Recovering after shock
For most obvious reasons, summing up is now done with one eye on the pandemic, which, having affected all economy sectors, has become the main factor. The Federal Service of State Statistics reports that the annual growth of retail sales in Moscow was 5% in June and 7.1% in July while it did decrease during the spring when many businesses were under restrictions. However, based on the figures of September and October, the recovery rates started to slow down as business annual growth was only 1.6% and 0% respectively. “This could mean that put-
off demand was met during the summer and consumers got back into their conscious spending. On the other hand, counting the Black Friday, winter sales and borders closed due to the coronavirus, we are hoping for a traditional increase in sales and people turnover in December,” says Marina Malakhatko.
It is definitely still too early to talk about a full recovery. Based on Oxford Economics forecast, retail turnover and consumers spending will get back to the pre-crisis level only by the end of 2022.
Saving mode ensures success to outlets and all sorts of discount formats. Other concepts with low risks, according to the experts, are retail parks, shopping streets, neighborhood shopping centers focusing on creating a community. Higher risks are specific to superregional shopping centers, hypermarkets and department stores.
“The lockdown has been a telling blow for retail real estate as not only the traffic in shopping malls, but also consumers’ spending has decreased. This led to discount stores becoming in high demand. Also, online shopping has grown both in terms of cash flow and new customers,” notices Anna Nikandrova, Regional Director of Retail Real Estate and Real Estate Management Department with Colliers International.
Lease terms
The pandemic has also affected the lease rates in shopping centers. Knight Frank repots, they are down by 25% for key tenants as well as for small retail galleries operators compared to the figures of 2019.
Maximum basic rents, despite a certain decrease, are for fast-food courts, diners, island retail in open projects with high people turnover and they can reach up to 120k rubles per sq. m annually in Moscow. Minimum lease rates are set for spaces over 2,000 sq. m for key tenants.
According to Marina Malakhatko, most retailers (about 70%) have fixed their lease discounts until the end of 2020. The size of a discount depends on the profile of a tenant and the position of an owner. Fashion operators were granted 10–30% discounts during the restricted period of operation, while for luxury products these discounts were 90% for foreign currency fixed contracts and 60% for June – July. In August, all lease rates went back to normal. Asking lease rates are expected to go down in 2021, while the discounts are to stay for current lease agreements.