Elena Stryukova: ‘If there are no strong shocks, we will approach the traffic of 2019’
According to the expert, shopping centres in Kazan in the first half of the year were visited by 17% more buyers than a year earlier
In the shopping centers of Kazan, 35 new stores were opened in the first half of the year, including the restart of temporarily closed ones. Moreover, the replacement of withdrawn brands is mainly due to Russian and the remaining foreign brands, and not Turkish, Indian and others, said Elena Stryukova, the plenipotentiary representative of the Russian Guild of Managers and Developers (RGUD) in Tatarstan. The traffic in Tatarstan shopping centres, according to her, may reach the indicators of the reference 2019 year by the end of the year. Other experts also observe increased activity in the real estate market of Kazan. Read the details in the material of Realnoe Vremya.
Change of signs or owners
According to analysts, after the withdrawal of foreign brands, Russian retailers have increased sales by almost a quarter. Domestic companies are actively expanding their presence in the regions. Almost all temporarily suspended shops are now working again, having changed signs or owners, Kazan real estate market experts confirm this trend.
According to her estimate, 35 new stores were opened in Kazan shopping centers in the first half of the year, including the restart of temporarily closed ones. So, the vacancy rate in the second quarter of 2023 decreased by 3%, and with such dynamics, the vacancy rate may decrease by another 5-7% by the end of the year. “Despite the experts' expectations, the replacement of the withdrawn brands is mostly not at the expense of new Turkish, Indian, and other brands, but at the expense of existing Russian (Gloria Jeans, Kari, Lime and others) and remaining foreign brands (New Yorker, Lichi)," the expert said.
Traffic to the level of 2019
The vacant sites in the shopping centre are actively occupied by Russian companies, clothing stores of Sportmaster group of companies, Gloria Jeans, Melon Fashion Group, Familia, Kari and others have become the leaders of sales.
The number of visitors to shopping centres has also increased significantly: “The traffic in shopping centres in Tatarstan in the first half of the year increased by 17% compared to the same period in 2022. If there are no strong shocks by the end of the year, then there is a chance to approach the attendance of the reference 2019 by the end of the year," Elena Stryukova believes.
At the same time, according to her, the vacancy rate in the retail real estate segment of Kazan is quite high — 18% versus 0,9% warehouse and 2,2% office ones.
“The closer to autumn, the higher the business activity in the real estate market, but this does not mean an increase in rental rates. Where the percentage of vacant areas is small, the price may rise there, and where vacant areas are large, nothing will change," Rustem Safin, the head of Quartet real estate centre, is convinced. “Therefore, we cannot say that rates will rise, there will simply be more transactions on renting and purchase.
After analysing the retail real estate market in Kazan, experts told Realnoe Vremya that the volume of space has decreased, but not much.
Trend — purchase of commercial real estate
Experts of the Kazan real estate market noted another new trend — some investors have switched from residential to commercial real estate. In their opinion, this is happening for quite objective reasons. If earlier it was possible to invest in housing construction at the excavation stage and in a couple of years to sell an apartment before renting a house much more expensively, now this opportunity is coming to naught.
“There are some people who either earn nothing, or even lose. I've recently had a transaction — a person sold to zero. He did not earn anything for a year, because he chose a project that in reality could not bring any profitability, but, in his opinion and in the opinion of developers, there could be income. In fact, there was no profit, and the person trusted the sales manager of the developer," Rustem Safin gave an example.
Apartments have ceased to bring investment income in the short term, according to industry representatives. Therefore, investors want to invest in commercial space, as they expect to recoup investments faster than in residential real estate.
“We are not talking about the category of professional investors who already have 2 or 3 thousand square metres, who have been in this market for a long time. We are talking about a new wave of investors who are moving from residential to commercial real estate. For their finances not to be eaten up by inflation, people refocused on buying offices and warehouses. Investors are interested in the areas in the price range from 10 million to 25 million rubles. They buy them or rent them," the source added.
The problem is that not the entire sector of commercial facilities in Kazan is liquid, he noted. People with money want to invest in a ready-made rental business, but there are not so many quality offers.
According to him, now the payback of commercial real estate is 10-11 years, although 3-4 years ago it was possible to talk about 8 years.
“There is a shortage of highly liquid areas. If it is a basement or an attic, then the tenant can move out in six months due to poor conditions: it's cold or the roof leaks. It is necessary to invest in repairs here, and it is unknown when you will find a new tenant," Akhmerov explained. “One of the developers announced a 'cool' business centre, so there are rates at the level of 2-2,5 thousand per square metre.”
Nevertheless, with the withdrawal of foreign companies, a new window of opportunity has opened even for little-known young Russian brands. If not so long ago many of these retailers were selling clothes, shoes, and accessories through social networks, now they are opening their own stores in shopping centres.
Interest in new generation real estate investments has grown
According to the expert, the Tatarstan capital attracts the attention of both Russian companies from other regions and foreign ones: “Many major players in the field of commercial real estate are interested in developing and investing in Kazan, especially in the sectors of office and industrial premises, retail trade.”
Anna Abramova also noted that there are a lot of transactions being concluded in the commercial real estate market, and some of them may be significant investment projects, the development of new facilities or the sale of existing real estate assets:
“Our company has implemented large commercial facilities, such as a production building (with an area of more than 6000 square metres), an office centre building. Investors purchased them for the purpose of subsequent redevelopment. Future upgrades and modernisation of these facilities will significantly increase their cost, which in turn will lead to attractiveness for potential tenants. Besdies, we have implemented a street retail space in the city centre.”
“The shopping centre is no longer just a place for shopping”
Commenting on the situation on the Kazan retail real estate market, UD Group noted that the rules of existence in the new reality have now become clearer, so retail is coming to life and trying to strengthen its position: “There is a reduction in vacant space in Kazan shopping centres thanks to Russian fashion brands. They are not only increasing their presence, but also expanding the formats of stores. Melon Fashion Group stores (Zarina, befree, Love Republic and Sela) are actively developing, occupying the areas of withdrawn brands. We observe that household goods are appearing in the assortment of different stores, as well as men's clothing lines are expanding.”
According to the company's experts, the average vacancy rate in Russia as of July 2023 was estimated at 14-16%. At the same time, this indicator is higher in Moscow. Several categories of shopping centres are clearly distinguished in the Kazan market: in modern shopping centres, which turned out to be the least dependent on the presence and departure of international retailers, the vacancy rate is no more than 2-3%. Among these — KazanMall, GorkiPark, Yuzhny, Park House. In other shopping centres of Kazan with an average area of 15-40 thousand square meres, the share of non-functioning retail space (where there is no existing tenant who would generate traffic) can reach 15% (the reasons for this are different, including the obsolescence of the facility itself, an unbalanced pool of tenants). The largest share of such non-functioning retail space in MEGA shopping centre — about 40%, analysts added.
“The goals to visit shopping centres are changing. According to the results of surveys of visitors, we see that shopping centres are no longer just a place for shopping. Visitors choose several reasons to go to a shopping centre. Increasingly, visits to cafes and restaurants, meetings with friends are noted as goals. Now there is a trend towards multifunctional spaces with an emphasis on entertainment functions and gastronomic zones. Requests for placement in facilities (or for the selection of premises) for children's play spaces and quests have become more frequent, the company's press service said.
Against the background of the growth of online commerce, according to experts, the activity of networks in the development of omnichannellity, interaction with the client not only offline, but also using online opportunities is noticeable. This synergy increases efficiency and customer loyalty. With regard to offline, which is increasingly becoming a market for impressions, changes in the design of retail spaces are important, and customisation, maximum understanding of the client and the formation of personal offers are important for online interaction. Retailers are forced to change along with a changing audience of consumers. The owners of shopping centres are looking towards progressive tenants with an interesting conceptual format.
“The demand for street retail depends not only on the location”
“Street retail still feels quite confident. The demand and the rate for liquid objects with heavy pedestrian traffic in good locations are steadily growing. There are no vacant premises in the facilities that are under our management, and the waiting lists continue to be replenished," UD Group reported. “This situation is not only in central locations, for example, Art City residential complex, but also in more remote projects (Tsarevo Village residential complex). The demand for street retail depends not only on the location, but also on the correct product concept.
On average, the rental rate, according to experts, has increased by 20% since the beginning of the year. The highest rental rate is traditionally in Vakhitovsky, Novo-Savinovsky, and Sovetsky districts. One of the most expensive streets to rent in Kazan: Yamashev Prospekt, Zorge and Dekabristov Streets.
“It is also worth noting that major international brands are showing interest in street retail premises, but remain within shopping centres due to the shortage of vacant space and the underdevelopment of the clothing segment trade corridors in Kazan. We are seeing an increased interest on the part of tenants in catering facilities, which is associated with the trend of designing so-called 'gastronomic corridors' in residential complexes," the company added.
According to her, the demand and selling value of street retail facilities are also growing. Since the beginning of the year, the cost has increased in proportion to the rental rate by 20%.