Guiding Lines: High-risk Investment Zone
Before the end of this year developers plan to launch approximately just as many retail properties across the city. As a journalist covering commercial real estate I highly welcome such activity on the part of builders and cannot help calculating fees for future surveys of the booming retail market in St. Petersburg. But as a shopper, I cannot help feeling somewhat confused.
I cannot understand what for I need all that glare -- I don’t have enough time for shopping anyway (given the high demand for articles on booming retail). Brand shops in the galleries of St. Petersburg malls repeat so often that it is hard to figure out whether you are in a lifestyle center or in an outlet. When choosing between cash & carry and a hypermarket, I have to opt for a modest round-the-clock grocery store run by an entrepreneur by the name of Nalbandyan, because it is close to my home and is always open.
Perhaps, I am a bad consumer. But that is how most of my St. Petersburg acquaintances live. They all belong to the so-called middle class, the target audience of most developers. Not long ago Adamant Group – the key player on the St. Petersburg retail property market, with a track record of 12 completed retail developments and more in the offing – held a public opinion survey that yielded surprising results.
It turned out that nearly 70% of St. Petersburg residents do not care as much about the concept of the mall, the much-talked-about tenant mix or the pleasant atmosphere as they do about the store’s proximity to their homes. Perhaps, Muscovites are different, more mobile, more West-oriented. As for us, St. Petersburgers, we bear less resemblance to happy-go-lucky American customers who enjoy spending their weekends under the roof of a gigantic retail and entertainment center.
In summer months a typical St. Petersburger seeks to get out of the big city to his dacha in the countryside. As a result crowds of shoppers besiege all – without exception – retail outlets en route which offer everything necessary for a picnic. As for the rest of the year, it is difficult to lure a local resident out of his home, and shopping is the least desirable pastime. Most St. Petersburgers are not rich.
Property experts grin remembering how far Russia is behind Europe, let alone the U.S. with its culture of consumption, in terms of shopping space per person. I agree. I have many times mentioned that in my articles myself. But, as we all know, there is truth, there are lies and then there are statistics. The latter often has little to do with reality.
I would not say that people do not stand in lines in local shops. Crowds may be seen in shops where people make target buys – in hypermarkets, large DIY and home appliances stores, etc. As to the marble palaces of shopping, on weekdays they are frightfully empty. Especially oppressive are shopping malls in the first weeks after their launch, when half of all shops are still closed, cafes do not work and you cannot help feeling sorry for a handful of bored shop assistants…
It is no fortuity that professional developers attach special importance to promotion of new malls and consumer loyalty. Employees of property management companies master skills of amusement workers. A solemn opening ceremony at large retail complexes worth hundreds of thousands of dollars is followed by a series of parties for city-dwellers, timed to New Year holidays and the Victory Day, St. Valentine’s Day and Halloween, the Day of Knowledge and the Day of Senior Citizens. Mass actions where guests receive numerous presents feature “big guns” – pop stars and famous athletes. Popular radio stations are involved in all sorts of games with the buyers, the city streets are adorned with ads of retail centers, creative commercials are played on television. Over the past twelve months, according to Adamant, the group’s advertising activity grew considerably.
What forces retail giants to apply such efforts? Maybe they are simply unaware how few retail properties there are per one resident in St. Petersburg? But there are projects in St. Petersburg, which clearly lack common sense. Imagine a futuristic scene: you are behind the wheel (without which your destination is hardly possible to reach), driving northwards, along the bustling thoroughfare, Prospekt Engelsa. You are leaving a series of hospitable retail centers behind – from Svetlanovsky to Grand Canyon for they are not where you are heading.
You are leaving the city, take the outer ring road, KAD, which is being phased in gradually and nobody knows when the entire road opens for car traffic, and now you are only a stone’s throw away from the village of Bugry, where you receive a warm welcome at Mega and IKEA, a 50-hectare retail park and a high-end retail and amusement center, reportedly the only such project in Europe.
As to the latter project, it deserves a more detailed description. The developer of the complex measuring a total of 100,000sqm is set to re-create the structure and arcades of the real Coliseum. Shopping galleries will be decorated to resemble the celebrated streets of Rome, Florence and Milan. The project will feature Riviera entertainment zone that will include a Southern seacoast, palm trees and a beach. The question is: who needs that all in the village of Bugry, just outside St. Petersburg?
The answer to the riddle is simple, I think. With vast arable lands formerly owned by Soviet-era collective farms (sovkhoz) available for construction, foreign investors were tempted by the key words “Europe’s fourth largest city”, “exit road”, “outer ring road.” It cannot be ruled out though that the project will be abandoned. Except Mega Mall, which is to be commissioned as early as this winter.
However, St. Petersburg is already doomed to have at least one shopping Babylon. The motorway Pulkovskoye Shosse is our landmark road, indeed! The general idea is the same. The exit road leading southwards to the city’s only airport, with the KAD road under construction nearby, lots of vacant land plots available, once owned by the agricultural cooperative Leto… And all that – against the background of booming retail industry and an acute shortage of building plots. Under these circumstances it is hard to keep your head and remember that residential areas are quite far away and motorists taking Pulkovskoye Shosse are unlikely to ensure sufficient customer flow. As a result, about a dozen of developers gathered on a site measuring approximately 40 hectares…
Once all the projects are completed, the area will have four hypermarkets, two DIY stores and two shopping centers, one of them measuring 100,000sqm. Taken together with another powerful retail zone (two more shopping centers, a cash & carry and a DIY store) already launched a bit farther off from the city along the same road, we will see a picture calling forth many questions.
Meanwhile, more developers are giving in to the magic of statistical reports alleging that rental rates run as high as $2,000 per a square meter per year, with a payback period of three years…