The most significant drops in vacancy in Q1 2017 compared with the end of 2016 were at Kuznetsky Most (from 11% to 4%) and Nikolskaya Street (from 20% to 7%). Kuznetsky Most saw store openings in Q1 by such Russian and international operators as the Moscow Jewellery Factory, Ketch up, Kiko Milano, Massimo Dutti. Bon App Café opened on Nikolskaya Street. Meanwhile, Arbat remains the most occupied pedestrian street, where vacancy is only 1%. Food service operators, cell phone shops, and jewelry stores are the most frequent types of vendors to occupy space on pedestrian streets.
In general, amid increased demand for street retail premises, vacancy in the shopping streets of Moscow in fell from 9% to 7.8% in Q1. At the same time, banks continue to reduce their floor space due to the transfer of services online. For example, over the past few months, Sberbank has scaled back several of its large offices on the Garden Ring.
Lease rates on key trade corridors remained unchanged. Accordingly, rates on Tverskaya Street are 60,000-130,000 roubles/m2/year, Petrovka – 60,000-154,000 roubles/m2/year, Kuznetsky Most – 65,000-204,000 roubles/m2/year, Arbat – 66,000-120,000 roubles/m2/year, Novy Arbat – 55,000-122,000 roubles/m2/year, Stoleshnikov Lane – 120,000-280,000 roubles/m2/year.
Food service operators (39%), other service operators (12%), and grocery stores (8%) became especially active market players in terms of occupying leased space in the Central Administrative District. Of the 40 food service operators in the area, the most popular formats are restaurants (30%), cafes (28%) and coffee houses (15%). It should be noted that there is growing demand among food service operators for premises of up to 200 m2, and not only highly visible ones, but also those in alleys and courtyards, where premises with lower lease rates are offered. When selecting premises for lease, owners of cafes and restaurants are often not attached to high-visibility and/or high-traffic locations, and they attract customers with one-of-a-kind and individual concepts, and advertise online while saving on rent.
Also, new shop formats with food products for rapid cooking are appearing. For example, note the emergence of the new chain of deli shops Vsyo Gotovo (“Everything is Ready”). At the same time, the European format of grocery stores is gaining popularity – for example, Allfoods, which embodies traditional European retail displays and shop windows, is expanding.
Ekaterina Podlesnykh, head of Street Retail, Colliers International Russia: “We expect vacancy to fall further and lease rates to gradually recover in 2017. Food service operators, grocery chains and household goods stores will continue to drive new demand. The upcoming summer renovation of streets in Moscow will have a significant impact on street retail. Initially, it will cause temporary inconveniences for tenants, pedestrians and motorists, but then it will lead to increased demand among tenants who focus on foot traffic. Accordingly, a change in the profiles of tenants on the Garden Ring is expected with the emergence of new chain and individual food service operators and impulse demand shops focused on pedestrian flow.”