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. Last Updated: 07/27/2016

Blueprint of a Shopping Center

With projects like Moscow's Manezh and St. Petersburg's Project 2000 leading the way, the shopping center has arrived in Russia.


As retail centers begin to take off here, it is worth looking at the commercial form they are likely to take. The players involved in a basic shopping center structure include the owner, agent, manager, anchor tenant and the building's other tenants. It is important to understand the interests that motivate each player and to carefully structure their relationships if the center is to be a success.


The owner should make a market study convincing it of the viability of the investment, as its main concern is that investors receive the projected return. In Russia particularly, purchasing or developing a building demands the owner have the support of local authorities to obtain necessary permits and secure the land lease and/or title. The owner will normally contract with market analysts, architects, engineers, contractors, agents and building managers.


The agent is responsible for finding a suitable anchor tenant -- often, in order to secure financing, before work commences -- and letting out the project as quickly as possible, seeking to ensure an appropriate commercial mix including parking, restaurants, cinemas and other leisure facilities to make the center attractive to targeted clients. Hired at an early stage, the agent can offer valuable advice on how the center should be designed.


The manager enters the scene once the center is up and running, although it is typically hired long before. Occasionally, the roles of agent and manager are entrusted to the same firm, reducing costs and ensuring full understanding of the center and its issues. The manager's chief role is to manage not the building but the investment; the owner delegates to it collection of the expected return. The manager enters into agreements with service companies and common facility providers, collects rent, drafts internal rules and regulations for the center and monitors their compliance.


The anchor tenant is the center's ambassador to the public, its best marketing weapon and its insurance for success. A good anchor tenant from the initial stage attracts financing, other quality tenants and customers ensuring the stability of the project. For a project in the outskirts of the city, a leading name will encourage customers to drive out to the center. Such a client is obviously aware of its value to the center, so the owner or agent needs to be reasonably flexible in amending its model agreement to keep it happy.


The other tenants generate the main return on the investment. Ideally, they will be convinced that their own success depends directly on the success of the center and will regard the owner not merely as the landlord, but as a partner. This allows for options such as turnover-linked rent, which includes a fixed minimum guaranteed rent at the lowest possible level and a flexible rent contingent upon the tenant's volume of business. One drawback of such a structure is that tenants may be reluctant to share information on their business accounts with the manager.


It is often helpful, especially in large projects, to set up a tenant's association, membership in which is mandatory under the lease agreement, with the president of the association being the voice of the tenants. This can greatly simplify managing the center.





Mario de Echevarria is a lawyer specializing in real estate with Clifford Chance in Moscow.