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Russian capital’s growing wealth entices retail

Think Moscow is a dicey place for retail ventures? It may be, but that has not cooled the interest of the investment community. In a survey of 400 European investors by the Urban Land Institute and PricewaterhouseCoopers, 72 percent of the respondents rated Moscow retail properties a buy, the highest of any European city.

Many of these investors cited Moscow’s rising household income and personal consumption levels as reason for optimism in retail development. Though some also expressed worry about rising rents and the possibility that big-box retail and power centers sprouting in the suburbs will saturate the market, Richard Gregson, who heads the real estate group at PricewaterhouseCoopers Russia, said the combination of “extensive city development and market balance prospects and high risk brings considerable profits.”

For a while, it looked as if Moscow’s retailing revolution would take place mostly in the suburbs, since most new shopping centers were going up outside the city center. But the new Evropeiski Mall is evidence to the contrary.

Evropeiski — Russian for “European” — is a 2 million-square-foot edifice that observers say has raised the bar for Moscow retailing. Crammed with 300 stores, the center sits across the street from the Kievsky railway station and astride two metro lines. Little surprise, then, that there has been no shortage of shoppers since the center’s opening in March. “It’s probably the best-performing center there is,” said Jeff Kershaw, retail director in the Moscow office of CB Richard Ellis Noble Gibbons. Rumor has it that Evropeiski pulls in average rents of about $200 a square foot, Kershaw says.

There are plenty of other places to shop in the center of Moscow. The legendary and newly refurbished GUM department store, for instance, has occupied the eastern edge of Red Square since 1893. And nearby is the underground Okhotny Ryad shopping center, with its mix of restaurants and upscale shopping built next to a metro station. Indeed, Moscow’s transportation hubs are becoming hot spots for development. The 1 million-square-foot Atrium Mall created a stir when it opened in 2002 at the Kursky railway station on the eastern edge of downtown, offering a staggering mix of Western and Russian brands and a hypermarket. (The hypermarket has been closed to make way for a casino.) .

This all stands in bright contrast to the retail scene Kershaw found when he came to Moscow six years ago. “In the beginning it was, ‘Build it and they will come.’ There wasn’t much choice, so you could build anything; it didn’t have to be special,” he said. “Now you compete on atmosphere, schemes and tenant mix, just like anywhere else.

“Maybe the biggest change is that customer service is finally important,” Kershaw said. “It used to be that you went to a store and the clerk said, ‘What do you want?’ Now they ask how they can help you, and they hand you the bag around the counter, just like at Nordstrom.”

— Curt Hazlett

The road to Russia

Moscow is the top destination for European retailers seeking to expand across international borders, followed by St. Petersburg and Prague, according to new research from ICSC and Cushman & Wakefield. European chains are most actively seeking new sites in Central and Eastern European cities, where economies are growing at a faster rate than in Western Europe, according to the survey of executives in charge of international expansion at 250 retail chains from 23 European countries.