Money-Growing: Shopping Between the ‘Dentures’

Novy Arbat (formerly Kalininsky Prospekt), built in 1967 for the 50th anniversary of the October Revolution on an old development area and dubbed rather discourteously “the dental plate” of Moscow, is one of the retailers’ most favored streets in the capital.

Although a huge amount of space in the area’s buildings is occupied by offices, trade is booming here with retail outlets ranging from a large supermarket to small boutiques. Most of the Novy Arbat shops traditionally occupy the ground floors of Soviet-era high-rise buildings. Unlike Tverskaya Street, where shops with planned layouts and new projects are rare, Novy Arbat constantly generates new reconstruction and development projects.

Novy Arbat has about 20,000sqm of retail space with rental rates of $3,200-3,300 per square meter per year – only Tverskaya is more expensive, despite the supply being relatively high for the city center, according to Stiles & Riabokobylko real estate agency.

Major retail centers are situated on the left side of the street, if one is coming from the city center. Those include Valdai Tsentr (11, Novy Arbat) rented by the Dikaya Orkhideya (Wild Orchid) lingerie shop, Kashemir and Sholk (cashmere and silk shop), Adamas, Ecco, Naf Naf; the Novoarbatsky shopping center (all in the same address); Moskvichka (15, Novy Arbat), and Delta Sport (building 17).

The right side of street is far less busy with a narrower sidewalk, and the volume of retail space is much lower. But then, the legendary Dom Knigi book store, the Oktyabr movie theatre long closed for reconstruction, as well as a chain of restaurants and bars are situated here. In addition to Metelitsa, Novy Arbat has the Korona and Admiral casinos. The premises leased to gambling establishments bring landlords more profit than retail areas.

Among the Novy Arbat properties listed above there are virtually no shops with a particularly interesting history – the street is too young for memoirs; at the same time, many have fascinating stories dating to more recent times. Even more so because it is a rare investor who would abstain from making a bid for the right to real estate in Moscow’s second most expensive thoroughfare.

My Dear Muscovite

Moscow’s best-known department store Moskvichka (in English: female Muscovite) occupies part of a high-rise built in the late 1960s. The store occupies a total area of 6,500sqm, while retail space is less than 4,000sqm. The British House department store occupied the building from 1996 to 1999.

In 2003 the company Sindika took over the department store. Sindika manages the major Moscow markets Tushinsky, Troitsky, Pokrovsky, Usachyovsky, as well as the construction materials market Sindika-O in the Strogino district.

Sindika bought a 100 per cent stake in Moskvichka from a group of shareholders including “several Russian entrepreneurs” and the U.S.-based investment fund Russia Partners in a deal brokered by Colliers International. The sum of the deal remained a secret, but market experts estimated that it was in the region of $15-18 million.

The new owner must be very tempted to turn the shop into yet another casino, say real estate experts. However, Moskvichka’s neighbor, the Vesna shopping center, claims it will resist that temptation and even benefit from doing so.

‘Springtime’ Overhaul

Three years ago Metelitsa Casino purchased a part of Vesna’s retail area and opened additional gambling halls there. Meanwhile, the Vesna shopping center still operates on the premises it retained after the deal with Metelitsa. Moreover, the center has undergone reconstruction and even expanded its retail space. In March 2002 Inkom-Nedvizhimost realty launched the reconstruction of Vesna (in English: spring), acting as a co-investor and a management company. In February 2004 Vesna re-opened.

The unique ‘open space’ concept was used when designing the new shopping center, whereby goods are sold in open spaces with no partitions between retail outlets, making the area more convenient both for retailers and cutomers, experts from Inkom say.

After reconstruction Vesna’s total area grew to 14,800sqm – as compared to 12,000sqm before reconstruction – the architectural design of the building has changed entirely, making it one of the most notable buildings on Novy Arbat. Andrei Novikov, owner of one of Moscow’s leading restaurant chains, has since opened a restaurant there.

The list of Vesna’s tenants include such famous brands as Constellation, MaxMara, Marina Rinaldi, Articoli, Aldo Coppola, Charactere, Imperia Detstva, Dikaya Orkhideya, Fabrika Razvlecheny, Piquadro, No One, Vision, and Infiniti Art.

Thirst for Knowledge

Another famous Novy Arbat store – Dom Knigi – is to undergo reconstruction in the near future. The building is occupied by the municipally-owned enterprise United Center Moskovsky Dom Knigi (Moscow House of Books) – Russia’s biggest single-city bookstore chain.

The chain, set up in 1998 under a decree by the Moscow city government, includes 37 book stores and kiosks situated across the city. The largest of them include Dom Knigi na Novom Arbate (House of Books on Novy Arbat), Dom Pedagogicheskoi Knigi (House of Pedagogical Books), Dom Meditsinskoi Knigi (House of Medical Books), Dom Tekhnicheskoi Knigi (House of Technical Books), Mir Detskoi Knigi (World of Children’s Books), Dom Knigi na Sokole (Sokol House of Books), Dom Knigi na Voikovskoi (Voikovskaya House of Books). Many of those outlets have been operating for nearly half a century and have become real Moscow landmarks.

Everyday 70,000 people buy books in Dom Knigi stores. The total volume of sales exceeds 25 million books per year. Trade in stationery accounts for over 25 per cent of the Dom Knigi chain’s goods turnover. In terms of the quantity of goods sold the chain is the largest store in Europe. Over 2,000 people are employed by the Dom Knigi stores.

In spring of this year the city government unveiled its plans to reconstruct the building of Dom Knigi on Novy Arbat. The public town-planning council under the city mayor’s office has approved the plan for reconstruction, which will raise the height of the building by two extra stories, expanding its space by 3,000sqm.

The first, second and third floors will be used for the sale of books, while part of the third and the fourth floor will be occupied by restaurants catering for customers and employees of the store. The new book store will also have an underground parking area.

It is very likely that the project will not be implemented at the expense of the city budget, because the Interros holding has shown an interest in the city’s largest bookstore chain. Interros is a privately-owned investment company with total interests worth $10 billion (Norilsk Nickel - 60 per cent; power engineering concern Siloviye Mashiny (Power Machines) - 70 per cent; Argos agro-industrial complex - 100 per cent; Rosbank - 95 per cent; RUSIA Petroleum - over 25 per cent; O.V.K. Bank Group).

Yuri Roslyak, the head of the city committee for economic policy and city development, was the first to announce that the city government and Interros were negotiating a joint venture on the basis of the Moscow House of Books chain.

It is not the sale of the chain or even part of it that the parties are discussing, Roslyak says; the new company is to transform the MHB stores into a retail and entertainment chain. If the agreement is reached the government will hand the chain over to Interros in exchange for a share in the newly established venture, said Roslyak.

The book market “has strong development potential” but it needs financial injections and marketing support, explains Andrei Bugrov, managing director of Interros. Interros’s idea for the store is a place where customers can “sit down and leaf through a book while sipping a cup of coffee”.

Market participants believe that Interros is interested mainly in the vast properties the stores of the chain occupy, their total space being some 30,000sqm and worth approximately $60 billion, as well as in the opportunities of using the premises for purposes other than selling book.

High-rise Renovation

Retail areas on the ground floors of the Novy Arbat high-rises, and office premises above them, are to undergo reconstruction in the foreseeable future.

Work on the insides of the obsolete Soviet-era buildings [dubbed ‘books’ given their resemblance to open books] will begin with the fourth “book” (counting from the city center), situated at the intersection of the former Kalininsky Prospekt and Novinsky Bulvar [Boulevard]

The landmark building adorned with a giant terrestrial globe was erected as part of a complex of ministerial high-rises in 1967. Several years ago it was transformed into a large business center but the layout of the building and its technical equipment failed to meet the high standards set by the prestigious location. The building is to undergo partial renovation, though its exterior will remain the same – only the window panes will be changed.

After the renovation is complete the first three floors will be occupied by small shops, photographer’s studios, copying outlets, restaurants, cafes, while the useful office space on higher floors will be expanded as a result of a new layout. The electricity, water and heating networks, as well as the air conditioning systems, will be upgraded.

New Projects

Muscovites will soon witness the completion of several new projects on Novy Arbat, which are to be partially occupied by retailers. The largest project – the hotel, business and retail center Lotte & Lotte at the intersection of Novy Arbat and the Garden Ring – was initiated in 1996 by JSC LogoVAZ.

In 1997 LogoVAZ and Lotte Group, including 85 Korean and Japanese firms with a total turnover of over $16 billion, set up L&L, securing the right to develop the site.

Five years were spent on preparing the project and negotiating with the authorities; in 2002 Lotte Group bought LogoVAZ’s stake in L&L and thus assumed full control over the project. The project is still in the construction phase.

The total space of the new complex will amount to 84,000sqm. The first part of the building is to be commissioned in 2005. That will be a 23-storied building, the first eight floors of which will be occupied by retail and entertainment outlets. The other floors will be used as office space. The second part of the project – a top-class hotel of 350-400 rooms – is to be commissioned after 2005.