Money-growing: Any Mall Begins in the Car Park

Modern shopping centers are mixed-use developments featuring hypermarkets, small boutiques and leisure zones comprising multiplex theaters and catering establishments. Some malls provide sports facilities, ice-rinks (Gorod, Mega) and even water parks (XL). Such projects are family-oriented, catering both to children and adults.

Major shopping centers operate beyond the Moscow outer ring road, MKAD, or on the outskirts of the city, where it is easier to secure building plots. That is why most Muscovites head there by car. Centrally located projects, such as GUM, TsUM, Gostiny Dvor, Novinsky Passazh and others target higher-income shoppers who are not used to traveling by metro.

Conceptual Solutions

Parking is one of the key components of a shopping center. A shopper must be offered space where he may leave his car safely and rest assured that it would not be towed away by police, damaged by other cars or stolen.

Yelena Lapshina, analyst at the commercial real estate and development department of the property services company Miel Nedvizhimost, notes that buyers usually ignore shopping centers that provide no convenient parking areas. Even if a buyer is satisfied with everything else about the mall, he or she is unlikely to wait until a car-space is vacated. Attendance rates in shopping centers unable to offer parking facilities to their buyers is approximately 30% lower, she adds.

Retail real estate consultants place special emphasis on components which predetermine success of shopping centers. “A conceptual retail center is impossible without an underground parking area or an open-air car park,” says Alexandra Kadchenko, deputy head of research and analysis at Praedium. “Such are the requirements laid down in the building rules and regulations and those set by visitors.”

Oleg Voitsekhovsky, managing director of the Russian Council of Shopping Centers, adds that according to the guidelines adopted by the International Council of Shopping Centers sufficient parking capacity is one of the four main criteria retail projects are to meet, along with requirements as to single assets management, concept and size.

Sergei Lobkaryov, head of commercial real estate at MIAN realty, says that while the project is still on the drawing board the developer needs to pay special attention to placement of entry and exit gates, car-spaces and to organization of car flow within the parking area. “Faulty design may have a negative impact on attendance, and hence on the entire project,” Oleg Voitsekhovsky adds.

Underground and Open-Air

Parking lots in shopping centers and retail and leisure complexes fall into two categories – underground facilities (heated) and open-air (ground level) car parks. Ramstore shopping center on Sheremetievskaya Street offers a large open-air parking lot; shoppers experience no problems with parking at Mosmart on Yaroslavskoye Shosse and Auchan on Ostashkovskoye Shosse.

“The largest ground level parking areas are provided by shopping complexes Mega in Khimki and Tyoply Stan,” says Yulia Dalnova, head of retail real estate at Knight Frank. “Those projects provide 8,000 and 10,000 car-spaces respectively.” The hypermarket Gorod on Ryazansky Prospekt provides heated underground facilities; warm car-spaces are available in Atrium, Smolensky Passazh on Garden Ring and in Yevropeisky mall near Kievsky train station.

But the choice of a certain parking scheme by developers is not fortuitous. It depends on location of the project, Alexandra Kadchenko says. For example, shopping centers operating along MKAD where land is comparatively cheaper provide open-air car parks as building an underground parking facility there is simply not feasible. The development of an open-air parking in Mega has cost much lower than construction of an underground facility would. Developers of centrally located projects, on the contrary, are forced to undertake costly construction of underground parking areas, instead of downsizing retail zones in order to vacate space for a ground-level car park.

Anatoly Vassiliev, development director at Torgovy Kvartal, says that examples of underground parking areas may be found in Atrium and Mega Tyoply Stan. Vassiliev believes that without a parking area Mega would have failed to operate successfully, while Atrium, even if it had provided no car-spaces at all would have been quite successful. Yalin Gur, managing director at Capital Partners, agrees that for a project with a limited building plot an underground parking facility is the optimal planning solution and the most convenient option for shoppers.

Although, Andrei Zhamkin, senior commercial real estate analyst at Blackwood, says that an underground parking area is not a compulsory requirement, being "just one of amenities within a retail center, designed for convenience of buyers."

Organization and operation of an underground parking is fraught with additional problems. “Organizing car flows requires installing additional signs and shields and hiring traffic-controllers,” says Maxim Gasiyev, head of retail real estate at Colliers International. The main requirements organization of transport flows within a parking area is to meet are as follows, according to Gasiyev: motorists must be able to find an entry gate easily, as well as entries to other levels; besides, shoppers must be able to find their cars easily when leaving the mall.

Underground parking facilities should be equipped with signs leading the way to the entrance of the mall. “That may be achieved with numerical, alphabetical or color signs; what is important is that those should be readable and visually prominent,” Gasiyev adds. The analyst cites underground parking facilities provided by Ramstore malls as a good example, as those are equipped with electronic navigation systems enabling motorists to find a vacant space quickly.

The problem of many underground and multi-level parking areas is faulty column grid spacing, according to Knight Frank’s analysts. Quite often where three slots are marked there is barely enough room for a motorist to get out of his car or open a trunk. Oleg Voitsekhovsky notes that the parking facility provided by Kaluzhsky Mall is poorly designed, with plenty of steep ascents and narrow passages. The facility is hardly safe for large vehicles. “I think that inexperienced drivers who use that parking once will not go to Kaluzhsky again,” he notes.

Yulia Dalnova believes that the best solution is the placement of car-spaces on the same level as entrances to the mall, en route from the exit from the main road to the mall entrance. An example of a well-organized ground-level parking is the facility provided by Mega Khimki, Maxim Gasiyev says. Problem spots where several car flows intersect are organized as roundabouts, which ease congestion; traffic controllers are always there to help. Each intersection is equipped with signs. The area is divided into segments marked with letter number combinations facilitating the search for a parked car.

But even experienced retailers sometimes make mistakes, Oleg Voitsekhovsky says. “If you try to park your car near Mega Tyoply Stan between 14-00 and 16-00 on Saturday or leave the parking area at that time in the direction of Kaluzhskoye Shosse you risk losing at least 20 minutes in the jam,” he says.

Follow the Rules or Keep Your Fingers Crossed

Parking capacity requirements for retail projects in effect in Russia are not compulsory and mall developers are free to decide for themselves whether to follow their provisions or not, Andrei Zhamkin says. In line with the adopted rules the number of parking spaces in a retail center depends on the total area of the project and its location, as well as the type of the project.

Alexandra Kadchenko has reported that in accordance with the decree “On introduction of amendments and alterations to the decree of the Moscow government No 49 of Jan 25 2000” the number of parking spaces in shopping malls is determined depending on whether the project is located within the Garden Ring (i.e. centrally located), or beyond it. As to shopping centers operating outside the Garden Ring, those are to provide 1 slot per 40-50sqm. Stores located within the Garden Ring must offer 10 to 20% more spaces, or 1 slot per 70-80sqm.

Natalia Oreshina, senior director and head of retail real estate at Cushman & Wakefield Stiles & Riabokobylko, says that to succeed the project needs at least 3 to 5 car-spaces per 100sqm of retail space. It makes no difference whether slots are situated outdoors or underground. “Where the complex concerned is a mixed-use providing retail and office space the number of car-spaces is calculated separately for offices and shops,” she says.

“By way of comparison, U.S. mall developers proceed from GLA (gross leasable area) and parking index,” says Anatoly Vassiliev. “For example, a shopping center measuring less than 40,000sqm must have a parking capacity of up to 1,600 vehicles. The larger is the retail area the higher is the parking index.” Irina Kirsanova, head of marketing and consulting at Astera Oncor, explains that the parking index is the number of parking slots per 93sqm (1,000sq ft) of GLA. In Russia, the index is measured in slots per square meters. The index depends on the area and format of the project. The lower is the project’s parking capacity the higher are losses. “Availability of a parking area with a capacity meeting international standards enhances the image of the project and boosts its appeal for retail chain operators,” she notes.

Anatoly Vassiliev says that the required capacity may be calculated more precisely on the basis of several criteria. For example, for a grocery hypermarket it is possible to increase the number of slots to 1 space per 10-15 sqm of retail space; for shopping centers measuring less than 1,000sqm one slot per 25-40sqm is enough. Car parking capacity for food courts is calculated proceeding from the number of dining spaces, one space per 6-12 seats. “If parking capacity is low and visitors regularly fail to find a vacant space, that tells on their loyalty,” he says.

Yelena Lapshina notes that attendance rates also have to be taken into account. For example, the mall should provide at least 500 spaces per 10,000 visitors. “Such ratio makes it possible to avoid jams in parking areas,” she says. Alexandra Kadchenko says that in reality malls often fall short of those standards. Mega in Tyoply Stan measuring a total of 230,000sqm has the highest car capacity in town, with 7,000 slots in the open-air car park and 2,400 underground parking spaces. The 30,000-square-meter Waymart has 500 open-air car-spaces.

The shortage of parking spaces is especially felt in centrally located shopping centers. Galereya Aktyor (Actor Gallery) commercial center, measuring a total of 12,000sqm has only 25 underground car-spaces, available only to office workers. The shopping center Druzhba, 16,700sqm, has 40 underground slots and 50 ground-level spaces; as a result, shoppers park their cars chaotically in front of the building creating hindrances for other motorists. The 6,700-square-meter Nautilus provides only 35 ground-level car-spaces.

“If a shopping center claims the status of a regional or a super-regional project and houses a hypermarket as an anchor, its parking index needs to be increased,” Oleg Voitsekhovsky says. “Besides, it is important to take into account the time the buyer spends in the mall, its remoteness from residential areas and public transport routes.”

Yulia Dalnova says that as far as smaller shopping centers are concerned, observing parking capacity requirement is not always critical for them. “For example, Metromarket stores are viewed as professional shopping centers, but those complexes provide no organized parking spaces,” she says.

Two-faced Economy

Svetlana Batalova, head of consulting at the property services company Praedium, believes that a shopping center that provides no parking spaces cannot be rated as a prime property and charge high rents. Shops that have no parking report lower goods turnover and lose profits. Of course, construction of a parking lot pushes up the cost of the entire project. But developers agree to incur expenses opting for a more feasible variant of car park construction.

Natalia Oreshina notes that the cost of the car park is calculated individually for each project as the amount of spending required depends largely on volume of work, technical characteristics of ground, foundation and depth of the facility. “At any rate ground-level parking facilities are many times cheaper than underground spaces,” she says.

Yulia Dalnova puts the cost of ground-level parking at $50 to $70 per 1sqm. Construction of an underground parking costs $550 to $600 per 1sqm, according to Blackwood. Oleg Voitsekhovsky says that construction of one underground level is 25% more expensive. Where the soil is complicated and closure is required that difference may reach 40%.

“If what is meant by a ground-level parking is a paved area in front of the shopping center, the cost of building an underground parking facility is on average 10 times higher,” Gasiyev says. “This is due to larger amount of spending needed to build 1sqm of underground space and a larger space required for one car-space, in line with the building standards.”

“But if the construction of an underground car park pushes up the cost of the project more than by 50%, this may tell negatively on the appeal of the project,” Yalin Gur warns. Quite often developers abandon the plan to build an underground parking and lets that space instead, Anatoly Vassiliev says.

Oleg Voitsekhovsky says that building and running a parking area is fraught with huge expense, which in the long run may push up rental charges which may also include the cost of cleaning, servicing and guarding the car park.

Yalin Gur believes that higher rents in shopping malls providing car spaces are justified, while retail centers that have no parking lots are less appealing to buyers and, accordingly, to retailers; as a result, rents drop, Gasiyev adds. “Anchor tenants may simply withdraw from the project only because of that, as their buyers are the ones who generate the highest demand for parking spaces,” Yulia Dalnova says.

“Sometimes the situation is the opposite and some malls have more parking spots than necessary,” says Anatoly Vassiliev. “Then the mall operator can derive extra income from that miscalculation by letting spaces, for example, to neighboring office tenants and thus offset maintenance costs.”

The Price of Comfort

Natalia Oreshina says that it is the mall operator who decides whether to charge visitors for parking or not. As a rule, parking spaces in centrally located malls are never free of charge whereas shopping complexes operating on the outskirts of the city and beyond MKAD provide free car-spaces, as operators seek to boost attendance rates.

“Charging buyers for spaces makes sense where parking spaces are claimed by residents of neighboring apartment houses or employees from offices situated nearby and the mall fails to provide enough spaces for visitors,” Yulia Dalnova says. But Khramov, development director at 4Rent Estate, says that availability of a paid parking lot tells on attendance. “This is especially true for shopping centers which target medium income buyers who drive cars worth $15,000 to $18,000,” he notes.

Colliers International reports that attendance rates at shopping centers which charge their buyers for parking spaces drops only slightly, hence, the measure does not tell on returns. Yelena Lapshina says that upmarket shopping centers catering to well-off shoppers set a priority on parking area safety. Customers, too, are ready to pay for the service. “At successful projects such as Atrium and Okhotny Ryad parking charges do not have considerable impact on the economy,” Oleg Voitsekhovsky agrees. “Operators charge visitors primarily with a view to bar entrance to those who simply seek to park their cars safely in downtown, without intending to visit the property.”

Charges vary across the city. Car-spaces in Pyataya Avenu (Fifth Avenue) mall are free for buyers during the first three hours, whereupon they are charged 30 rubles per hours. Parking spaces near GUM cost 100 rubles per hour, in Atrium and Festival 50 rubles. Slots in Smolensky Passazh cost 100 rubles per hour but if a visitor buys more than 500 rubles worth of goods in Stockman he or she is not charged for the first hour. Nautilus charges 60 rubles per hour.

“Paid parking tells negatively on attendance and time spent by visitors inside the mall,” Irina Kirsanova says. “As a rule, visitors are charged on hourly basis. As a result, they spend less time in the shopping center being aware that they will be charged for every extra hour of their stay. Even if the charges are not very high that weighs always on the buyer’s mind.”

Oleg Voitsekhovsky says that the question whether to charge visitors for car-spaces or not needs to be addressed as early as during the marking analysis of the building plot designated for mall development. “That issue is of psychological rather than economic nature,” he stresses.