In the second quarter of 2024, the balance of supply and demand in retail real estate is maintained, rental rates remain stable, and the growth of cash income and other factors have a positive impact on domestic trade. Brief results of the quarter and forecasts for the retail real estate market in Minsk were presented by experts from the consulting company COLLIERS.
Stock
In the second quarter of 2024, the supply of leasable space in large-format retail real estate in Minsk will surpass the one and a half million mark and reach 1,504 thousand square meters. m, having increased by 2.6% since the beginning of the year.
In May, the Chervensky shopping and entertainment center was put into operation on the street. Mayakovsky, 6 with a total area of 63.5 thousand square meters. m and rentable 32.9 thousand sq. m, the main anchor is the Green hypermarket with an area of 7 thousand sq. m. m. The shopping center is planned to have a shopping gallery on two floors, an entertainment center and a food court, a fitness center and a medical center.
Read also: Minsk retail real estate market. Results of the 1st quarter of 2024
By the end of 2024, about 87 thousand more square meters are expected to be commissioned in Minsk. m of leasable space in the Prizma shopping center and the Avia Mall shopping center, as well as an increase in the area of the Titan shopping center as a result of its reconstruction.
Demand
In the second quarter of 2024, a balance of supply and demand is maintained in retail real estate, the basis of which is rotation processes and new openings in high-quality objects and locations. Existing retail operators continue to expand: the sixth Korona hypermarket began operating, GRINroznitsa opened the first Local Famous stores, Seven Fridays opened in the new premium supermarket format, and the number of Detmir and Colin's outlets is increasing. The first store of the Russian DNS network was opened, and Podruzhka entered the Minsk market with two stores at once.
Rates
In the second quarter of 2024, as in general since the beginning of the year, rental rates remain stable. A slight decrease in their values in Belarusian rubles (by 1%) completely coincides with the dynamics of the strengthening of the Belarusian ruble against the euro (by 1%). In euronominal terms, rental rates remain unchanged. In the near future, in connection with the expected changes in legislation, the mechanism for calculating the rental rate depending on retail turnover is becoming more and more realistic for tenants of small (100-300 sq. m.) areas.
* For ease of understanding, rental rates are given in euros per 1 sq. m. m/month excluding VAT, operating costs and utility bills for retail space 50-250 sq.m. m.
Vacancy
Growth in cash income and other factors have a positive effect on domestic trade. For 5 months of 2024, the growth in retail trade turnover compared to January-May 2023 is 121.3%, public catering – 115.3%. At the same time, the physical volume index increases for non-food products by 32%, food products – by 8%, and in public catering – by 15%. As a result, vacancy in quality properties remains at 8%. The lowest occupancy rates are recorded in outdated shopping centers that need to change their format and concept, as well as in newly commissioned facilities.
Sales and purchase transactions
In transactions for the purchase and sale of retail real estate, the calm characteristic of the beginning of the year is giving way to activity: in the second quarter, three transactions* were concluded in relation to 16 objects. At the same time, the average price of sold objects is almost twice as high as the values of the previous quarter and 45% more expensive than the average price of transactions in 2023.
13 out of 16 objects were purchased by the Quality Food company, which acquired the objects of the Mak.by chain from the State Property Committee. This transaction could become the most significant investment event in the retail real estate market in 2024.
Another interesting deal is the purchase by the Polotsk development company TsBK-torg of another retail facility in Minsk: 3.5 thousand sq. m. m of retail space were purchased in the Levada mixed-use complex on the street. Novovilenskaya, 27 for 5.2 million US dollars (excluding 19 parking spaces).
* Transactions registered from 03/16/2024 to 06/15/2024, with an area of 500 sq. m. Prices include VAT.
** The price is based on the amount and area of the transaction.
Trend of need for renewal
The shopping center market has been developing in Minsk since the early 2000s. The first shopping centers, such as “Parking”, “Europe”, “Impulse” and “Zerkalo”, offered small shopping boxes to the nascent business. But today they are the ones who contribute to the increase in the overall vacancy rate.
In the late 2000s, second-generation shopping centers appeared, including the first Korona, Expobel, Maximus and Globo. The Stolitsa shopping center was perceived at that time as the most progressive format. The development of retail real estate was determined by food chains – Korona, Hippo and ProStore, while non-food retailers played a secondary role.
In the 2010s, large-format shopping centers, already familiar to us, actively developed. Currently, the market is represented by various types of shopping centers: district, district, regional. The retail real estate market in Minsk is still young: 11% of the area (164 thousand sq. m) is occupied by objects older than 20 years, and the majority of shopping centers – 68 objects with an area of 845 thousand sq. m. m (56% of area) – built in 2006-2015.
Retail real estate is undergoing rapid change, requiring developers to be flexible and innovative. Carrying out partial reconstruction and reconception, as in Expobel, Galileo, Titan, or expansion, as in Green City, reflects these trends. In the near future, competition is expected to increase further, which will require developers to increase the value of their properties through renovation, rebranding, reconception or full-fledged redevelopment.
Every sixth shopping center in Minsk is in decline and cannot compete with modern facilities.
More than 60% of operating shopping centers have faced or will face the need for significant renovation in the coming years.
