The Iyun (June) shopping center was planned as the first of a chain of shopping centers which meant that the developer and owner, Regions Group, paid a huge amount of attention to the design and concept. The project had to be a success in every way and a flagship for the chain. After the commissioning of the project in St. Petersburg it became clear that it had lived up to its expectations.

The construction of the Iyun (June) shopping and entertainment center began in May 2005 and was completed at the end of 2006. It is located in the Krasnogvardeisky district of St. Petersburg at the intersection of several large transport routes: prospect Kosygina and Industrialny prospect in the center of a rapidly developing residential area. There has been a severe shortage of retail space and a high density of development. The concept was defined by the location, and the price range is geared towards the local population who have average and above average income levels.
The total area of the four-story Iyun shopping and entertainment center is 46,500 sqm. The concept incorporates a mixture of retail and entertainment areas with a Mosmart hypermarket located on the first floor as the main magnet for shoppers. The first floor also houses stores selling mobile phones, and chinaware, a dry cleaner’s, chemist’s, bank outlet and tourist agency. The second floor hosts a cafe and retail gallery. The third and fourth floors are given over to entertainment operators, restaurants and cafes. In addition to Mosmart (5,700 sqm), the other large tenants are: Detsky Mir (2,100 sqm), a Mori Cinema multiplex (2,100 sqm), Bowling City (2,000 sqm), Extra Sport fitness club (2,000 sqm), a Star Galaxy entertainment center (1,300 sqm) and Sportmaster (1,300 sqm). The Iyun also offers multi-level parking for 1,300 cars.

Project Realization
The general contractor and designer were chosen on the basis of a tender won by Renaissance Construction. By agreement with the developer, TRK-Petersburg, the supervision of design work and construction as well as the resolution of all technical and organizational issues related to the construction and development of the infrastructure was the responsibility of the technical customer, Delta-Stroitek. Over 100 subcontractors were involved in the project but this did not affect either the pace of completion or the quality of construction.
The design was developed by French firm, Design Architectural which has many years of experience in building shopping and entertainment centers. The only changes made were to comply with local building codes and the tenants’ requests. The architectural design is modern and attractive and has helped to make the shopping center the focus of attraction for the entire district.
The most challenging issue was providing a reliable power supply. The area is experiencing an electricity shortage and so the search for the necessary capacity and the design and installation of an external power supply system took a considerable amount of time and additional financial resources.

Financing
The rental rates in the complex are $450/sqm per year. The total cost of the projects was $54 million, of which $36 million was provided in loans. The payback period is 5 years.
“Overall the Russian retail real estate market is quite attractive for investment. However at this stage (market formation) the real chance for success lies with large investors having considerable assets in other regions. This is because of the high risks involved in a developing market and the difficulty of accurate forecasting. In the near future when the market stabilizes, Russia will become more attractive for investment. A confirmation of this is already apparent in the extent to which foreign firms are analyzing the retail real estate market,” says Grigory Naidenov, general director of Regions-Management.

Management
The Iyun is managed by the owner’s management firm. “Large developers who plan to develop a chain usually create their own management company. The market for outsourced management services in currently quite weak in Russia. This is because of low demand stemming from owners’ unwillingness to entrust their sites to outside companies. Also management can be financially attractive with a view on several future projects,” says Mr Naidenov.
The company in charge of the Iyun facility management works with tenants, compiles waiting lists and provides facility management services including cleaning, security and marketing (promotion of the shopping center to the local consumer market). It also oversees rental and subcontractor payments. The central office also carries out a supervisory function analyzing the KPI (Key Performance Indicators) and making improvements to the business processes and building regulations. The fact that the Iyun is currently 100% occupied is testimony to the effectiveness of its management.

Market Demand
According to Yulia Parinyuk, a consultant from the market research department at Knight Frank, St. Petersburg, the Iyun is a classical example of a family shopping center and this has allowed it to attract visitors from the vicinity. “The nearest competitor is the Zanevsky Kaskad shopping and entertainment center near Ladozhskaya subway station. However the Iyun has no direct competitors because the majority of the tenants of the Zanevsky are small private entrepreneurs. On the other hand, the Iyun is geared towards consumers who prefer to shop in brand stores.” It should also be pointed out that in 2006 a MEGA shopping and entertainment center was opened near the Iyun. But here again it is not a direct competitor because shopping centers in residential districts serve the daily shopping needs of local residents while super-regional shopping centers are geared towards weekend shopping and larger purchases.
When it comes to project failings Ms Parinyuk comments, “Far from all visitors to the Iyun are happy with the quality of the Moscow Mosmart hypermarket, the anchor tenant. Also it was a mistake for the management company not to open the entire center at once. When visitors arrived for the official opening they were greeted by empty shop windows in most of the stores. Experience has shown that the first impression of a shopping center has a direct impact on the building of shopper’s loyalty, particularly in a market with increasing competition.” Yuri Borisov , managing partner at IB Group, believes that with increases in consumer income and requirements and the planned extension of the Zanevsky Kaskad the level of competition for local shoppers will increase.
Only time will show if the Iyun can maintain its strong position. However experts point to the strong concept, excellent location and good tenant composition. Currently construction of other Iyun shopping and entertainment centers is under way in Krasnoyarsk and Ufa. Designs are also being finalized for Iyuns in Omsk, Mytischy, Cherepovets and Volgograd.