4 April 2016

Shopping centers in Russia: what will be in demand in the future?

The construction of shopping centers in today’s Russia is an unrewarding business, stated First Vice President of TPS Real Estate Alexei Chinaliev at the Magnetic Development conference devoted to the current dynamics and outlook of retail property in Russia.
Shopping centers in
Russia: what will be in demand in the future?

Mr. Chinaliev mentioned four main reasons why the retail development is unrewarding nowadays. “Above all, this is the changing ratio of the project revenues to construction costs and retailers curbing their expansion plans,” he noted. “Furthermore potential tenants, choosing between the low rent and project quality, opt for the former. These factors coupled with general economic volatility result in lower accuracy of tenant turnover forecasting.”

Developers get back to the active development of shopping centers, when the retail turnover growth rates increase to the level of 12-15% a year, the cost of projects goes down, and the cost of retail property management is optimized.

Mr. Chinaliev also dwelled on what kind of shopping centers will be in demand in the years to come. In his opinion, the success formula for a retail project will be good knowledge of the target audience and consumer. “For a shopping center to be more than just a shopping floor, the developer needs to focus on a thorough investigation of consumer behavior and fine-tuning of the tenant mix, proper decoration of public spaces and the shaping of social functions,” he said.