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. Last Updated: 07/27/2016

Striving to Combine Retail With Pleasure

With the general improvement in the Russian economy, thoughts have been turning to how to persuade Muscovites to part with their hard-earned cash. This has led to an interesting development in the real estate market: the incorporation of leisure facilities in an increasing number of projects.

Although such pursuits as bowling and cinema going have been popular for some time, most existing facilities are located in separate developments rather than incorporated into larger schemes. The change to "mixed-use" developments mirrors the experience of other European countries where operators are increasingly concentrating their efforts on town centers or units situated within shopping malls.

It is now generally accepted that neither leisure nor retail do best when separated and that combined they may create a "destination" development.

The aim is to keep customers in the shopping center for as long as possible, and many European shopping centers market themselves as a place for a "day out" rather than simply as malls. This means offering a host of other activities often including multi-screen cinemas, bowling facilities along with a variety of bars and restaurants. Repeat visits are also important to the overall success of a scheme, and it is thought that customers of the leisure attractions are likely to return to visit the shops.

It is interesting to note that some developers in Western Europe are known to be considering more ambitious facilities such as skiing. This may in part be attributed to saturation of the traditional pursuits, for example, Sheffield, a city in northern England, now has as many multi-screen cinemas as there were in the entire country at the beginning of the 1990s.

Of course, the leisure-retail mix is not entirely without problems. Opening hours for leisure attractions are long, and such matters as the security of the center as a whole need to be addressed. In addition, the combination of different activities into a single trip increases the requirements for car parking, which is especially difficult for centrally located developments.

For developers of retail centers, leisure users' fondness for their product may be seen in some ways as a mixed blessing. On one hand, such users as cinemas and bowling alleys pay considerably lower rents than retailers; however, they do take up considerable amounts of space — typically 3,000 square meters for a 10-screen cinema complex. However, they contribute to the success of the scheme as a whole, and, allow the landlord to achieve increased rents and better quality tenants in the other areas.

A good example of a project in Moscow that will, when complete, incorporate retail and leisure is the CityStar project at Kursky Station. In the city center, two further projects of this type are also planned close to Belorussky and Paveletsky stations. There are also plans for such a development in the suburb of Mitino, in recognition of the lack of services that exist in the new "sleeping suburbs."

Russia may now be becoming more interesting for foreign leisure operators as saturation problems create difficulties in their home markets. The general improvement in the Russian economy has resulted in the reestablishment of the middle class, and it is these people who are the targets of both the leisure operators and the "mainstream" retailers. It should be noted, however, that cinema operators in particular will need to proceed with caution, as lower income per person, coupled with a thriving market for video releases limits their potential audience.

Amanda Spring is the managing director of DTZ Zadelhoff Tie Leung in Moscow.