Low Rent Good News for Food Outlets

For MTSPB Bar, a chain of beer halls, has opened four restaurants since summer and is planning four more this year.
ST. PETERSBURG -- The crisis has presented new opportunities for chains of restaurants and cafes, which can now afford to rent premises that were previously too expensive.

In the middle of January, SPB Bar, a chain of beer halls, opened a branch at 8 Nevsky Prospekt -- premises that were previously leased out as an office. Since last summer, the chain, which comprises seven bars, has opened four new establishments and plans to open several more this year, a representative of the company said.

In the middle of December, Ginza Project opened Charlotcafe -- which, its management claims, will have an average bill of 500 rubles ($14) -- in the former MCM clothing shop on Kazanskaya Ulitsa, while Khalyal, an oriental cuisine cafe, has opened in the premises of a former pharmacy on 1st Krasnoarmeiskaya Ulitsa.

The real estate market has become more attractive to public eateries, said Denis Radzimovsky, general director of Vkus, which manages the Mikc chain. Prices that were previously sky high have now decreased by an average of 20 percent to 30 percent and in some locations by 50 percent, he said. The cost of opening an establishment has not decreased, however, because fittings and equipment have become 20 percent to 30 percent more expensive during the same period, he added.

The Dve Palochki chain of Japanese restaurants is completing a new location at 4 Moskovsky Prospekt. Yakov Pak, the chain's marketing director, said investment overheads had not decreased significantly but that it was possible to negotiate significant delays in payment and discounts on work. In January, even the most sought-after premises dropped in rental value by 35 percent to 40 percent compared with December last year, he added.

Sergei Fyodorov, development director at Praktis CB, said supply exceeded demand in the street retail sector. At the peak of rental prices in summer 2008, premises on Nevsky Prospekt were being let for $15,000 to $20,000 per square meter, while now many owners have slashed their rates in half, he said.

Many jewelry stores, clothing shops and electronics retailers have left the rental market, leaving unoccupied high-traffic premises in prime locations that are of interest to restaurateurs, said Alexei Fursov, president of the Yevraziya holding. Landlords are offering prices at half the previous rate and are sometimes even prepared to renovate the premises at their own expense, he added.

Because of the crisis, people are eating out less frequently. In the premium sector, sales have decreased by 30 percent, said Anna Nikandrova, a consultant at the St. Petersburg office of Jones Lang LaSalle. The food and beverages sector is very diverse, and the most stable outlets are fast food chains, said Fyodorov of Praktis.

Previously, landlords were put off food establishments because they are subject to a whole range of health and sanitation requirements and fire-prevention measures. Now many premises are vacant, and their owners are becoming more open to offers from restaurateurs, said Olga Kornilova, director of the commercial real estate brokerage department at ARIN.