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.
What about the regions?
According to the data from CBRE, 207k sq. m are expected to be put into operation in 2020, 2.7 times fewer than last year. The results were supposed to be different, as about 60% of initially planned volumes have been put off until the next year. Four objects have been opened in the regions: Kazan Mall in Kazan (GLA 53.9k sq. m), Baltia Mall in Kaliningrad (GLA 40.5k sq. m), a shopping center as a part of Green Park multi-use development in Tyumen (GLA 18k sq. m). Approximately 400k sq. m have been announced for 2021 in the regions.
Analysts say that those cities with the population of 100–300k people have the biggest potential for retail real estate, providing there is a high level of income and a low level of good quality shopping centers in the city. Up to 2019, a share of such cities in the total construction volume was under 15%, yet within the past two years developers have been showing a growing interest and in 2020 their share made 32%, while and in 2019, it was already 39% of the total volume.
“Professional shopping centers in Russian cities are important for further retail development. It is because of them, international brands reach out to the regional markets. For instance, this year New Yorker has signed a contract to open a shop in Forum Mall in Ulan-Ude,” says Anna Nikandrova.
What brands do
This year, 12 international brands have entered the Russian market, while the number was 26 in 2019. This is the minimum amount, together with 2011, when there were 11 brands. Half of them belongs to the higher mid-price segment, and the other half is mid-price segment.
Some brands have announced they would be closing their stores in Russia, including Longchamp, Lefties as well as CJ CGV cinemas. The interest similar to the pre-crisis one is expected to get back no sooner than 2023, analysts predict.
Where investors go
Based on the analyses of CBRE, the investments into Russian real estate may reach 250 billion rubles by the end of the year, which is comparable to the results of 2019. Moreover, while investments into housing, including buying land for housing construction, has increased by 41%, commercial real estate has brought up 27% less investments than a year ago. Experts say this dynamic is in line with global trends.
Among all the segments of commercial real estate, most actively developing segment this year has been warehouse real estate. Over 40 billion rubles has been invested into warehouses in 2020, an increase of 25% over the previous year. On the other hand, the most affected segment has become retail real estate with a loss of 80% or tentative 16 billion rubles compared to 2019. This way, the investments into real estate objects may be at their lowest since 2014 when it was 7% of the total money invested.
It goes without saying, that the share of foreign money has gone down significantly and major deals — up to 94% — are signed by Russian companies. Another trend is concentration on the capital city. The share of Moscow investments has soared from 60% last year to 82% in 2020. It is 14% for St. Petersburg and 4% for the rest of the country.