Year of change - what will happen to commercial real estate
25.05.2011 5981

Year of change - what will happen to commercial real estate

One of the main questions that concerns all sellers is what will happen to retail real estate: what will happen to rental rates, will the construction of new shopping centers freeze or not, how to find mutual understanding with developers? These questions are answered by Mikhail Rogozhin, deputy director of the Jones Lang LaSalle retail space department, who recently returned from the international exhibition of retail real estate and retail chains MAPIC.

- Mikhail, tell us in which areas retail property will develop in Russia?

- This year, all visitors to the MAPIC exhibition noted that there were fewer Russians - developers and retailers. Nevertheless, interest in Russia is still high, perhaps because the recession in Europe is greater than ours. Moreover, quite large brands, for example, such as the Spanish Sfera, a large department store that does not want to go on their own and are actively looking for partners in Russia, are showing interest. That is, in general, the trend will continue: foreign operators will continue their expansion into Russia. Another question is how they will come and how they will work.

Obviously, those investors who have a large amount of cash can now invest in projects. First of all, these are large companies operating in hypermarkets - for example, Carrefour confirmed the desire not only to build and open hypermarkets, but also to buy land.

The main international anchors that already exist in Russia are expanding and strengthening their plans for the 2009 year. This is Carrefour, Auchan, and Decathlon, they will use every opportunity to enter this or that interesting project with their money. Plus they will develop their own projects. That is, they will be both anchors and co-investors. This is the main trend for the 2009 year.

A lot depends on how the market goes in the first quarter of 2009. So far, our anchor and mini-anchor operators honestly say that they are in a waiting situation at least until the end of January.

To talk about some new plans, they need to understand how much turnover will fall. And that will be clear at best next spring. And therefore, most likely, during the first quarter of 2009, the waiting situation will continue. This is not to say that trading companies completely stopped signing agreements with developers, but they slowed down this process very much.

In addition, both our and foreign companies are now trying to understand whether it will be possible to enter into some projects as a secondary real estate market, of course, on much less expensive conditions than before.

Plus, in Russia there are many companies that have been refinanced, and now they simply do not have money to pay rent even in those shopping centers where they already work. Many foreign companies are in the same limbo.

I think that in the coming months, many foreign operators in Russia will either withdraw their franchise agreements and begin to manage the development of the brand on their own, or will change their Russian partners.

Clothing manufacturers Mango and Promod, who developed in the regions together with partners, and now have declared their willingness to work directly in Moscow, have already taken the first path.

The second way was chosen by the cosmetic brand Sephora. Now in Russia the brand is managed by L'Etoile, and from 2010 of the year it will be developed by Ile de Beaute.

In any case, 2009 will be a year of change. How deep they will be, we still cannot predict. How these changes will affect the development of brands is also not yet clear. Some existing projects will disappear - first of all, those who are not strong on their feet, those who do not have a clear concept. Other operators will come instead. And the conditions for joining existing shopping centers (rental rates, deposits) will be milder. This will affect Moscow and St. Petersburg, perhaps to a lesser extent, but in the regions it will affect quite strongly.

Now even those companies that feel confident are trying to understand how they can minimize their own risks, how to make sure that they invest as little money in shopping centers as possible before the start of finishing work.

- Are developers ready for this?

“I can't say that.” But where there is a risk of losing 40-60% of the content of the shopping complex, developers will still have to do this.

In the new shopping centers the situation is slightly different: there will also be movement towards the operators, but not so obvious.

- How do you feel about the system of paying rent with interest on turnover?

- This is a fair scheme of charging money. Of course, it must be accompanied by some kind of mandatory financial minimum. The only difficulty is that it will be impossible to predict the net income of the shopping center in this case. On the one hand, operators also cannot forecast their turnovers next year, whether they will fall by 15%, 20% or more. We can hope that the operators have already survived the 1998 crisis of the year and understand that the recession is temporary, the development does not end there. On the other hand, they are afraid and reinsured - it is better to expect much worse, in the end to get something more or less acceptable.

I assume that consumer preferences will shift towards a cheaper segment and, most likely, we will see changes in the spring. Those who not only sell but also produce will have a clear advantage, because they themselves will be able to regulate the price.

In the future, for the situation to stabilize, we will need about three years. By the end of the 2009 year, we can only understand what kind of bottom we have reached, and then some movement will begin.

- And how to survive the period before we hit the bottom? That the crisis will end is understandable. What to do in the process?

- It is necessary to clearly understand and track changes in turnover. If the collapse is global, then everyone will have a dilemma that Ramenka faced in 1998 when they realized that they could immediately lose about 50% of tenants in Ramstore stores. Then, "Ramenka" all before the end of the year made a discount on rents, reaching 25%. And in fact, all they wanted, they saved. At that time, this measure was sufficient. Probably the same movements will be now.

I repeat, you just need to wait for an understanding of the depth of the crisis in order to realize its impact on the momentum in both Moscow and the regions.

Before the New Year, there is unlikely to be any strong recession. Moreover, in some segments there has been great growth: jewelry, hypermarkets and, surprisingly, movie theaters. If earlier cinema halls were filled on average by 18%, now occupancy rate reaches 80%. People went for a fairy tale.

- What will happen to large Moscow projects: “Kashirka Mall”, “Golden Babylon - Rostokino”, “Abramtsevo”? Will they fill up?

- First of all, the question is whether the construction will continue. Because store owners are ready to open them, but for this they will need to see that a shopping center is being built. Accordingly, the owner must be prepared that he will receive certain financial guarantees from operators either before the start of decoration, or upon reaching a certain percentage of construction.

- By the way, to the question of the relationship between sellers and developers. After the publication of an open letter from the Association of Fashion Industry Enterprises (APRIM), in which enterprises requested a review of rental rates, the reaction of the developers was negative: retailers, in their opinion, use an external reason to shift their personal difficulties onto the shoulders of developers due to inefficient financial development policy and strategy. What do you think about this? How to find mutual understanding in this regard?

- This is a twofold situation. On the one hand, when organizing committees or initiative groups gather, as a rule, the first to include companies with a fuzzy concept that do not have a regular customer audience. That is, those that maneuver. And they will always maneuver. And as soon as something goes wrong, they are the first to start bunching.

On the other hand, what is the truth of the owners of shopping centers? If such a situation suddenly arises that people start buying less in stores, and the attendance of the shopping center does not change, it is hardly worth blaming developers or owners for changing the speed. They did their job - they brought people. And the fact that the store owner cannot now sell the goods that used to go off with a bang is his risk. And this must be understood.

- Many retailers of clothes and shoes say that the format of multifunctional shopping centers has ceased to suit them, they believe that traffic is increasing, and the number of purchases is not. Do you agree with this opinion?

- In some ways, this is correct. Just as, for example, that which is not an anchor of the shopping center is a water park. In the Moscow Capitol, the owners wanted to make a huge water park in the basement, and for several years we tried to dissuade them from this. Fortunately, they did not.

On the other hand, the same cinema does pay a small rental rate, and building it is quite an expensive pleasure. But the loyalty that he brings up in people is hard to overestimate. Maybe not from the first moment, but in the end, all the same, people get used to spend more time in the project. And in the end, it has a beneficial effect on store traffic.

- How do you assess the prospects of the format of the fashion center, without a grocery hypermarket and an entertainment component?

Ambiguous. If we just have a fashion center, then the question immediately arises: why go there?

- Go to the stamps.

- You could say that. Only on a day-to-day basis, brands do not go into crisis. Therefore, the main anchor at this time will be a hypermarket. Whatever happens in life, there are people who do not stop. And today, 71% of Russians' income is spent on retail. Maybe the Russians will reconsider their attitude to that other brand of clothes, but they won't stop walking in shoes or eating. So, most likely, in Moscow, maybe options for such centers are possible, in the regions it is unlikely.

- And the shopping center "Astor Plaza" in Rostov-on-Don can not be an example of a successful project of this kind?

- Still, Rostov-on-Don and Krasnodar are specific cities. Just like St. Petersburg. If in the latter people are more likely to go to a museum or library than to a shopping center, then in southern cities people will go anywhere so that, firstly, they are noticed there, and secondly, to show something that was bought from label. In Siberia, this is not there, brands are approached reasonably and soberly. If you take Kaliningrad, then famous brands were bought in Poland, and now it just became more convenient to buy from yourself. Each region has its own specifics, but in general, the theme of the hypermarket is becoming more and more relevant.

- In September, at the CPM apparel exhibition, when the issue of the number of new retail space was discussed, it was announced that in 2009 Russia would introduce 2 million square meters. m of new retail space. Is this a real forecast?

- He proceeded from what was stated. What in the end will be continued in construction, I am not ready to say now. Probably, at best, 20-25% will be built. Unfortunately, now the project can freeze at any stage, sometimes construction stops when the decoration has already begun.

- What is the difference between ordinary retail space and high-quality - what infrastructure, what kind of service should a high-quality retail space be accompanied?

- I think there are projects that have grown out of the markets that are simply ennobled, and there are projects that were originally created with the desire to do everything right. That there was a concept that causally explains the content - why in the center there appeared certain operators. I think the difference is precisely in this. Of course, shopping centers of the first type delay part of the consumer flow.

- Does it make sense to rebuild them?

- If the owner has the opportunity, why not. These wild shopping malls still provide some kind of comfort. You no longer walk down the street, it’s not so dark, damp, cold, like in street markets, there are fitting rooms. Such projects are the first step for a buyer who does not want to go to the market. They are not so scary to enter. There, for the first time, a person understands what a brand is.

- How do our processes compare with the European ones: do we have any specifics, the same processes, but several years behind, the processes are exactly the same?

- Everything is a little different there. They do not have such rental practices as ours. There, store owners, arriving at the mall, pay money for entry, the so-called key-money, and this is a fairly large amount (it can be equal to the cost of a two-year rental), and then they simply break down this amount for the period that the operator must to work out, and add it to the rent. Therefore, this is a slightly different topic. Rental rates themselves are low there, but what will happen to this key-money is still unclear. In addition, there the development at 100% comes from loans, but we do not. Still, I think that our situation is a little more optimistic than there.

One of the main questions that concerns all sellers is what will happen to commercial real estate: what will happen with rental rates, will the construction of new shopping centers freeze or not, how ...
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