Restaurant Operators Come to the Rescue of Moscow Shopping Centers
- By Natalia Samarina
- Sep. 29 2016 00:00
Now people go to the mall to shop for emotions, and that is why the restaurant is taking on greater significance.
When Peking Duck restaurant was still open in European Shopping Center, the author of these lines was a regular there. Since the restaurant closed and in its place was taken over by American jeans, my friends and I rarely go to the mall except to see movies.
This illustrates an emerging trend. Currently 40 percent of European consumers choose what shopping center to go to based on what there is to eat there, according to research by management company ECE, which found that, between 2010 and 2015, turnover of Food & Beverages operators in German shopping centers alone increased by 54 percent. The average European consumer spends 474 euros per year on food and drinks in shopping centers, making about 160 visits to eateries (JLL data).
Despite the fact that hospitality and food items received 6 percent and 10 percent less money from consumers in Russia, respectively, in 2015 than in 2014 (Rosstat), food is still helping retailers earn. "Consumers are limiting their spending," said Alexander Obukhovsky, director of the Knight Frank commercial real estate department. "But people have gotten used to eating out and chatting in cafes. A return to gatherings in the kitchen, as in Soviet times, is impossible, in my opinion." Now people do not go to the mall to shop, they go for emotions, and that is why the restaurant is taking on greater significance, Anastasia Kuznetsova of Cushman & Wakefield. She said that these trends are well illustrated by Columbus. The food court of the mall is fully rented and, from dinner on, the entire huge area is packed with visitors, and there are lines at the doors of these restauarnts in the evening.
The average check at Moscow eateries was 265 rubles ($4.37) in 2015 (JLL data). "The consumer is getting older. Those over 35 are the most resistant to spending. Young people are the most vulnerable," the JLL study found.
According to the consulting company's estimates, the share of food court and restaurants in the gross leasable area in existing shopping centers in Moscow ranges from 3 percent to 15.4 percent. For comparison, in European facilities, restaurant operators occupy up to 10 percent. In Moscow shopping centers being built now, developers are willing to devote 20 percent or even 30 percent of the leased premises to food, said Marina Malakhatko, CBRE retail space director. "The smaller the project, the larger the share of eateries," she said. "Reconceptualization is a growing trend on the shopping-center market," said Tatiana Malyanova, head of shopping center leasing at JLL.
Shopping centers in Moscow
At present, total supply on the shopping centers market is approximately 5.4 million sq.m. By the end of the year, it could increase by more than 400,000 sq.m., if developers follow through with opening the facilities they have announced. The number of vacant premises is estimated by the “Big Five” brokers at an average of 10 percent. Most of the free space (close to 30 percent) is in shopping centers that have opened since 2014, according to CBRE analysts.
Most of the owners are now revising the content of their facilities, increasing food courts to replace inefficient tenants and attract new ones. If major alterations are not possible, they do a mini-reconception of individual sectors, combining spaces to get rid of the dead-end corners and open fresh markets in the food court, as they are now in high demand by consumers.
Rental rates in the food court are the highest among all operators in a shopping center. According to CBRE, in the second quarter of 2016, rents averaged from 64,000 ($979) to 106,000 rubles ($1622) per sq.m. per year — assuming that the operator is paying rent to the owner, rather than a percentage of turnover. Cafes and restaurants get much more favorable terms. The former are charged from 20,000 rubles ($306) to 31,000 rubles ($474), and the latter from 13,000 rubles ($199) to 16,000 rubles ($245).
"The uniformity of restaurant offerings has given way to diversity, successful brands don't repeat a concept but are diversifying," say JLL experts. The newly opened Riviera shopping center (the only shopping center to open in Moscow this year) has devoted 5000 sq.m. to the food court and restaurants. There are 14 operators, said Olga Kazakova, deputy director of leasing at the Riviera, and they are in the process of signing contracts with another 12. The shopping center has the usual fast food chains (Burger King, KFC, Teremok), as well as restaurants in new formats (Uryuk.me). The developer offers not only standard inside premises, but also a summer terrace with views of the Moskva River. According to restaurateurs, the correct food court increases visitor flow to the shopping center by 7 percent, and by 12 percent evenings and Sundays. The revenues of other tenants in the shopping center grow by 5 percent when the Food & Beverages segment is expanded.
"Everything related to food is of interest to shopping center owners now," Malakhatko said. "Those who can't expand the area of their food court organize fairs and farmers' markets and so on." Without exception, all brokers surveyed by REQ were looking forward to the opening of the food court a la farmer's market from Ginza in the Fifth Avenue shopping center. The group already has experience with a similar project at Danilovsky market, which it has been managing since Spring 2015. There are 20 different food outlets (they are called "food court units") with 200 seats in 300 sq.m. Each unit occupies from 10 to 35 sq.m. Visitors number 2000 a day, according to brokers, and the average check is from 250 to 750 rubles ($3.80-11.40).
These projects are becoming more numerous, says Ginza shareholder Alexei Gubkin. In addition to Danilovsky Market and Fifth Avenue, the farmers' cooperative LavkaLavka is operating in Mega shopping centers, and at the Ecomarket in Konkovo a new food court has been in operation since last December. In September, a "food court from the best restaurateurs" has been located at Usachevsky Market.
Gubkin calls such projects the result of "restaurateurs' and developers' concerted movement" towards each other. "The market came up with this concept, and now people are looking for partners who can do it, invest in it and manage it," he said. Gubkin did not disclose what investments the Ginza group is making in such projects. It is hard to calculate investors' costs, Obukhovsky said, but now the risks of such investments have decreased in comparison with investments in other segments of commercial real estate. He sees great potential in them. Haute cuisine restaurants and little-known hospitality enterprises are becoming more eager to consider malls, says Malyanova. However, she adds, such concepts are being actively developing only in the top malls. Only they can ensure a steady flow of visitors and high conversion into buyers. Attendance is up in the 90 shopping centers in Moscow in 2016 compared to 2015, the Watcom company's Shopping Index shows. For example, in the last week of July, visits remained at the level of 482 persons per day per 1000 sq.m. of leasable area.
Turnover in public catering establishments can differ by an order of magnitude, says Malakhatko. At best, the standard revenue of a successful spot (50 sq.m.) in a shopping center food court will be 2.5 million rubles ($38,230) per month. A "hot" restaurant can bring up to 50 million rubles ($765,000), and a small one will make 100,000-150,000 rubles ($1530-2294). Since the beginning of 2016, the operators in food courts have faced no serious drops in revenue, said Obukhovsky.
Everyone is reminded of the German model of a "market plus a food court" on the top floor of a department store such as, for example, in Berlin's KaDeWe, said Obukhovsky. The Moscow department store Tsvetnoi is trying to do something like this. It has a supermarket with a restaurant on one floor. But, Malakhatko notes, the atmosphere there is not very convenient, to the point that there are not enough restrooms. But the situation could be corrected with a professional manager.