The Russian consumer remains the key player in terms of the retail property sector moving forward, says a report from international property consultants Jones Lang LaSalle.
The retail sector experienced rapid growth when real wages grew on average by 15% per annum over the last eight years and households spent almost three-quarters of their income on purchases, says the report.
In the last quarter of 2008 Russia was hit by the global economic crisis which led to a decline in retail turnover as many companies reduced wages and unemployment began to increase. However, the retail sector has confirmed its resistance to crises, the report points out.
The situation varies among retailers working in Russia. Large international operators are continuing to expand their chains. New brands are entering the market, with GAP (USA) and H&M (Sweden) recently opening stores in Moscow. Hypermarket chains Carrefour and potentially Wall-Mart are expected to follow. There is also a shift from franchise operations to the direct sales model.
It is the large Russian operators who have been more affected by the credit crunch. Their aggressive expansion programmes financed by short-term loans are now experiencing difficulties as lending constricts and consumer demands start to decline.
Shopping centre supply continues to grow actively in Moscow but this is mainly due to completion delays for projects initially scheduled for 2008. Last year, 65% of projects announced for delivery were not completed.
However, Moscow remains significantly under-supplied with quality retail space. Expected construction slowdown in the next two to three years will keep the situation largely unchanged.
But outside Moscow lack of finance is proving a major problem and only a few projects continue to be developed.
In the short term Jones Lang LaSalle expects that limited debt availability will restrict transaction volumes in 2009. Developers will concentrate on completing current projects, the report says and there will be a change in focus to smaller projects.
'Despite the current turmoil, Russia is well positioned to recover earlier than most economies in Europe and will again deliver superior performance. The key distinguishing factors are low household debt, an undersupplied consumer as well as active state support of the economy,' the report concludes.