The Fever Breaks

Specifically these types of facilities will prove successful on a competitive market, and namely the choice of Russian and Western investors will be given to them. It is possible to speak for a long time about how to construct these types of facilities, given that the experience of market players is increasing with the completion of each new building. Moreover, the participants at the seventh international conference entitled Shopping Center Concept: International Standards and Russian Experience, having taken place on March 22 as part of the International Exhibition of Retail Real Estate and Shopping Chains – Mall 2007 at Expocenter, shared their experiences on creating quality shopping centers.

Russia today is experiencing a consumer boom, and retail and entertainment operators as well and shopping center developers (without whom there could not be development adhering to the demands of consumers) are trying to meet the demands of the population for goods and services. However, although most shopping centers built in the majority of Russia’s cities are well-received, the time has already come to think about the future construction of shopping centers. “The increasing pace of construction is causing demand for quality facilities,” noted Oleg Voitsekhovsky, managing director of the Russian Council of Shopping Centers, during his presentation. “The market has reached maturity, and today the most important factor we are concentrating on is the liquidity of shopping centers which must be profitable for a long time.”

“Properly constructed shopping centers make our lives more comfortable, which is to the advantage of both the consumer and the owner,” says Hermin Emis, managing director of the European representative office of the International Council of Shopping Centers (ICSC Europe). “We must constantly increase efficiency and improve the professionalism of managers, and only this way can the most be drawn from retail facilities.”

Experience in Europe was reviewed as part of the conference. Indeed, Stefan Pregnell, president of the Polish Council of Shopping Centers, spoke about the development trends of shopping centers. “We must design our facilities to suit the lives of people in specific locations, not forcing them to adjust to what we build,” he noted, illustrating his point with the most obvious examples of shopping facilities completed in Eastern and Western Europe. Moreover, Sergei Vasin, director of the Investment Department of the Ulyanov Region, and Natalia Firstova, representative of the Yekaterinburg administration, spoke about the investment attractiveness of Russia’s regions. Indeed, they spoke about the impressive rates of development offered by their territories and their investment advantages.

The meritorious award for a shopping center developer is the readiness of a Western investor to purchase said facility. In line with this theme, Andrei Zakrevsky, senior vice president at the Russian representative office of Knight Frank, enumerated the liquidity factors of a facility which render it attractive investment-wise. Zakrevsky spoke about the timeframe for return on investment and the means for financing the construction of a shopping center. Furthermore, Timothy Fenwick, managing director at Quantum Potes S.A., Luxembourg, presented the Western investors’ point of view by stating that they are differentiated from one another by the level of risk they are willing to assume. “The higher the yield, the more risks an investor is willing to take,” Fenwick said. “There are investment funds trying to find risk-free investments, and they are willing to accept a lower return in exchange for this.” Fenwick also enumerated.

Additionally, Dmitry Zotov, general director at Torgoviy Kvartal, spoke about practical experience in selling retail real estate in Russia. “It is a seller’s market today in Russia he or she dictates the terms; therefore, if a potential buyer is too finicky, he will walk away with nothing,” noted Zotov. He also described the classification of deals on the real estate market, while also citing the necessary presale preparation of a facility. Moreover, the conference participants discussed the most important issues of design, construction and shopping center management, with special attention being paid to the interaction of all the participants in these processes.