Developers here see room for
continued growth. The level of retail
space per person in Russia remains
far below the West European average,
according to Cushman & Wakefield.
Russia has a little more than 100
square meters of retail space per 1,000
people, versus 250 square meters per
1,000 in Western Europe.
1. RUSSI~SRETAIL
GOLD RUSH
MALLS ARE RISING ON A TIDE OF GROWING CONSUMER WEALTH
By Bennett Voyles
URING THE COLD WAR, NIKITA KHRUSHCHEV
reportedly boasted that his Soviet Union would soon "bury" its geopolitical rivals
in the West. That did not happen. But today, a little over 50 years later, some
might wryly observe that Khrushchev's ghost must be off somewhere tittering up
his sleeve over the speed at which Russia is now building its shopping centers and
leaving the West behind.
Only two decades ago Russians shopped mostly at open-air markets or by
pointing to something hanging on the wall of some kiosk the size of a newsstand
- a little newsstand. Now huge shopping centers are rising all over Russia as devel-
opers try to cash in on the reality of an increasingly affluent Russian consumer. In
j the second quarter oflastyear alone, some 464,500 square meters {about 5 million
~
~ square feet} of new mall space opened in Russia, including the 152,360-square-
~
~ meter OZ Mall, in Krasnodar, a city of 750,000 not far from the Black Sea.
S?
~ And there will probably be much more where that came from. In Moscow
~
A PR I L 2 0 1 3 I seT 51
2. expected to rise to 422 ,000 squ are
meters fro m 334,000 square meters.
Growth will be even more abrupt in
N izhny NovgoruJ, a ci ty of 1. '3 mi l-
lion some four hours fro m Moscow.
There, retail stock is expec teJ to
rise to 500,000 square meters frum
300,000 squ are meters by year-end .
As for the smaller cities (those with
population of about 300,000), get-
ting consumers accu stomed to the
new malls can be difficult, Sokolov
says. In many cases regional shopping
centers cannot Jraw the chain and
thus end up with local shops instead.
Developers here se e room for
continued growth. The level of retail
space per person in Russi a remains
far below th e West European aver- And Russian incomes continue to Russian credit<ard debt grew by 60 per-
age, according to Cushman & W ake- rise. Per capita income is $13,543 yearly cent in the first nine months of 2012, to
field. Russia has a little more than 100 at present, and that is climbing about 4 the equivalent of $19 billion, according
square meters of retail space per 1,000 percent annually, after inflation, accord- to government data.
people, versus 250 square meters per ing to Credit Suisse. Furthermore, con- What might the old-school commu-
1,000 in Western Europe. sumer access to credit is getting easier: nists say if they could see all this? SCT
APR I L 2 0 1 3 I SCT 53
3. said Andrew Muzzlewhite, Hines' de- expected to ri se to 422,000 square
velopment manager for the project. meters from 334,000 square meters.
"They have been a real benefit to the Growth will be even more abrupt in
development, being both honest and Nizhny Novgorod, a city of 1.3 mil-
sophisticated people who know how lion some four hours from Moscow.
to work in a constructive and trans- There, retail stock is expected to
parent manner." rise to 500,000 square meters from
The new Russian malls comprise a 300,000 square meters by year-end.
mix of formats, from razzle-dazzle me- As for the smaller cities (those with
gam ails - such as Moscow's Vegas mall population of about 300,000), get-
- to factory outlets. Russian shoppers ting consumers accu sto med to the 'J>
iii
like the outlet concept a lot, accord- new malls can be d ifficult, Sokolov 0:
o
ing to Muzzlewhite. "Russians are very says. In many cases regional shopping ~
""
u
brand-conscious and spend a relatively centers cannot draw the chains and i
z
large proportion of their income on thus end up with local shops instead. 2-
Q
shopping," he said. "The outlet format Developers here see room for o
t-
o
allows those who might not be able continued growth. The level of retail ;:
to afford brands full-price access to space per person in Russia remains
high-end products as well as providing far below the West European aver- And Russian incomes continue to Russian credit-card debt grew by 60 per-
bargain hunters with opportunities to age, according to Cushman & Wake- rise. Per capita income is $13,543 yearly cent in the first nine months of20l2, to
purchase discounted brands." field. Russia has a little more than 100 at present, and that is climbing about 4 the equivalent of $19 billion, according
To be sure, these shiny new shop- square meters of retail space per 1,000 percent annually, after inflation, accord- to government data.
ping centers are not in competition people, versus 250 square meters per ing to Credit Suisse. Furthermore, con- What might the old-school commu-
against much of anything else. Even 1,000 in Western Europe. sumer access to credit is getting easier: nists say if they could see all this? SC T
alone, roughly 1 mill ion squ are me- particular. In January 2012 Morgan in Moscow it remains difficult to find
ters of shopping space is set to come Stanley paid $1 billion for the 2-year- a high-quality supermarket. Chains
online over the next five years or so, old, 93,000-square-meter Galeria mall are relatively few. "It takes quite a
by Jones Lang LaSalle's .reckoning. in St. Petersburg. In recent months long time for a new chain to enter the
And for the period between first-half the firm also bought the super-posh, market and to expand, and our mar-
2012 and first-half 2013, Russia in its 205,000-square-meter Metropolis ket is only 15 years old," said Denis
entirety is on track to see some 2 mil- Shopping and Entertainment Mall, Sokolov, a Moscow-based analyst with
lion square meters of new shopping just outside Moscow, the largest for- Cushman & Wakefield. One reason
center space, boosting the country's eign acquisition of Russian real estate is logistics: This is an inevitable chal-
total floor space by about 13 percent, to date, for $1.2 billion. lenge in a country so physically vast
according to Cushman & W akefield. Western developers, too, are ac- that it comprises six time zones. Re-
By contrast, the shopping center tive in Russia. Ikea Group operates tailers must therefore either wait un-
space pipeline in France is expected 14 centers here. And last year Hous- til distribution networks are able to
to produce about half that amount ton-based developer Hines opened cover such an expanse or else bu ild
over the same time frame, while the Russia's first factory outlet center, their own supply chains. In either
U.K. is anticipatin g only about a the Outlet Village Belaya Dacha, in case, that takes time, Sokolov says.
third of the volume in France. (The s uburban Moscow, in partn ership Mall development is reachin g
U.S. saw just 580,000 square meters with local partner Belaya Dacha. beyond just Moscow and St. Peters-
of new construction through the first Hines attributes the center's success burg, spurring change in the habits
nine months of last year, according to in part to that partnership. "They of shoppers in almost every city, large
Colliers International.) owned the land, wh ich was contrib- and small, across the country. In No-
To look at the newspapers some uted into the joint venture, and they vosibirsk, Russia's third-largest city
days, o ne might think the Cold War have worked alon gside us on the and Siberia's largest (population 1.4
is still on. But the old [ron C urtain development, in particular in help- million), annu al retail sales stand at
has lo ng rusted into oblivion, for ing to deliver approvals and working $10.4 billion. By the end of this year,
foreign shopping center investors in on utility and infrastructure issues," total retail tock in Novosibirsk is
52 SCT I APR I L 20 I J A PR I L 20 I 3 I SCT 53
4. said Andrew Muzzlewhite, Hines' de- expected to ri se to 422,000 square
velopment manager for the project. meters from 334,000 square meters.
"They have been a real benefit to the Growth will be even more abrupt in
development, being both honest and Nizhny Novgorod, a city of 1.3 mil-
sophisticated people who know how lion some four hours from Moscow.
to work in a constructive and trans- There, retail stock is expected to
parent manner." rise to 500,000 square meters from
The new Russian malls comprise a 300,000 square meters by year-end.
mix of formats, from razzle-dazzle me- As for the smaller cities (those with
gam ails - such as Moscow's Vegas mall population of about 300,000), get-
- to factory outlets. Russian shoppers ting consumers accu sto med to the 'J>
iii
like the outlet concept a lot, accord- new malls can be d ifficult, Sokolov 0:
o
ing to Muzzlewhite. "Russians are very says. In many cases regional shopping ~
""
u
brand-conscious and spend a relatively centers cannot draw the chains and i
z
large proportion of their income on thus end up with local shops instead. 2-
Q
shopping," he said. "The outlet format Developers here see room for o
t-
o
allows those who might not be able continued growth. The level of retail ;:
to afford brands full-price access to space per person in Russia remains
high-end products as well as providing far below the West European aver- And Russian incomes continue to Russian credit-card debt grew by 60 per-
bargain hunters with opportunities to age, according to Cushman & Wake- rise. Per capita income is $13,543 yearly cent in the first nine months of20l2, to
purchase discounted brands." field. Russia has a little more than 100 at present, and that is climbing about 4 the equivalent of $19 billion, according
To be sure, these shiny new shop- square meters of retail space per 1,000 percent annually, after inflation, accord- to government data.
ping centers are not in competition people, versus 250 square meters per ing to Credit Suisse. Furthermore, con- What might the old-school commu-
against much of anything else. Even 1,000 in Western Europe. sumer access to credit is getting easier: nists say if they could see all this? SC T
alone, roughly 1 mill ion squ are me- particular. In January 2012 Morgan in Moscow it remains difficult to find
ters of shopping space is set to come Stanley paid $1 billion for the 2-year- a high-quality supermarket. Chains
online over the next five years or so, old, 93,000-square-meter Galeria mall are relatively few. "It takes quite a
by Jones Lang LaSalle's .reckoning. in St. Petersburg. In recent months long time for a new chain to enter the
And for the period between first-half the firm also bought the super-posh, market and to expand, and our mar-
2012 and first-half 2013, Russia in its 205,000-square-meter Metropolis ket is only 15 years old," said Denis
entirety is on track to see some 2 mil- Shopping and Entertainment Mall, Sokolov, a Moscow-based analyst with
lion square meters of new shopping just outside Moscow, the largest for- Cushman & Wakefield. One reason
center space, boosting the country's eign acquisition of Russian real estate is logistics: This is an inevitable chal-
total floor space by about 13 percent, to date, for $1.2 billion. lenge in a country so physically vast
according to Cushman & W akefield. Western developers, too, are ac- that it comprises six time zones. Re-
By contrast, the shopping center tive in Russia. Ikea Group operates tailers must therefore either wait un-
space pipeline in France is expected 14 centers here. And last year Hous- til distribution networks are able to
to produce about half that amount ton-based developer Hines opened cover such an expanse or else bu ild
over the same time frame, while the Russia's first factory outlet center, their own supply chains. In either
U.K. is anticipatin g only about a the Outlet Village Belaya Dacha, in case, that takes time, Sokolov says.
third of the volume in France. (The s uburban Moscow, in partn ership Mall development is reachin g
U.S. saw just 580,000 square meters with local partner Belaya Dacha. beyond just Moscow and St. Peters-
of new construction through the first Hines attributes the center's success burg, spurring change in the habits
nine months of last year, according to in part to that partnership. "They of shoppers in almost every city, large
Colliers International.) owned the land, wh ich was contrib- and small, across the country. In No-
To look at the newspapers some uted into the joint venture, and they vosibirsk, Russia's third-largest city
days, o ne might think the Cold War have worked alon gside us on the and Siberia's largest (population 1.4
is still on. But the old [ron C urtain development, in particular in help- million), annu al retail sales stand at
has lo ng rusted into oblivion, for ing to deliver approvals and working $10.4 billion. By the end of this year,
foreign shopping center investors in on utility and infrastructure issues," total retail tock in Novosibirsk is
52 SCT I APR I L 20 I J A PR I L 20 I 3 I SCT 53