsk, Vladivostok, Tyumen, Sochi, Kazan, Novosibirsk, Rostov-on-Don can be singled out," lists Magomed Akhkuev, analyst, CBRE Market Research Department. These cities have historically attracted more interest due to a number of factors. In the case of million-plus cities, this is the market capacity, the level of income of the population, the degree of infrastructure development, and so on. Sochi and Vladivostok are promising due to their tourism potential.
Analysts name Saratov, Tomsk, Omsk, Ufa, Volgograd as the "most depressing" cities. CBRE experts note that a significant impact on the development of the regions was caused by a drop in the level of income of the population in the regions and an increase in the cost of capital: many developers froze projects amid the crisis, and retailers began to choose cities even more carefully and cautiously, focusing exclusively on high-quality projects with high traffic and a successful location.
"Among the top ten promising cities are those in which stable incomes of the population are recorded, and constructive actions of the authorities help developers in the development and modernization of old projects and the construction of new ones," Waldemar Weiss, head of the Russian branch of the Munitor Group, reflects. – Developers in the regions do not need to help – they will be more pleased if no one interferes. Of course, there are still cities on the map of Russia that lack high-quality retail facilities, but due to the state of the market, one can only dream of both the reconstruction of existing and the construction of new facilities there. In the current economic conditions of permanent crises, it is important to measure seven times and never cut. Tyumen, Kazan, Surgut, Novy Urengoy, Kaliningrad, Irkutsk are just some of the cities where there is a positive movement forward. Traditionally – Yekaterinburg, Novosibirsk, Vladieast. Well, Khabarovsk is empty for now. Many territories are closed to developers due to administrative barriers. Examples of such markets are Perm, Saransk, Pyatigorsk and the entire North Caucasus. Kalmykia, Tambov, Syktyvkar, Pskov, Chuvashia, Mari El are also depressed from the point of view of development.
According to Mr. Weiss, against the background of the crisis and the growth of competition in Moscow and St. Petersburg, retailers have become more actively interested in the regions. "The realization has come that there is life there," the expert explains.
Vitaliya Lvova, CEO of Promotion Realty, agrees that the current economic situation has influenced the dynamics of the retail real estate market in the regions.
"In a number of cities, the availability of retail space was at a high level, however, many of the existing facilities were built in 2006 and 2007, and at the time of the onset of the last crisis, more modern, higher-quality and larger malls should have already appeared on the market," explains Ms. Lvova. – However, this did not happen. Kazan can be called a striking example: the city is traditionally among the ten most well-provided with retail space for millionaires in Russia, but the city is insufficiently saturated with high-quality, modern and interesting objects. Due to the fact that new economic realities have come and retail chains have stopped active development in the regions, new interesting projects have not been released in such cities, or they have only recently begun to appear and are rather a rare exception than a natural evolution of the market. At the same time, in cities where large malls were not represented at this stage of development (with a GLA of 100 sq. m.), development, on the contrary, continues quite actively. Vladivostok can serve as a good example here, where major landmark projects of the super-regional headquarters are currently being built.
Vyacheslav Andryushkin, First Vice President of the Asia-Pacific Bank, also said that the Far East remains one of the most promising and so far undervalued markets by players. "This is where several factors converged: the region is rich in natural resources, the region has a relatively small population density, and the infrastructure is just beginning to develop," says Mr. Andryushkin. – Currently, the volume of investments in the region is relatively low, but the potentially eastern part of Russia is strong and highly promising. With proper development and state support measures, this potential can be fully realized, which will improve the economic and social situation. Patrick Sjoberg, Executive Director for the management of shopping centers of the SRV concern in Russia, adds Tyumen to the promising locations. "In turn, the Krasnodar Territory is characterized by the growth of domestic tourism and increased investment," Mr. Sjoberg notes. "There are several key changes in the background of the crisis that affect the plans of developers and retailers. Their only difference in the regions compared to Moscow or St. Petersburg is the level of changes. Firstly, investments in the regions are declining. Secondly, there is economic stagnation and, as a result, wages are falling.
To be continued.
Author: Ekaterina Reutskaya