The Continent Shopping and Entertainment Center opened exactly one year ago in Novosibirsk. For the project’s developer – a company that started out as a retailer – it was the first experience of its kind. Construction proceeded “intuitively”. Now that time has gone by, the project’s advantages and disadvantages are visible.

The developer’s history is typical for many retailers in the Russian market. It started out developing its business in rented premises and due to lack of space was obliged to build its own outlets. And subsequently, the development business became an entirely separate company.
The firm Itera was founded in 1997, and started out as an operator in Novosibirsk’s food market. Having consolidated its position in the region’s wholesale market, starting in 1999 Itera began to conquer retail. With this objective, it created a separate company called Continent, which opened three supermarkets under the Solnechniye Produkti brand, in rented premises. Later, the strategic decision was made to build another supermarket from scratch. And in 2004, the new developer tested itself with a new format – a shopping and entertainment center. Continent Shopping Center on the intersection of Gusinobrodskoe Shosse and Dovator street opened in June 2005. During the project’s design phase, Continent’s developer did not conduct any market research. “When we had the possibility of acquiring the site to build, we did not take long to decide: it was common sense and intuition that told us that the location was good. Later, we did our own research; we listened to our business partners and studied the experience of both capital cities, only occasionally using the services of external consultants. However, we did not spare any means on a four-month advertising campaign prior and subsequent to the inauguration,” notes Itera development company’s commercial director Timofei Melnikov
The amount of investment in the project has not been disclosed but unofficial estimates place the cost at approximately $13 million. The construction was financed with a loan from Sberbank. Interestingly, during construction the owners sold 2,000 sqm of retail space to anchor tenants Sibvez, Perestroika and Banka Alemar. The development company says, “This was done with a view to ensuring the project’s financial stability. Theoretically it is possible to buy back part of the premises or to jointly sell the entire shopping and entertainment center. But at present, none of the owners intends to part with their space.”
Later, after handing Continent and Regionprodopttorg (a second subsidiary) all of the retail business, Itera focused on investment activity and the construction of new retail properties.

In full color?
The six-story building of the Continent shopping center is a complex consisting of two blocks, angled towards each other at about 135 degrees. Thanks to the pink-grey facade and large mirrored windows, it is easily visible for drivers on Gusinobrodskoe Shosse and other points.
Of the six stories, three are dedicated to retail with 4,380 sqm each. The two lowest floors with a total area of 9,100 sqm are warehouses, bought by private entities. And another floor is entirely dedicated to technological requirements: for example, the supermarket’s food production, tenants’ warehouses and equipment.
With time, some of the faults in the shopping center’s layout have come to light. For example, the main entrance is on the second retail floor, which makes it difficult to direct visitor flows to the first floor. “This is made even more difficult by the lack of a second escalator to go down, since the existing one only works to come up from the first floor. However, on the second and third floors the organization of visitor flows, in my opinion, is fairly successful,” observes Timofei Melnikov.

Location
According to numerous experts, the capital’s tendency to locate large retail outlets on the periphery is not viable in Novosibirsk due to the lack of a ring road. However, the developers of the Continent Shopping and Entertainment Center are confident that the building’s location on the periphery near Gusinobrodskoe Shosse is successful. “In my opinion, the situation with Continent is not an exception, but rather a predictable model: in time, prototypes will appear in the district,” asserts Timofei Melnikov. “To some extent we have followed the American model, placing the shopping and entertainment center on the city outskirts but also in the immediately proximity of two large residential districts. This means that we do not have to rely on car-owners. The developer believes that it is precisely the residents of the adjacent areas that constitute the main flow of visitors to the shopping center. However, the connection between Bogatkova – Nikitina – Gusinobrodskoe is also a fairly influential factor defining visitor flows, especially given that the avenue has heavy traffic. Also, construction is currently underway of a pedestrian bridge over Gusinobrodskoe Shosse, which should also increase visitation to the shopping center from non-car drivers.
However, at the Siberian analytical agency RID Analytics, the complex’s location is viewed more skeptically: “Given the concept and tenant composition, Continent should be located nearer to the city center. The products on offer are obviously targeted at the middle class and above. It would make more sense for this type of shopping center to be situated near a metro station, in a district with high pedestrian traffic. The periphery location in our view is more appropriate for an inexpensive hypermarket - confirmed in fact by the opening of the Lenta hypermarket in October 2006, literally just a few hundred meters away from Continent.”
Curiously, the shopping center is in the close vicinity of a regional market that people come to from all over Western Siberia. Even at the design stage, the developer announced that the neighboring market would not only fail to deter customers, but on the contrary, Continent could confidently count on having visitors from its “competitor”. The director of the Continent Shopping Center Natalia Patrina is certain that the presence of the neighboring market does not hinder the shopping center’s development: “The reason for this is that the complex’s concept is appropriate for the situation. Moreover, many tenants with a business at the market express an interest in having premises with us, which I believe is the best proof.”
However, experts disagree. Elena Yermolaeva, director of RID Analytics, suggests that a market district creates a sensation of crowds: cheerless, ragged containers, a “specific” type of public… Although it is a kilometer away from the nearest part of the flea market, the territory as a whole is perceived negatively.”

The enjoyment factor
The developers of Continent believe that it is designed for shoppers with average and below average incomes: “Unlike shopping centers of the 'expensive luxury' type, we are oriented at a public with average and below average incomes,” explains Timofei Melnikov, adding that visitors truly enjoy the shopping center. “Firstly, they see a quality finish from both outside and within the building, and feel comfortable thanks to the successful layout, the building’s climate system, escalators, restrooms, etc. At the same time, shops with accessible prices ensure that customers with lower incomes can feel “at home.”
Analysts however questions the enjoyment factor and say that the shopping center is not that accessible. Sergei Dyachkov of DSO Consulting finds the shopping center’s concept highly debatable: “In my view, only the cinema acts as a magnet for visitors from the city. Meanwhile, the Gusinobrodsky market is a massive place, which has customers from all over Novosibirsk and neighboring Siberian cities …”
The neighboring market lead the owner to adopt an original approach to forming the tenant pool. The developers did indeed wager on the success of the cinema – the Continenty Kino multiplex. It is no secret that worldwide 95% of visitors to cinemas in a shopping center also do their shopping there. In addition to the multiplex, anchor tenants include the Holiday supermarket (food), Sibvez (domestic appliances), and the DIY hypermarket Perestroika.
The proximity to the market partially determined the shopping and entertainment center’s concept as “complementary”. Continent tries to offer goods that are missing in the market, or to offer a broad variety in a somehow different way. “In this place it makes sense to sell mass-market clothing, since the shoppers in this district of the city already have a particular mentality,” confirms the general manager of Gloria Jeans Novosibirsk, Natalia Belykh. It does not bother her that Gloria Jeans products are also sold in the market. She believes that by making a broad assortment available there, it is possible to attract the right buyer to the store within the shopping center.
“The presence of large tenants probably means that Itera does not receive the same revenue as it would with a pool of smaller ones,” comments Elena Yermolaeva. “At the same time, when it opened, it was the first shopping center with a multiplex, but now others are appearing with multi-screen cinemas. It is also questionable that the shopping center should have only one fast food operator – New York Pizza – and that there are no outlets with more Russian cuisine.”
Aside from the anchor tenants, the retail gallery is filled with operators selling books, photography items and children’s goods. Continent has a chemist’s, opticians, perfume and cosmetics shop, costume jewellery and jewellery outlets, an interior decoration store – Chudodom – and others. As entertainment components, the shopping center also has an arcade called MGM Galleon, a tanning studio and a children’s playroom.
According to Timofei Melnikov, the shopping center’s tenant pool was created 10 months prior to the opening: “The operators we needed responded rapidly to our proposals and there were no particular problems when it came to locating them.” The shopping center’s director Natalia Patrina is not disappointed with the tenants: “In our first year of operation, only two changed: the first was asked to leave by us because the product selection was identical to what was on offer in one of the section’s of the Solnechniye Produkti supermarket. The second, who occupied the place of the first, underestimated their ability to cover the rent rates.”
Now, the management company works actively with the tenants to create a unified approach to attracting visitors to the shopping and entertainment center: there are thematic events, publication of the Continental express advertising and informative paper, and a joint discount system is being prepared.

Competitors aren't sleeping
Continent’s developer acknowledges that until recently there has been no serious competition from other shopping centers. However, as already mentioned earlier, literally 800 meters away from the shopping center a Lenta hypermarket has opened. “The appearance of a large food retailer nearby will undoubtedly reduce the revenue from our Holiday Classic supermarket,” reflects Timofei Melnikov. “However, it does have a positive side: on the one hand we should consider the synergy effect, two large different-format retailers attract far more shoppers than each one individually; on the other hand, the strong competitor will encourage us to move and increase the quality of service.”
For DSO Consulting, Continent’s fate against a background of competition is predictable: “After large shopping and entertainment centers come online in Novosibirsk such as Mega from IKEA, Avtoyarus (with the Cinema-Park multiplex), the smaller Kalina boutique center (with a multiplex from Art&Science Cinema Distribution) and others, Continent’s clients will just be the residents of the two adjacent districts. ”
According to RID Analytics, the return for shopping and entertainment real estate in the region is currently 30%, as opposed to 12–15% in Moscow. Meanwhile, the pace of shopping center construction in Novosibirsk is proportionately lower, which is why investors are cautious about investing in this type of real estate, fearing unfinished projects.
At present, Novosibirsk only has two outlets that can be fully qualified as shopping and entertainment centers: Itera’s Continent and the Moskva, owned by Trud. In the future, the opening is expected of a complex on Gogol Street, Sibakademinvest’s Apelsin centers, Mega from IKEA, and a complex on the territory of the Kuzmin metallurgical combine, among others. The deadlines for delivery vary. Rumor has it that on the territory of the Central Hotel, acquired by Maria-Ra, another shopping and entertainment center may be built.
Itera also has big plans. Thus, in November on Kropotkina Street, Continent-2 will open; in the third quarter of 2007, the plan is to launch Continent-3 on Trolleinaya street with a retail area of more than 20,000 sqm. The anchors there will be the Kora supermarket, a ten-screen multiplex, an entertainment complex and food court. There are also plans to build Continent-4 with a total area of approximately 50,000 sqm, though its location has not yet been disclosed.
Actually, in the beginning the shopping center’s name was also the subject of debate. In Russian retail the word “Continent” is particularly associated to the Sedmoi Continent brand. However, in this case the developer of the Novosibirsk complex used the company’s legal name, trusting buyers’ opinions: “Research showed that clients like this name for a shopping center. We do not feel there is any influence at all from the association with Sedmoi Continent: they do not have any outlets in the Asian part of Russia, and in fact a supermarket chain and a shopping and entertainment center are two entirely different things. The most relevant coincidence is with the Continent Shopping and Entertainment Center in Novokuznetsk. It opened two days before ours, and it has a similar size and a multiplex as well.”

Information:

Kontinent Shopping and Entertainment Center

Address: Gusinobrodskoe shosse, 20, Novosibirsk

Surface area: 18,000 sqm

Retail area: 13,500 sqm

Investor: Regionprodopttorg

Developer: Itera

Architects: Modul PSF

Property managers: Itera

Car parking capacity: 300

Daily visitors: 4,000-8,000

Rent rates: From 200 – 3,600 standard units

Rent durations: From 11 months to 5 years

Anchor tenants: (each occupying in the region of 2,000 sqm) - Supermarkets Holiday (food) and Sibvez (domestic appliances), Perestroika DIY hypermarket, Kontinenti Kino multiplex of the Art&Science Cinema Distribution chain