Overshadowing the Airports

Champion of the Domodedovo Market

The Domodedovsky REC is located at the intersection of Kashirskoe Highway and Orekhovy Boulevard, two kilometers from the MKAD. Under the USSR, this particular spot was a favorite for those business people venturing to compensate for the shortage of mass-consumption goods in the shops. In 1994, a new marketplace was established; it became widely popular among both local residents and people from nearby Moscow suburbs. According to Paul’s Yard, between 10 and 20 thousand people will pass this site on any given weekday; on weekends – 25–35 thousand. Therefore, it comes as no surprise that this particular site was chosen for the Domodedovsky REC, with a total floor space of 31,767 sq m.

“At the time when the project was undertaken, the Orekhovo-Borisovo neighborhood only had the Ramstore-Kashirskaya (overall floor surface 30,000 sq m) and the Galereya Vodoley (16,000 sq m). Along with the Domodedovskaya Yarmarka they were servicing large bedroom communities with more than 315,000 residents. But such a densely populated neighborhood was in dire need for additional shopping and entertainment facilities,” says Olga Yasko, Regional Director, Analysts Department, Colliers International. “Following several marketing investigations our company simply adjusted the percentage ratio of different facilities,” recalls Evgeny Petrov, Director and Manager at Domodedovsky. “In fact, we didn’t choose this site at all – it chose us!” In all fairness, the site also “chose” the Mebelgrad REC and the Oblaka REC. Several additional malls are located nearby: the Gallery Brateevo Mall, Tvoi Dom and Belgrad.

According to Vyacheslav Katsegorov, Director of the Research Department at Magazin Magazinov, Domodedovsky’s GLA (gross leased area): 18 thousand sq m) most obvious competitor is the Oblaka (GLA: 32.6 thousand sq m), opened this year by the TEN development company. “It is still too early to open this topic. Nevertheless, while the Oblaka has twice as much GLA, the Domodedovsky is more favorably located. Not to mention, some people reacted poorly to Oblaka’s unorthodox interior styling. The Domodedovsky, on the other hand, has always been regarded as pleasant and rather cozy.”

“The target demographic at Domodedovsky are the middle and business classes. The competition – the Galereya Vodoley – is rather weak,” contrasts Mikhail Litinetsky, leading specialist in the commercial real estate department at Paul’s Yard. Nevertheless, the competition will soon increase; the site at General Belov St, 28, will soon witness a REC with a 300-room hotel (project development should be completed by the end of 2008). A separate shopping center is underway at the 24 km exit of the MKAD, located on Kashirskoe Highway, in the direction of the center (13 thousand sq m). However, the most formidable object is the Kashirski Mall (200 thousand sq m, GLA: 120 thousand sq m, proprietor: Krokus International), located at the intersection of the MKAD and Kashirskoe Highway.

One thing is certain: Domodedovsky has no problems with visitor volumes. “One of the major advantages of the facility is its location alongside a key highway, which makes it easily accessible. Furthermore, the facility is close to the Domodedovskaya metro station and in direct reach of large residential agglomerations, which provides it with a strong customer base and is easily accessible by pedestrians,” comments Olga Yasko. This is true despite the congestion issues in the area surrounding the Domodedovskaya metro stop – a major transport hub, linking together several traffic infrastructures: underground, municipal above-ground, district and (believe it or not) aviation. According to the developer, freight carriers make over 1200 departures from this area every day – not even including destinations outside the Moscow region. When you consider the nature of the existing roads networks – outdated and too complex – the rush hour around the REC comes as no surprise. “This is a problem all across Moscow – a solution will only be possible with the help of the city and district authorities,” argues Evgeny Petrov.

The highway meets the REC in the east-bound direction, where drivers will see an entrance into an automated parking lot. There are three public parking lots on the mall grounds, capable of accommodating 440 automobiles in total. All three are joined by a single system which evenly distributes the automobiles upon entry. The Parktime system keeps track of the entrance and exit of every car, helping to combat the misuse of the lots by non-visitors. The upper parking level leads to the mall’s main entrance, while the lower two lead to the Viktoria supermarket, Tekhnosila (electronics warehouse), or to the mall’s ground level. Those parts of the grounds not covered by building, pavement or sidewalk are covered by grass – the lawns are made up of aged grasses, which are cut regularly. In addition, there are decorative hedges, trees and flower beds. “The above-ground parking is limited, and costs money after 3 p.m. The below-ground parking – for 2000 cars – is sometimes difficult to locate,” observes Vyacheslav Katsegorov. “However, the building is visible from any direction, thanks mostly to the bulky structure.” Ilya Shuravin, Partner at S.A. Ricci/King Sturge, said this about parking: “(The parking) is ample, despite the confusing layout.” “You can always find a spot, even on the weekends,” agrees Pavel Korneichuk, Senior Consultant at DTZ, as well as project manager at Domodedovsky.

You Pay a Price for Beauty

The initiation of groundwork on the Domodedovsky center was pushed back, despite the fact that all the fund-raising had already occurred. In all fairness, there was a good reason. “The investor was not happy with the concept plan, so the decision was made to undertake major project alterations, including all the necessary licensing procedures and expert analysis,” explains Evgeny Petrov. “Our goal was to not only optimize the project, but also to improve the financial indices, including more floor space.” As a result, the construction terms were pushed back, and the investment volumes went up. Initially, investment volumes were targeted at $25 million, but the alterations pushed this figure to $33 million. On the other hand, the recoupment period was reduced to four years, and the amount of space for rent was increased by 5,000 sq m. According to the proprietor, such figures more than justify the delay.

Over the course of construction on the Domodedovsky center, the following companies were invited to participate: BIOLAN Stroi (electric engineering), Pluton-S (outside engineering), the TERMOFORM building-assemblies company (heating unit), PR Kvadrat (building exterior illuminating), Demigraf (mall layout designs), Top Glass (shop windows), MilanStroi (rolling shutters), Norton and NIIpro (advertising and lighting units). “Startup developers must have strong partners. Otherwise, the project won’t succeed,” argues Mr. Petrov. “The general contractor – and the rapport between contractor and developer – determine not only the term and quality of construction, but also the possibility for productive collaboration. We lucked out – out of all the participants in the tender, we found the one representing the perfect combination of relevant experience, cost efficiency and a mutually-positive rapport.” The construction firm – Kochak – was included in the project alteration work, requiring instantaneous reactions to the investor’s decisions. For example, the ground-level was initially targeted for parking, but sometime later the decision was made to put in a supermarket and service facilities instead, while also adding on more parking in the central lot. Ultimately, despite the traditional difficulties in the investor-builder partnership, Kochak handled the job in a professional manner, staying on a level with the project commissioner, say representatives at HC Avtoban and Co.

The architecture at the Domodedovsky center provides an edge over the typical “boxes” of the first generation of malls, which – outside of the bright surfaces – more or less resemble apartment blocks. HC Avtoban and Co. intentionally stuck with the district’s familiar spectrum of beige and blue, while furthermore adding stained glass to the front facade and all the entry ways. “The facade is trimmed out with a lot of blue glass, making this already-visible facility stand out even more – definitely a plus!” reports Ilya Shuravin. Approaching the entrance, the visitors first notice the “Cannes-style” staircase, underneath a 28-meter glass overhang. One more large object – a 28-meter airplane wing – will soon be put alongside the entrance ramp, along with an 8-meter neon inscription reading “Domodedovsky”. The structure will be a conspicuous reference point for drivers.

The main entryway (out of five) distributes the visitors between two floors. Practice has shown that visitors generally start out with the second floor. Clearly, the artistic lighting underneath the stairwell is one of the reasons. “The lighting on the building exterior and the rooftop image – a 4 x 27 inscription reading ‘Domodedovsky shopping center’, written in double-neon letters – are strong visual instruments, serving both marketing and aesthetic needs,” argues Mr. Petrov. Once inside the building, visitors will experience vibrant lighting – a soft-blue tint coursing through overhead channels. The facility also features four-story atrium openings, as well as Russia’s first SI-16 airplane, made at the Sikorski plant; it now hangs under a cupola dome. “Thanks to the many atriums, there is plenty of natural lighting inside,” observes Pavel Korneichuk. “The accent on aviation is perfectly obvious, as well as the prevalence of beige, blue, and light metals.” Both the interior design and the original constructions were devised in the partnership between the developer and Gennady Vetrov, a designer from Demigraf, as well as the NIIpro marketing-production company and architects from Kochak. The vertical axis of the building composition – as well as the main foot-traffic connections between floors – is a round atrium, extending from the ground level to the third floor and covered with a glass cupola measuring 15.3 m in diameter.

Crazy Pool

What is the secret to Domodedovsky’s success? The mall’s slogan states: “We are geared toward the frequent shopper of the middle class; we offer clothing and services in southern Moscow among smiles and a stress-free atmosphere”. Is the project really that simple?

As a matter of fact, the project is rooted in meticulous marketing research. The proprietor conducted this research during different phases of concept work and construction – both independently and with the help of leading consultants. “We worked with several (consultants), but the final version was developed by Cushman & Wakefield Stiles & Riabokobylko and DTZ Zadelhoff Tie Leung. The selection of tenants and facility rentals was handled by the retail real estate division at DTZ, who provided us with a choice between many competing candidates,” explains Evgeny Petrov. The developer interacted with the potential anchors during the drafting phase, in order to provide for the right technology (entertainment, supermarket, etc.) far enough in advance.

The first tenants to sign were the Viktoria supermarket and the Tekhnosila electronics hypermarket. Next were the restaurants and fast food operators, needing considerable time for drafting, licensing and renovation. There were even some first-timers: Russia’s first Yo!Sushi, and Moscow’s first location for Kookai, a French chain of stylish women’s apparel shops. The mall also includes one of the first locations of Tammy I Bottega Verde, a store for fashionable kids. The mall includes a total of 89 shops and stands. The anchors signed agreements for 5-7 years, with a three-month security deposit. The remaining operators signed for three years. According to the proprietor, the rates vary quite a bit – from $400 to $6,000 per sq m/year, not including operational costs. “The rates are above the market average, due to the complex’s favorable location and competent planning,” explains Pavel Korneichuk. “If you include the anchors, the average rental rate is close to $850 per sq m/year, triple net. The rental agreements vary between three and ten years.” For comparison, rates at the Oblaka mall fall in the range of $3,500-6,000/sq m/year.

The complex includes shops from the most famous Russian and international brands – Marks&Spencer, C&A, Esprit, Peacocks, ECCO, Geox, KOOKAI, Nike, Sela, Incity, Tammy, Detski Mir and others. According to the developer, the anchors include Viktoria (3,050 sq m), Tekhnosila (2,300 sq m), Detski Mir (1,750 sq m) and Crazy Park (799 sq m). Despite the strong competition in the local electronics market (Orekhovo-Borisovo offers all the major, successful electronics retail operators), Tekhnosila opened with a bang! That was an unheard of ruckus!” the manager relates. According to Pavel Korneichuk, the facility was rented out in a brief amount of time. “After three months, 80% of the space was under contract. The Viktoria supermarket, for one, made a great impression with the abundant amount of products that the company manufactures independently – prepared products, baked goods, etc.” The Domodedovsky REC is currently the only completed project for the Company Avtoban holding. The location will eventually see a 70 thousand sq m hotel-office tower, with multilayer underground parking, a retail gallery, fitness, a spa center and a conference hall.