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Traffic in Russian malls is declining and revenue is declining

Traffic in Russian malls is declining and revenue is declining

And the Russian media estimates that the situation is unlikely to be saved by replacing these brands with chains of “friendly countries” and domestic products. The first is afraid to risk the development of business in Russia, and the possibilities of domestic producers are small. Local companies will have to focus on development, and this will take two or three years.

According to Knight Frank, a significant number of brands that have ceased operations in Russia are apparel companies (21 percent), but also car dealers (13 percent) and consumer goods producers (10 percent).

So far, only six entities have finally announced their withdrawal from the domestic market, but local experts believe that similar decisions may also be taken by others due to the fact that the geopolitical situation is very unstable and the pressure on international brands to act responsibly is very strong.

Mikhail Vasiliev, head of research and consulting at Focus, citing the Kommersant daily, believes that the problem will be resolved within six months. Either chains that have shut down will decide on their own that they will permanently close and leave their stores, or they will require clear advertisements from malls experiencing a significant drop in traffic. – If all the brands that announced a temporary job freeze left the market, shopping centers would lose between 30 and 70 percent. Of its revenue – believes Marina Małahatko of the consulting and investment firm CBRE.

The actions of the owners of Western brands so far have led to serious problems in many shopping centers, including in Moscow and St. Petersburg, where these companies rent from 15 to 25 percent. surface. The turnout is declining from week to week. In Moscow, the number of visitors fell by 9 percent in the last week of March. On an annual basis, and in St. Petersburg increased by 17 per cent.

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Małahatko reported that at the moment, the companies that have suspended their activities are still paying rents, not vacancies. But Knight Frank expects an increase in mall vacancies in the second and third quarters. Renters could lose, according to his estimates, between 30 and 35 percent. commercial space.

The owners of the centers are trying to replace those who decided to exit the market with companies from India, China, Turkey and South Korea. However, experts estimate that entering the Russian market is a problem for new global brands, since it is difficult to draw up clear and transparent development plans for several years. It is difficult to predict the development of events from week to week, let alone in the long term.

The most viable option is to bridge the gap with home businesses. But Knight Frank estimates that it will take two to three years to expand it. Perhaps some international brands will return through franchisees or organize logistics networks in partner countries of Russia. For now, however, operators have to plan without them.

The massive withdrawal of foreign brands from the Russian market forced the developers of shopping centers to postpone their opening. Not a single facility was opened in Moscow in the first quarter. Colliers International does not rule out that some of the existing malls may be reformatted, but these will be somewhat isolated cases. On the other hand, the construction of new facilities will be limited, also due to higher loan costs and higher prices for building and finishing materials.

Monica Borkoska

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