Chinese Fosun Group, Vanke, the Arab Mubadala Development Company, and others — signed a few deals with Russian partners“.
Long-term investments by institutional investors are directly related to such and concepts like risk management and liquidity. This means that projects that have worked well are being considered — they were put into operation about a year ago or earlier, working successfully, have low vacancy, as well as the possibility of further capitalization.
National format features
In European countries, the vast majority of shopping centers are of small size and regional coverage, in Asian and Arab countries there is a predilection for megaprojects. It is these familiar formats for one or another country that determine the range of objects that are interesting for investing specific investors.
An additional motivational factor is the management of the facility and its operation by well-known international companies that have already earned trust. “This is due to the fact that, as a rule, foreigners do not have the competence of organizing business in Russia and do not wish to get involved in solving bureaucratic issues. That’s why shopping centers under construction or design, are less likely to be sold. Exceptions include cases where the object is acquired in proportion with local investors, such as the building of Voentorg in Moscow”, says Pavel Lyulin, CEO of SVN management company.
The threshold for entry into the domestic retail property market for foreign investors is determined firstly average cost per square meter of rentable area. On average, it is
3,000 – 3,500 euros. In this case, we can estimate the investment volume of a large shopping center on the average from 170 to 900 million euros. For such an amount, for example, the Nevsky Center shopping mall was acquired, and the Immofinanz shopping center portfolio costs the investor nearly 1 billion euros. But the amount of the transaction may be much less. At present the richness of choice, private investors can afford to buy in Russia smaller objects with the input threshold of 20–80 million euros.
“Foreign investors today are interested in high-quality retail space with a capitalization rate in the range of 9–10% per annum and a payback period of seven to eight years,” specifies Vadim Kashkin, head
of the commercial real estate department NDV-Supermarket Real Estate. According to the expert, there are still a lot of such objects on the Russian market today. However, the activity of foreign investors is constrained by sanctions restrictions.
Pavel Lyulin is much more optimistic. According to him, the Russian market of shopping centers is comparable to big countries, such as Germany, the United Kingdom and the United States, is not saturated with objects, and therefore interesting for investors. “There is potential for growth, with both in large cities and in the regions“, — concludes the analyst.
Thus, according to estimates of RealJet analysts, in 2017 the share of investments in shopping facilities surpassed the share of the office segment and accounted for 30% of the total volume of transactions. In 2018, this figure increased to 38%.
Text: Marina Yampolskaya
SHOPPING CENTERS RUSSIA | JANUARY 2019 | 76
There is potential for growth, both in
large cities and in the regions