Page 41 - bne magazine March 2017 issue

bne March 2017 Special report I 41
With an official population of 11.92mn, the retail market in Moscow alone is larger than most CEE countries. How- ever, the 2008 crisis, and then a lower profile second slump in 2015, wrong- footed many developers. Vacancy
Russia new supply by class, mn sqm
rates were a low 1-3% until 2014, and then they soared to 10.2% in 2016.
1.5
1
0.5
0
The retail segment hit its nadir last
year as the delivery volume of new space slightly exceeded 2015’s volume. Nine new shopping centres with a total leasable area of 473,000 sqm were delivered in Moscow in 2016. Only two new shopping centres announced for 2017 were suspended in 2016, while the rest of the projects initially announced remain on track for completion this year – a total of 183,000 sqm, which
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017F
Class A
Class B
Source: CBRE Research, Q4 2016
is still less than half (2.5 times lower)
than the 2016 delivery volume, accord-
ing to CBRE. Not much will change 7000 in retail until real disposable incomes 6000 start to grow again – something that
is not expected to happen in 2017. 5000
Russia’s nascent recovery is partly being 4000 driven by new investors looking to get 3000 in on the ground floor while prices are 2000 dirt-cheap. Last year a total of 39 new international brands entered the Russian 1000 market, with 34 opening their first ever
9.3
10.2
183
12 10 8 6 4 2
Modern retail stock and new delivery, ‘000 sq m, vacancy rate, %
708
7.2
583
229
187
261
427
“Stabilisation of the economy, absence of significant currency fluctuations and global political stability encouraged some companies to be more proactive in their plans. We expect tenants to
2014
2015
2016
2017F
Q3
Q4
Q1 Q2
Take-up Vacancy rate
248
274
00
store (all but eight of which were in cooperation with a Russian partner).
2007 2008 2009 2010 2011 2012 2013 Stock as at the beginning of the year, '000 sq m
Source: CBRE, Q4 2016
2014 2015 2016 2017F
12%
2013
16.7%
16.6%
Q3 Q4
3.0
3007
3.0
3434
Completions, '000 sq m
473
5261
441
4819
8.7
5733
2.7
3663
2.6
3850
7.0
4111
1.5
1902
2.0
2151
2424
Even more encouraging for the retail sector's prospects is warehousing,
which saw its most dramatic decline in vacancy rates in six years, from 13.6% as of the end of the third quarter of 2016 to 12.2% as of the end of the year. The new supply of warehouses in the fourth quarter of 2016 hit 570,000 sqm, the highest quarterly level in the market’s history, although the annual level of completions (1.2mn sqm) was slightly behind the previous record set in 2015 (1.3mn sqm). The fact that retailers
are investing into new warehousing space suggests they believe the retail market is about to grow strongly.
Vacancy rate, %
Moscow Office Market, Q4 2016 Completions, take-up and vacancy rate
1.5
1.0
0.5
0.0
17.70%
400
300
200
100
0
17.6% 17.7%
16.6%
15.90% 15.40%
17.4%
Completions
2015
2016
15.9%
Source: CBRE Research, Q4 2016
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0.89
1.41
0.74
0.72 0.32 0.51
0.87
1.06
241 257 63
211
329
168 112
82 60
234 269
mn sq m
Thousand sq
1.07
1.10
390