Guiding Lines: Developers and Chains

For many years Russia had no developers specializing in construction of shopping centers across the country under their own brand. Even if there were such companies those were few. But in recent years the Russian market saw the arrival of new retail chain developers. Admittedly, so far those firms have not advanced farther than projects united under a joint brand.

Beginning the early 2000s, the country had, perhaps, only two development firms involved in construction of several shopping centers under the same brand. Both emerged in the regions. Those are Vremya Group, raising Park House complexes, and Torgovy Kvartal (Retail Quarter).

For years both stayed away from the capital. Remarkably, these days we can see companies that remain loyal to the province or even to some particular town; others, having accrued some experience in the capital, are breaking into the province and have already launched their projects across the country; still others have ventured on entering the Moscow market; still others again develop their retail chains solely in the Russian capital.

Among the developers who make up the first category are Vremya, with shopping centers in Samara, Tolyatti, Yekaterinburg, Volgograd and Kazan; DVI Group (Perm, Yekaterinburg, Krasnodar, Izhevsk, etc.), City Center (Yekaterinburg and Krasnodar), as well as the Moscow-based Wakelin Promotion Limited (Zolotoi Vavilon stores), Capital Group, Garant Invest (Galereya Aeroport, Retail Park, etc.).

Moscow-based developers who have expanded their operations beyond the city limits and are now active both in the capital and other Russian regions are Hypercenter (Mosmart malls), IKEA, Ramstore and RosEuroDevelopment.

The group of developers from other cities who have launched their projects in the capital and at the same time continue to raise properties in the province includes Torgovy Kvartal (shopping malls in Krasnoyarsk, Kazan, and several projects in Moscow), Tashir Group (Rio in Moscow, Favorit in Yaroslavl, Kaluga XXI Vek in Kaluga and Paradiz in Tula).

Provincial developers arriving in Moscow, it seems, make up the riskiest group. Moscow-based companies expanding their operations in the regions, on the contrary, are stronger and more experienced. But even they are not always successful. The most stable group is that of developers who stick to their familiar spots, be it Moscow or some other city.

So the chains of shopping centers operating under the common brand, developed by the same developer, are emerging in this country, after all. But a closer look at operations of each of those companies shows that companies involved solely in the development of shopping malls are so few you could count them on the fingers of one hand. That is one of the peculiarities of Russia’s retail sector.

In Moscow, for example, almost all large projects are developed by non-real estate companies, - companies and individuals who had never been involved in property development before. Take, for example, Garant Invest, a large diversified group of companies. Finance & industrial corporation Garant Invest began with launching a chain of grocery stores Moi Magazin and then took up development of shopping malls where Moi Magazin outlets could operate. One of Garant Invest’s projects is a retail park on Varshavskoye Shosse, the first-ever project of such a format in the capital.

(Incidentally, Moscow’s second enormous retail park is planned by an obscure firm Kashirsky Dvor – Severyanin. So far it remains unclear whether that name will become a brand for a single shopping center or a chain of new malls.)

RosEuroDevelopment, it appears, undertakes all kind of projects. The company has announced plans to build offices, warehouse and shopping facilities.

Well-known entrepreneur Sait Gutseriyev, who runs the A.N.D. building corporation, too, plans a chain of shopping centers. A.N.D. is part of BIN Group controlled by Gutseriyev’s brother. BIN Group includes oil firms Russneft and Slavneft, and BIN Bank. Festival Mall launched by the Gutseriyevs brothers on Michurinsky Prospekt is the first store in the future chain of malls of the same name.

All those developments create the impression that shopping projects are undertaken largely by people who are in principle capable of securing building plots in the capital and build something there.

Of course, there is also another category of developers, who inspire more confidence. One of those is the afore-mentioned Capital Group, which began with housing projects, then switched to offices and launched construction of Metromarket stores.

Then, there is Don Stroi, the company that builds shopping and leisure centers at the Shchukinskaya metro station and as part of the Vorobyovy Gory (Sparrow Hills) residential compound. Or, MIAN Development, which is planning a retail and office center on Snezhnaya Street.

In other parts of the country, non-real estate companies, too, have been increasingly active in construction. Not long ago, Moscow-based retailers Perekryostok and Sedmoi Kontinent, and a provincial company KIT Capital announced their plans to expand their chains across the country.

Although, it should be noted that Russian regions have more developers specializing solely in shopping centers. Among those are DVI Group, Torgovy Kvartal and Vremya.

But then, there is nothing bad about retailers taking up property development, for they are more or less versed in retail property operations. Many of them could prove as successful as IKEA or Ramstore. The emergence of chains of shopping malls is another positive sign. The most interesting question is what path Russia’s retail centers will embark on in the future.

It is scarcely possible to forecast that, as international property consultants seek to, trying to describe the situation on the local real estate market in generally accepted terms. The future of Russian property market is as unpredictable as the Russian development business is non-transparent.