Retail Property Market
Aggravation of the crisis in 2009 revealed the weaknesses of the market and its players as well as the mistakes made in project development during the years of extensive development. The most attractive properties of the highest quality managed to avoid an increase in vacancy rates as well as a decrease in rental prices.
In 2009, the total supply in the retail real estate market has increased by almost 900,000 square meters. As of the end of the year, the total supply amounts to 4,857,000 square meters (GLA — 2,538,000 square meters). In early December, the average vacancy rate in Moscow was approximately 5%. We do not expect it to change drastically until the year’s end.
By the end of Q3 2009, it became possible to speak of stabilization of rental rates in Moscow shopping centers. The situation with rents in properties offered for lease is often the following: The owner intends to reach a certain rent level in 2-3 years and, therefore, negotiates discounted rent for the first and second lease years. Formerly, if the rental rate was determined as a fixed rate plus percentage of turnover, the fixed part used to be very low, whereas today it is increasing. Annual indexation ranges from 3 percent to 7 percent. Moreover, by the end of 2009, owners of successfully operating shopping centers have stopped offering discounts, and it has become possible to say rental rates are likely to increase. Nevertheless, it is noteworthy that there are still many properties on the market that have difficulties with occupancy of their premises and continue to offer considerable discounts to tenants.
