Retail Rents in Russia are Expected to Grow 30 per cent in 2007

An increase of around 7%, up to $2000 per square meter, is expected in Moscow’s average quality shopping center rental rates, while annual rental rates in the country’s regions are likely to increase by as much as 30% by the end of this year, Cushman & Wakefield reported .

Despite the active development of shopping centers and street retail, supply of quality shopping centers in Russia is still at low levels compared with markets such as the United Kingdom or France, however the best Moscow and regional shopping centers are of a comparable quality to the best European examples,” says Konstantin Sakharov, Head of Retail.

He added that the market was somewhat constrained by not having a wide enough choice of retailers to fill the growing supply of shopping centers.

The regions are quite clearly an area of focus for both developers and investors. Sakharov said developers are expanding into new submarkets focusing on smaller cities with populations of 500,000 or less as these markets are extremely short of quality stock, providing a wealth of opportunity for developers and the investment community.

The capital’s position as the spiritual home of Russian retail was confirmed by Denis Sokolov, Deputy Head of Research. “Muscovites are clearly spending more than they officially earn with 75% of consumer spending represented by retail and services, although the Russian consumer market is still cash based,” he said.

This level of consumer appetite is fuelling demand of quality shopping centers, currently growing at a rate of around 20% a year. Sokolov predicts that the best shopping centers will become more expensive in rental rates while more medium class shopping centers will be built in the suburbs.

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