MONEY-GROWING: Down Pyatnitskaya Street

However, according to real estate market experts the street is one of the city’s top centrally-located retail corridors where sales soar. Retail properties in Pyatnitskaya are expensive, rentals are high and tenants rarely move out.

Major businesses – banks, insurance firms, and oil and gas companies – have taken root here, which has also determined its character. Pyatnitskaya has turned into a retail and business zone and in the near future it will become a popular tourist attraction, as well.

Vacancy rates for retail space in Pyatnitskaya Street stood at 2% in early 2005, according to market analysts, a good sign for businesses seeking to launch operations here. At the same time, in terms of popularity Pyatnitskaya can hardly compare to Tverskaya, Novy Arbat and Kuznetsky Most where customer flows are bigger and vacancy rates are even lower.

Pyatnitskaya’s sidewalks are too narrow for a leisurely stroll, especially in early spring when they are still covered in ice. However, for some reason the street has always been popular with customers of the local shops, clubs and cafes. Since the days of yore the street has offered a variety of eateries for lunching and dining.

Companies of more than 100 different retail profiles worthy of the attention of market analysts have outlets along Pyatnitskaya. They include furniture stores, children’s goods, youth-oriented and classic shoe stores, bathhouses, coffee houses, exotic restaurants, telecom shops, etc.

The largest and most famous outlets are the Realist men’s clothes shop at 11, Pyatnitskaya, the Ecco shoe store (17, Pyatnitskaya), the 24-hour restaurant Rock Vegas (29) and Pizza Hut downstairs at the same address. The Vtoroye Dykhanie commission shop at 2, Pyatnitskaya, sells second-hand clothes worn by the rich.

It has to be admitted that there is more than one interior design studio, a couple of art-shops and a carver and gilder’s, selling, among other things, stage props.

Perhaps, the interior design studios target the numerous companies who run their offices in the area while the stage props are meant for the employees and patrons of the Moon Theater.

Also, there are several beauty parlors, including Na Pyatnitskoi, ElitEl, Persona and Versais, not to mention the usual mobile phone shops and travel agencies that have been mushrooming across the city in recent years. Pyatnitskaya has about a dozen of them.

Pyatnitskaya has become a retail corridor catering for a wide range of consumers with all levels of incomes.

“That corridor is extremely multifarious in terms of retail potential which is normal for a street that long,” says Olga Yasko, retail real estate analyst at Colliers International. “It runs from the bank [of the Moscow River] opposite the Kremlin to Valovaya Street on the Garden Ring.”

Two Streets in One

On entering Pyatnitskaya from the direction of the Dobryninskaya metro station a visitor will see Soviet-era shops still bearing signs like Kolbasy (“sausages”) and Glavpromtorg. At the opposite end is the embankment of the canal of the Moscow River, where Baltschug Street ends.

In the central part of the retail corridor stands a magnificent cathedral erected in the baroque style between the years 1762 and 1770. Even a layman will notice that there are two different Pyatnitskaya streets, says Olga Yasko: the section between Baltschug Street and Klimentovsky Pereulok and the other one between Klimentovsky and Valovaya.

Yasko says, that such the clear-cut division of the street is the result of a natural selection of retail formats. The former section – resembling Rozhdestvenka, Maroseika and Solyanka streets – is in many respects contrary to the latter.

A variety of retail outlets – telecom shops, a drug store, several shoe stores, clothes shops, etc. – including low-cost ones, are present in that part of the street. The proximity to the metro station and hence large numbers of passersby enable shop owners to make good profits with a high turnover.

It is that part of the Pyatnitskaya retail corridor that attracts retail brand chains targeting customers with medium incomes. The Ecco, Chester, Mascotte, and Salita shoe stores, the Bustier lingerie shop, and Columbia sportswear run outlets here.

Rentals fluctuate between $1,000 and $1,600 per square meter per year. Sale prices are $4,500 to $8,000 per square meter depending on the condition and quality of the property.

The other section of the street, however, is not as crowded, and is occupied by retail outlets where prices are higher and the target audience is smaller, with beauty parlors, jeweler’s stores, bank offices, etc.

Properties in that section are rented at $600 to $800 per square meter. Sale prices are $3,000 to $4,000 per square meter, but in some cases can reach as high as $4,500. That part of Pyatnitskaya is similar to Ostozhenka, Malaya Bronnaya, or Prechistenka.

Lately Pyatnitskaya has seen a slight reduction in rental costs as the vacancy rate grew, says Mikhail Gets, head of commercial real estate at Blackwood. Antonina Lairova, research analyst at ABN Realty, agrees. In some parts of the street the vacancy rate is as high as 12%, she says.

In February 2004 the average rental rate on Pyatnitskaya stood at $1,000 per square meter, while the average sale price was $5,500, according to a survey by the real estate consulting company Magazin Magazinov. Over the past year those rates have seen no drastic fluctuation, remaining more or less stable.

Most retail outlets in Pyatnitskaya occupy first floor properties; the second floors are rarely used for that purpose, says Olga Yasko

On the whole, Pyatnitskaya’s realty properties and the street itself are not very well adapted for retailing. The appearances of the buildings, their narrow windows and lack of displays, decaying facades, and poor internal layouts are all drawbacks.

On top of it all, there is a shortage of parking spaces. Pyatnitskaya is a one-way street, always heavily congested. “And still, all that doesn’t really tell on the popularity of Pyatniskaya’s shops. Vacated properties are quickly snapped up by new tenants,” Yasko says.

Business Horizons

Pyatnitskaya has a variety of large, medium-size and small offices, occupied by both large and small firms. Branch offices of Sberbank, Narodny Doveritelny Bank (People’s Trust Bank), TsentroKredit, Master-Bank, Alfa Bank, Narodny Kredit (People’s Credit), Pervy OVK, Moskovsky Industrialny Bank (Moscow Industrial Bank), an outlet of the Soyuz media store, and an East Line travel agency are situated here.

The Astronomy Research Institute of the Russian Academy of Sciences is also located on Pyatnitskaya, between Klimentovsky and Valovaya. The employees of all those offices make up a considerable share of the permanent customer audience. Both retail and catering outlets cater for rank-and-file office employees and scholars with modest monthly incomes.

There are no expensive boutiques or restaurants on Pyatnitskaya. In the light of the ongoing redevelopment of small mansions into corporate dwellings in downtown Moscow it is quite likely that the share of office workers among local customers will continue to grow because there are many properties of this kind in the area.

Among recently built properties is the headquarters of Slavneft Oil Company. “Most retail profiles cater for employees of offices situated here,” says Antonina Lairova. In her opinion, restaurants and banks account for the majority of tenants and buyers on Pyatnitskaya.

Considering the size of Pyatnitskaya’s old houses it is barely possible to operate anything larger than a small caf?, a restaurant or a small retail outlet on their premises.

Many cafes and grocery stores have a total space of 20-50 square meters, according to Cushman & Wakefield/Stiles & Riabokobylko’s report; famous shoe and clothes stores, and restaurants occupy 80-150 square meters. A rare exception is the 300sqm office of Alfa Bank.

But then, Pyatnitskaya is one of the few Moscow streets to be spared the reconstruction and construction boom of the past decade. “Many historic buildings have been preserved on Pyatnitskaya, and in these terms the street is, in fact, one of the last [ancient] Moscow streets. This largely determines the parameters of the retail outlets present here,” holds Antonina Lairova.

Pyatnitskaya lies within the office-business area Zamoskvorechye. In line with the plans of Moscow City Hall, the street will also become a part of a tourist and recreation zone – the Golden Ring of Moscow – to be established in the city’s historic center.

The project authorizes the redevelopment of several architectural monuments and even construction of new properties on the sites of older houses, says Mikhail Gets. Private investors will be awarded contracts in the project through tenders. “The situation is changing, and the central location – especially given the growing shortage of building plots – is in itself prestigious,” says Olga Yasko.

But the opportunities for development in the secondary market are higher in the area because office buildings of over 5,000 square meters are prohibited here. This is in line with the town-planning program for the Central Administrative Okrug [district] adopted by a decree of Moscow City Hall. However, there are new projects, as well.

In line with the city government’s decree, work on the designs for pedestrian zones in the vicinity has already begun (Order of the Moscow Government #208-PP “On the program for comprehensive development of the tourist-recreation zone ‘The Golden Ring of Moscow’ and priority measures for the implementation thereof”).

According to the plan these pedestrian zones will be developed in Klimentovsky and Ordynsky lanes, including a site near the entrance to the Tretyakovskaya metro station where a public garden and a tourist information bureau will be situated.

The authorities also plan to lay out a public garden near the Novokuznetskaya metro station. All those parks and zones are included in the list of properties to be developed in the framework of order #208 mentioned above. The plan also envisages new construction and redevelopment of an administrative building at 1-5, Bolshaya Ordynka and of a retail and business center on Sadovnicheskaya Naberezhnaya (embankment) (at 7, 9, 11, and 13, Ulitsa Baltschug).

Several projects are set to be implemented on Pyatnitskaya itself. Those, in particular, include a shopping mall in the square outside the Novokuznetskaya metro station and a rehabilitation center for the disabled at 16, Pyatnitskaya.

The plan also envisages reconstruction of the main house of the Ivanov-Velikolepovs’ manor at 19, Pyatnitskaya, the Yeremeyev manor (6/1), the main town house (10) and another manor at 13/21, the Glazunov manor and the Church of Pope Climent.

Market analysts say that the year 2004 saw no major deals involving retail property in this corridor. Most deals signed were tenancy agreements, while sale of properties accounted for only 15% of the overall number of real estate deals, says Antonina Lairova.

No large shopping malls have been built along Pyatnitskaya over the past three years, Lairova says. The only remarkable project commissioned was the Shesh Besh restaurant that opened about two years ago on the premises of a 3-storied building at 24, Pyatnitskaya with a total space of 1,700sqm.

In 2004 the M.Video home appliances chain closed and sold off all of its retail properties within the Garden Ring. The same fate befell its 1,500sqm shop at 3, Pyatnitskaya, sold for $6.3 million, says Mikhail Gets.

Local Specifics

Public catering outlets account for 49.3% of the overall number of retail profiles operating on Pyatnitskaya, according to Colliers International. The street itself and adjacent areas have long developed into a district of cafes, clubs and restaurants. On Pyatnitskaya alone there are over 30 such outlets.

Pyatnitskaya houses a variety of eateries ranging from fashionable coffee house chains and snack bars, such as the 140sqm Coffee Bean at 5, Pizza Hat (130sqm, at number 29) or Mama Mia (150sqm, at 34) to Soviet-style cafes, offering traditional Soviet-era cuisine at low prices (Russian salad or rassolnik at 30 rubles for a portion).

On Pyatnitskaya there are two or three such outlets situated one after the other in the section located between Klimentovsky and Baltschug. The interior of these Soviet-era cafes has been preserved almost intact, perhaps, since the 1980s. The same tables with iron legs, the same brown tiles on the floor… Despite their obsolete decor these outlets seem to make good profits, with all the tables occupied on weekends.

There are, of course, more exotic and fashionable joints, such as the Internet caf? Cafemax, oriental cuisine restaurant Tanuki, Plyazh-Caf? with a chaise-longue installed at the entrance, Syusi Pusi (with a twin outlet situated on Stary Arbat), and Rock-Vegas on the second floor at number 29.

The club Trety Put (Third Way) occupies a communal apartment at 4, Pyatnitskaya, near a small church. The club is a somber and somewhat weird place with run-down decor and beer-stained tables. Nonetheless, guests are charged 150 rubles at the entrance.

The club has its regular patrons. It is a frequent venue for concerts of little-known rock bands from different parts of Russia and has a discotheques organized in the style of the late 1980s. Club owner Boris Raskolnikov heads a band of his own, named FBR, or Fantastic Boris Raskolnkov. (FBR is the Russian acronym for the U.S. Federal Bureau of Investigation).

The Backstreets of Pyatnitskaya

In the first quarter of 2005 a new 40,000sqm Arkadia shopping mall opened in Sredny Ovchinnikovsky Pereulok near Pyatnitskaya. Arkadia is a spacious mall with retail areas of nearly 18,000sqm. Such projects are rare in the narrow lanes of downtown Moscow.

The first and the second floors of the mall are entirely taken up by retail traders while the basement floor houses a supermarket and a 220-space parking area, according to Mikhail Gets.

The project was overseen and developed by Tobtim International Trade Centres. Earlier the same company built the 20,000sqm Tobtim office and retail center in Sredny Ovchinnikovsky Pereulok. Arkadia is a retail and entertainment center, as presented on the commercial real estate Web site www.arendator.ru.

Rental rates at Arkadia range from $500 to $1,600 per square meter per year. The mall includes beauty parlors, a jeweler’s, a dry cleaner’s and laundry shop, a bank office, travel agencies and several restaurants. One of the anchor tenants is a 6-screen movie theater – part of the Pyat Zvyozd chain. The cinema was one of the first outlets to open at Arkadia, earlier than most of the shops.

Pyatnitskaya has every chance of becoming one of the best and most expensive retail streets in Moscow, provided more modern developments equipped with underground parking areas start appearing there.