Moscow shopping centres could be 10% vacant by end of 2016 - JLL

Vacancy rates in Moscow’s shopping centres could reach 10% in 2016 as owners struggle to fill newly completed malls, analysis by JLL has found.

Around 460,000 m2 of new quality retail space is due to become available this year, much of it commissioned before the economic crisis. Latest market trends indicate that the new centres will achieve only 50-60% occupancy, said Tatyana Kluchinskaya, head of retail development JLL for Russia and CIS.

‘Currently, expansion-oriented retailers enjoy a variety of alternative offers in the existing shopping centres and prefer the malls with clear footfall and predictable sales. The empty spaces of newly-established schemes will be rented out gradually during the first year of operation,’ she said.

‘In addition, the significant decline in the future supply will support the overall vacancy rate’s contraction in the market in the long term.’

According to JLL estimates, vacancy rates in the Moscow retail market reached 8.3% at end-2015, increasing by 0.8% in Q4 and 2.3% year-on-year.

At the same time, retail turnover in Russia contracted by 9.3% between January and November, while Moscow’s retail sales were down by 13% over the same period.

JLL said the vacancy rate in Moscow could reach 10% in 2016, close to the all-time peak of 11% recorded in Q2 2010.

‘The reasons for the expected growth of vacancy rate in Moscow shopping centres are the negative forecast for retail market dynamics as well as a significant volume of new projects launched their development before the crisis,’ said Kluchinskaya.