Money Growing: It's Life-style Time

The life-style format of shopping centers new to the Russian market, seems to be something non conventional, refined and expensive. Especially if you compare it to all typical shopping centers constructed in the last five years in Russia.

In its birth country, the USA, life-style complexes are also considered expensive shops in comparison to usual malls. According to international experts, life-style centers are intended for the upper middle class. However they are open to everybody.

Experts started talking about new formats in 2006. Now is the right time to discuss life-style centers. Despite the fact that there are not many operating premises in Russia, they do exist. Businessmen in the competitive struggle are trying in every way possible to make an impression on consumers with something new. The heads of large development companies have more than once announced that they want to master unfamiliar types of trading real estate in Russia.

Who dictates fashion?

The first life-style projects have appeared in the Moscow region. It’s more correct to call them prototypes of life-style centers, which in the near future will adorn the capital. Among such premises Barvikha Luxury Village on Rublevo-Uspenskoye shosse is often mentioned. By 2009 Kashirsky Mall in the south of the capital should be open.

Yulia Nikulicheva, director of the department for trading real estate at Jones Lang LaSalle (JLL) considers Vremena Goda shopping center on Kutuzovsky Prospekt has features of a life-style center. This shopping center was constructed with the funds of the former owners of the Zolotoi Vavilon complexes, the only known investors in which include businessman Paata Gamgoneishvili. In 2007 Vremena Goda had a modest list of so-called luxury complexes in the capital.

If we look at the countries closest to Russia the Ukrainian capital does not lag behind Moscow. By the end of 2007 in Kiev on Moskovsky propekt a complex which its designers The Ukraine Trade Guild and Kievkhimpostach, have called the Lifestyle Center, will open. The shopping center combines not only shops and entertainment, but also office premises that fully meet “life-style” foreign standards. Ukrainian developers define the life-style format as a shopping center that reflects the beautiful style and comfortable life of its users. A life-style center needs to be located usually, in their opinion, in an area where the upper middle class live. The volume of such premises can vary from 15,000 sq.m to 50,000 sq.m. These shopping centers are distinguished by expenisive shops and unusual architectural decisions. The 75,000-sq.m "stylish" shopping area on Moskovsky Prospekt in Kiev is one of the solutions of the reorganization of an industrial zone.

Another Ukrainian company - Invi Deol LLC (planning and architecture) intends to specialize in new formats of commercial real estate. And the next life-style project in Kiev will be thanks to this company on Shchorsa street.

The usefulness of the formats

Russian cities are only at the threshold of opening life-style centers, Natalia Oreshina, director of the department for trading real estate at Cushman & Wakefield/Stiles & Riabokonylko (C&W/S&R) says. The majority of shopping centers in Moscow are quite typical that have a mass target audience, consultants note. According to C&W/S&R, there are still not enough modern shopping centers. The level of empty premises for rent in high quality shopping centers was not more than 1 per cent in the summer. In the area of the Third Transport Ring there were absolutely no offers for tenants. What can we say about the regions, they lag behind the capital by 2-3 years.

Judging from foreign practice, original, exclusive and expensive formats of trading premises appear in the market when it is saturated with large shopping centers that cover a mass audience. As Nikulicheva says, naturally first of all in developing markets investors make money in those niches where it can be made in the short term and therefore where there is a maximum number of consumers.

Life-style is not the only new format for Russia: alongside it in the country segments department stores (department stores operated by one operator), outlet-centers (large shops in the suburbs or outside a city where the goods of leading brands are discounted 30-70 per cent), power-centers (shopping centers consisting of several separately standing stores with anchor tenants and a small trading gallery), retail-parks (several different format shopping centers incorporated by a general infrastructure). From the above list the only department store to have opened is Marks and Spencer, in Evropeisky shopping center and retail-park by developer Garant-Invest, which is being built on Varshavskoye shosse.

It is significant that on the Web site of the Russian branch of ICSC (International council of shopping centers) there are such formats as stock (warehouse) shops, retail-parks and power-centers, but nothing is said about the life-style category.

But international consultants are convinced that the earlier new formats come to Moscow and the regions, the better. Investors will occupy an empty niche, and the buyer will have an alternative. According to Evgeniya Vlasova, head of the department for trading real estate at Sawatzky Property Management, in the US life-style centers only appeared, when the market had been satrurated with traditional formats.

Classic Genre

O, Bella Terra, Bella Terra! The name casts a sensation of something unimaginably fine and celebratory over any fan of shopping. Besides considering that this shopping center is located in sunny California, among palm trees, an ocean breeze and in the center of the wonderful "celebrity" life, it becomes clear to the visitor, that this is a classical life-style. It seems that such places as California are ideally suited for this format, in fact in southern latitudes, among the heat and magnificent nature, people have a sensation of idleness. And this is what potential clients of life-style centers have. In other words, such trading galleries are created so that people can relax in them and get only pleasure from their purchasers but pleasure form the aesthetics of the place. Therefore each premises is exclusive, a life-style center would hardly want to be called typical or a clone.

The full name of the famous Californian shopping and relaxation center is Bella Terra Huntington Beach Mall. It is a quarter for shops and entertainment and opened in 2004 at Huntington Beach, a popular vacation spot for surfers. Locally Bella Terra is called a shopping attraction. Here it is possible to come across, for example, a specialized shop for surfers, measuring 7,000 sq.m that sells both sports equipment and clothes. Recently the Cheesecake Factory rented a 10,000 sq.m space in the shopping center.

The area of Bella Terra is truly massive: it includes 71 shops with restaurants (both indoor and outdoor premises), and a 20-screen cinema theatre. All of this is on an area of 800,000 sq.m. It strikes the imagination and has a multilevel car park measuring 1,540 sq.m. Bella Terra is a $170 million project which was developed by J.H. Snyder Co., and Ezralow Co., together with the government of Huntington Beach. The shopping complex was stretched out in the place of an old mall, constructed here in 1966 "The fashion of open air shopping centers with entertainment areas later reached the coast of north California,” the promoters of Huntington Beach sum up in a press-release. Similar premises following in the footsteps of Bella Terra are being built in California’s Pasadena - Paseo Colorado for $225 million and in Sherman Oaks - Galleria for $100 million.

Dezert Ridge Marketplace is another popular open-air shopping miracle, located in Phoenix in the state of Arizona. Its founder - Vestar Development Property – has worked on the American market since 1977 and specializes in the life-style format. The company informs us that in Dezert Ridge Marketplace a customer can go shopping, have dinner, go mad on surfing, and can simply have a pleasant rest, without even buying anything. The size of the center is impressive and covers 1.2 million sq.m of shopping, and restaurants and cafes, which total 110. In Dezert Ridge Marketplace there are 950 hotel rooms under the control of Marriott, and a residential complex called Marriott Dezert Ridge Resort. Hotel services are exactly characteristic for shopping centers in the life-style format. The entertainment zone of the center works as a night club or concert hall with celebrities often performing there. And this is also characteristic of such a format.

In the US, which is considered the native land of the life-style format, the first examples of such shopping centers appeared at the end of the 1980s. At that time the market had become saturated with typical malls, and it was necessary to urgently feed the public with something new.

In this type of shopping center there can be any kind of additional component - from concert halls and apartments to fitness centers and sports complexes, says Vlasova. In general it is an attempt to introduce to shopping centers elements of this or that style of life of regular customers. These are, perhaps, the main characteristic that distinguishes life-style complexes from usual shopping centers. The developer is selling a life-style. Consultants say that for this format gravitation towards the countryside and suburbs is characteristic, their halls are often designed in the form of shopping streets, developers like to arrange parks and fountains. The scenery relaxes visitors and inclines them to spend time with a cup of coffee unlike the atmosphere of shops where people come purposefully to make purchases, adds Oreshina.

In life-style projects the finishing materials have great value, she says. Plastic tables and chairs in a restaurant courtyard are unworthy for such a format. The structures of shops in these shopping centers are also chosen in a special way – there are more clothes and shoes shops, and also more specialized goods. Food and electronic supermarkets less often act as anchor tenants in life-style centers.

Having decided on a life-style project, the investor should be ready for a serious marketing campaign to create and support the image of the unusual complex, Oreshina considers. And in general, such projects are 20-30 per cent more expensive than typical large-format complexes, consultants agree. Aside from the expenses on marketing the architectural concept should also be well considered.

There are general features for the life-style format that are come across in shopping centers worldwide. But at the same time each complex takes on the national features of the region. Experts separate complexes in the US, Europe and Australia. In America shopping centers are built for consumers with a high level of income, while European centers are more democratic, and have expensive and cheap shops combined, Nikulicheva notes. Moreover the life-style format is not the perfect format for Europe and is not present in many countries and is especially rare in countries with colder climates.

Second by number of life-style centers is Australia. This continent is simply ideal for experiments with life-style.

A la Russia

Experts argue whether it is possible for even one life-style center to operate in Moscow. If we compare local premises with American "classics" more are less there are no such complexes still in the capital. However, at least three buildings – Dream House on Rublevo-Uspenskoye shosse (investments totaling $25 million), Crocus City Mall on the MKAD ($40 million) and Barvikha Luxury Village (undisclosed investments) have the features of the life-style format. But something is not sufficient in each of them, to be considered a high-grade shopping center of such a format. For example, Crocus City Mall can apply for such status when in it will construct a third, Oreshina considers. It’s a plus that the project includes a hotel. The developer - Crocus Group - calls the project “the world's largest luxury class shopping center.” They also suggest visitors think of shopping as an art, creating the corresponding atmosphere. The lay-out of the premises is really reminiscent of a life-style center: palm trees, flowers and cicadas, a pond and fountains.

Of all of them the most similar to the classic life-style format is Barvikha Luxury Village, which opened in 2005, in the Odintsovsko region outside of Moscow. Its creator Mercury positioned it as a Luxury Center. According to the plans there will be hotel rooms in the complex. Visitors look out on a shopping street of boutiques connected by lanes, and surrounded by trees. The project has been developed by famous architectural bureau Project Meganom.

The Sferum Lifestyle management project ($35 million), which is being realized in the place of the Sfera shopping center on New Arbat street, and will also be filled with "expensive" tenants. This idea will be developed by Swiss Realty Group. Vlasova considers, that as the building is in the densely built up city centre, it will not have a large area. And the target audience of the center will most likely be employees who work in the offices nearby, of which there are a lot of.

Crocus Group the developer of Kashirsky Mall ($207 million), which is located on the junction of the 24th km of the MKAD and Kashirskoye shosse, has this time positioned it as a life-style center. According to the consultant for the project – C&W/S&R, the center will include a 200,000 sq.m trading area with 300 shops, in particular boutiques, a hypermarket, a theme park and a multi screen cinema. The design of the interiors will be executed in such a manner that each trading zone will be like no other, the galleries will remind you of streets from different countries of the world. For example, designers will create Bazzar street in the style of an eastern market.

The listed objects and projects are not numerous. Moscow developers’ precise representation of a life-style format has not yet been generated. Often luxury class malls are called life-style complexes, life-style features are often found in malls with the fashionable name, fashion (a gallery of expensive brands in Crocus City Mall, a luxury shopping center in Vremena Goda on Kutuzovsky Prospekt).

St. Petersburg developers have an original understanding of the format. For example, in one review of the market Nevsky Prospekt was named as a street ideally suitable for life-style shopping centers as tenants are more likely to pay here for a show-window and prestige, instead of for future profit on sales. The same concept to move to the city center might also be observed by companies in Kiev.

Does Russia need this style?

Not waiting until saturation of the market as in the US, not being frightened of the high cost of projects and the climate of the average strip, businessmen will most likely develop a new format. "The Russian market is developing not in an evolutionary way,” argues Vlasova. “With the transition to a new economy in the 1990s, the country has received all the ready formats, with other countries having adopted them. Therefore Russians have studied the formats which came to North America some decades ago for 10-15 years. These patterns should be considered, in building forecasts of the development of life-style centers in Russia.

But what can become of Russian life-style centers? In Nikulicheva's opinion, in Russia they are more often indoor premises. Prices will be focused on the middle class and rich people. However the format will not take root in all regions. First of all, they will develop in Moscow, St. Petersburg, and the southern cities and Siberia.

In Moscow a segment for life-style centers could be formed taking into account the very well-off public. In a twist of fate, the society's elite are last in the queue if we are talking about the prevalence of these or other formats, agrees Vlasova. The niche for shopping centers that cater for consumers with revenue of $50,000-$60,000 has not been filled.

Geographically such complexes will be located not only in the suburbs and larger territories, but also on modest areas within the garden ring. Consultants consider as the most suitable sites in the capital Losiny Island, Kuskovo, Tsaritsina and Luzniki.