Guiding Lines: News

Retail Streets

Expensive and stable

The main retail streets of the world, according to research by Cushman & Wakefield, have appeared to remain rather stable during the world financial crisis. Rental rates of retail areas in the last year have risen or remained at former levels on 94% of 236 retail streets of the world.

Fifth Avenue in new York has once again been recognized as the most expensive street in the world, where rent on average costs $1,850 per sq. ft, 23% more than rates in 2007. The other cities in the top five include Hong Kong, Paris, Milan and Dublin. This year, London and Tokyo which last year came in at 4th and 5th have dropped to 6th and 7th in the rating. Tverskaya street has risen in the ratings to 14th from 16th in 2007.

Developers disappear

In Japan in 2007 more than 400 small and medium-sized developers and real estate agencies have left the sector. The acceleration of the reduction of prices for housing in Asia will lead to a decrease in consumption and prolongation of the economic recession in region, writes Prian.ru.

Hong Kong, Singapore and Japan have officially entered a period of recession. It is expected that the rental rates of category A offices in Tokyo will decrease by 5%, and prices for housing will fall by 10% by the end of 2009. In Singapore the prices for housing in the third quarter of 2008 fell 2.4% and by the end of 2009 will fall 21%.

In Russia, any company working in the real estate market is yet to declare itself officially bankrupt. At the same time many have declared the suspension of projects. In the opinion of Alexei Vanchugov, general director of Mall Marketing, in the near future 60-70% developers will leave the retail real estate market. He expressed his views at the Vedomosti international conference, which took place in November within the limits of the MAPIC-2008exhibition.

In the meantime rating agencies continue to lower the ratings of development companies. JPMorgan Chase & Co has lowered the recommendation of the global depositary receipts (GDR) of PIK Group from buy to sell, Interfax imparts. In the opinion of Elena Zhuronova, an analyst at JPMorgan, there is currently a serious risk of PIK not being able to execute a share of the promissory notes. The company may be unable to repay $700 million of debt in connection with a lack of funds.

Rating agency Fitch has confirmed the long-term and short-term ratings of the default of issuer Sistema-Gals at level B. The forecast of its long-term ratings has changed from stable to negative. The downturn in the rating of the company reflects its weakening independent credit status and the prospective level of support from its parent company AFK Sistema (BB-/negative).

Lev Levayev, the main shareholder of Africa Israel Investment (AFI) which is part of AFI Development, has had to put all the assets of the holding (74.83%) into two banks belonging to it, Vedomosti has written. The assets have been put in Israeli banks as credit. Since the start of the year the capitalization of the holding has fallen 91.5% to $409 million.

In Brief

RETAIL LAND

About 70-80 premises with varying investment appeal will be put up in tenders in 2009, informed Alexander Voitanik, head of the department for the preparation of documents for investment tenders at the Moscow department of competitive policy, at the Third MREF-2008 forum for market real estate leaders in November. This year the department plans to carry out 10-15 auctions for the sale of Moscow sites. The department is currently carrying out an auction under the so-called simplified scheme (order 417-PP).

PARTNERS SEPARATE

Nataliya Kirpichenko has left Multibroker as an "unhappy partner" a press release of the company states, "and has left the real estate sector of the Russian economy." According to Kirpichenko, Grigory Kulikov, the owner of MIEL holding, the main shareholder and investor of Multibroker, is not financing the project, is threatening to bankrupt it, and is not selling the business. Kulikov has stated in the press that his decision to freeze the project was a result of the world financial crisis and the fact that banks are not providing finance. "The results of the activities of our sales offices prove the contrary," says Kirpichenko. "Multibroker has carried out all its plans and Kulikov’s decision is a real kick in the teeth to a sound project," she continued.

PIK HAS NO MORE GRIEVANCES PIK has withdrawn its claims from the Federal Antimonopoly Service (FAS) against the government of Moscow in relation to changes to the conditions of a contract for the city to redeem more than 17,000 sq.m of housing from the group through a tender. This was announced by Mikhail Yevrayev, head of control and supervision of real estate, local monopolies and housing and communal services at the FAS, RIA News has stated.

BARGAINING IS MORE AND MORE APPROPRIATE In the rental market of commercial real estate the volume of supply in October in comparison with September grew 45%, Russian Research Group’s (RRG) research shows. In October the average price of offers decreased 2% on the market as a whole. The reduction in prices is noted in practically all segments. Asking prices do not always correspond to the real price agreed, as proprietors are still not prepared to indicate a lowering of prices. Bargaining on some premises results in 20-30% discounts, notes experts at RRG.

Service

Helpful for Owners

Ross Group has offered proprietors a new service - anti-recessionary management of commercial real estate premises. Currently, having ended up in a difficult situation, tenants are presenting new conditions to the proprietors of premises: a decrease in the rental rate, delays in the repayment of debts, no fixed payments, etc. Ross Group offers proprietors the development of measures directed at decreasing costs. In October – November of this year the company has already concluded three such contracts. Ross Group thinks that the number of such appeals will increase.

Class B Office

The Yard in Bolshoi City (Big City)

The class B office complex The Yard has entered the Moscow market. The proprietor of the complex is Orlenok and its marketing partners are consulting companies Blackwood and Cushman & Wakefield/Stiles & Riabokobylko. The 6-storey office center in English style, measuring a total of 11,500 sq.m is located in Big City, on the first line of Zvenigorodskoye shosse, 500 m from the Third Ring. The Yard is one of the first class B office centers in the given area. The areas in the office center can be bought and rented entirely, or individually or by floors. The average rental rate is $650 per sq.m. The premises is being managed by Zeppelin Property Management Ltd.

Despite the Crisis

Zhuk in the Moscow Suburbs

In Zhukovsko in the Moscow region the construction of the Zhuk shopping and entertainment center has begun. The project was announced in 2007. Despite the financial crisis, the investor and developer of the project – SBA Torgoviy Tsentr has decided to start construction of the shopping and entertainment complex.

Interest in participating in the project has been confirmed by Spar, M.Video, Detsky Mir, Star Galaxy, DVI-cinema, and others.

The area of the Zhuk complex will total 45,800 sq.m, 32,500 sq.m of which will be for shops. The premises is planned to be completed at the beginning of 2011.

Put off

Rossiya frozen

In connection with the difficult situation in the financial market the owner of Russian Land Shalva Chigirinsky has suspended the construction of the Rossiya Tower, informs Interfax. According to the plans of the chief architect of the project Norman Foster, the tower should become the highest building in Europe and the second tallest in the world at 612m. In 2007 when the capsule in the base of the tower was laid, Chigirinsky said that the company would finance the pre-development with its own funds and later attract credit. He estimated investments at $2 billion (the area is 520,000 sq.m).

New shops

X5 Retail Group intends to open 5-7 new shops within a year in central Chernozemye, Interfax states. According to Roman Sokolov, PR manager of the company, to start the emphasis will be on Pyatyorochka and Perekryostok.

Magnit plans to open a minimum of 350 shops and six hypermarkets in 2009, informs Interfax. Earlier the company planned to open about 15 hypermarkets and 250 shops in 2009 under the U Doma format.

Lenta has opened its second hypermarket in Krasnodar, having invested 650 million rubles in its construction, says RIA Novosti. The hypermarket measures more than 8,000 sq.m and more than 13,000 goods. In Novorossisk Lenta plans to open a hypermarket in April 2009. Investments will total 650 million rubles and the area of the store will be 11,000 sq.m.

Retail chain Tekhnosila intends to open four shops by the end of 2010 in Chelyabinsk, the press-service of the company has said. The second Tekhnosila hypermarket in Chelyabinsk opened on November 21. Investments in the project totalled $1.7 million. The store measures more than 2,700 sq.m.

DVI Holding plans to open the KosmoMall shopping and entertainment center measuring 67,200 sq.m in March 2009 in Yekaterinburg, RIA Novosti states. The rentable area of the center will reach 41,000 sq.m.

In Brief

VTB SUPPORTS DON-STROI

Don-Stroi and VTB have concluded a number of long-term credit agreements worth $500 million. The developer will use all the funds for the completion of construction of residential complexes in Moscow at varying stages of realization. Among them are a building in Sokol, a building on Begovaya, the first phase of the Izmailovsky residential complex, Sedmoye Nebo, a building on Pokrovsky bulvar, a building on Mosfilmovsky, Alyie Parusa, etc.

RETURNS AND LOSSES OF AFI DEVELOPMENT

The net profit of AFI Development in the first nine months of 2008 was $28 million, having fallen 67% from $85.2 million in the same period last year, the press-service of the company has informed. Net losses in the third quarter totalled $69.3 million. AFI Development has announced that it intends to concentrate on three premises already under construction: Tver Zastava shopping center, Mall of Russia in Moscow-City and the project on Ozerkovskaya Naberezhnaya. The company is not ruling out that it will reject some projects whose construction has not already started yet.

WITHOUT WORK

In October - November in Moscow about 8,500 people in the retail sphere lost their jobs, Interfax has informed. The losses have been to Muscovites, citizens of the Russian Federation and migrant workers. Under the forecast of the Moscow authorities, approved by Mayor Yury Luzhkov in November, unemployment among inhabitants of Moscow in 2009 will not exceed 1%.

OBTAINING LAND HAS BECOME EASIER

According to regional management company Yupiter Kapital group, in 2008, in regions adjoining the Moscow suburbs the length of time it took to register property rights of land plots was reduced by 3-6 times. In the Ryazan region three years ago the procedure to allocate a land plot from general property to private property took 1.5-2 years. This year it took 4-6 months. It has become one of the stimuli of growth of the land market in the Ryazan region.

60 HOTELS IN TWO YEARS

In November, of the 28 planned hotels to be put into operation in 2008, only nine had been constructed, says Vladimir Yermolayev, head of approvals for the construction of hotels in the Moscow city Construction department, RIA Novosti states. The financial crisis may affect the completion of the remaining 19 hotels, he notes. The construction of these premises are currently coming to an end and painting and decorating is being conducted. In 2009 in Moscow 32 hotels may be constructed.

Design

Apelsin (Orange) Wins Award

As part of the first Russian Day of Architecture the ceremony of the international architectural awards ArkhiP-2008 took place. The Apelsin design concept won the Present of Future award of architectural magazine Domus. The project has been developed by Foster & Partners under the management of architect Norman Foster for Inteko. The construction is an unusual shape representing an orange cut into segments. All five separate segments of the building meet in a slope. At the center of the composition the emphasis is on the effective polygonal space. The futuristic view of the building is provided by the rounded shape of the facade.

For our offspring

Capsule under Newton Park

Inteko has filled in the first cubic metre of concrete at the building site of the Newton Park office-hotel complex. In the base of the future building a capsule with a message to our future generations has been incorporated.

Newton Park is being erected on a site measuring 11.4 hectares on Aminevskoye shosse. The total area of the complex will be 230,000 sq.m, of which 125,000 sq.m will be offices. There will also be a 4-star business-hotel, with 200 comfortable rooms and several conceptual restaurants.