major mall used to be as large as 25 km, i.e. it covered huge residential areas. Yet now its catchment area has shrunk because of stiffer competition and the emergence of smaller centers. This has resulted in clearer division: smaller centers with GLA below 30,000 sq. m have been redesignated as community centers, whereas those with GLA exceeding 30,000 sq. m are now perceived as regional centers. “Starting in 2018, it became clear that building large centers with GLA exceeding 30,000 sq. m is an unpromising endeavor, since such volumes do not pay off: they no longer generate the ample traffic which was earlier generated with milder competition and lesser development density,” says Mr. Belanov.
“Community centers are more resilient in times of crisis,” agrees Eugenia Khakberdieva, Director of Retail Department at Knight Frank, “because they are located in residential areas and this ensures a significant primary catchment area.” “Large SCs start gradually blending in,” opines Aleksandr Seregin, Marketing Director at Metropolis Fashion First and Galeria Saint-Petersburg. “Some large malls already operate in this mode, with residents of nearby communities accounting for much of the traffic due to their regular visits.” But even in this case precise calculation is a must. “Major facilities may operate as community centers only in the presence of solvent audience in a particular residential area; these shoppers should be numerous enough for a facility to form a requisite tenant mix for a property owner to cover operational costs,” believes Dmitry Yudashkin, Managing Partner, INST Group. The expert cites the example of Columbus Mall (Moscow, Prazhskaya subway station) with the GLA of 136,000 sq. m. This superregional shopping and leisure center operates successfully to cater to several nearby Moscow communities: North and South Chertanovo, West Biryulevo. The numbers and purchasing power of their residents are sufficient for the occupancy to stand at almost 100%.
Mr. Yudashkin warns that otherwise a facility risks ending up in the red. The result is low economic efficiency of such a project and extending the time of return on investments. With the optimal time for investments to return standing at 5-6 years, this time can be as long as 10-11 years in some instances. “An accompanying negative effect will be the need for extra investments in reconception, tenant rotation and positioning in new target markets. The practice shows that it’s extremely difficult for property owners who have not returned their primary investments to find resolve for making new capital injections. As estimated by INST GROUP’s experts, there are ca. 20% of such facilities in the Moscow area, one salient example being Mozhaisky Dvor. Its owners are ready for reconception, but prefer gradual rotation of tenants and moderate extra investments,” says Yudashkin.
Replacing some of retail operators with “services” to attract more locals works quite well. “We see a rewarding experience of opening multifunctional centers of public services, revenue agencies and other institutions in place of home appliances, bookstores, clothes discounters and other SC tenants who have lost the fight to e-commerce,” says Belanov. “Only services can effectively fill huge retail space going vacant and attract people in the hope that they may get inside and eventually buy something.”
Executive Director of SRV in Russia Olga Bolotnikova gives the example of 4DAILY where a multifunctional center of public services has been opened: “It was positively perceived by our audience, since it meets the new era’s demands, combining many functions within one space.”
“It’s also true that the sector of services for local population is meant to occupy large areas while paying twice lower rental rates than merchants,” Mr. Belanov points out. Another opportunity to change the profile, according to Belanov, is opening large children’s centers, entertainment zones for adults and so-called silver zones (services for people older than 60). These are places for meetings, interest groups, clubs, master classes, creativity circles, and other services.