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. Last Updated: 07/27/2016

Top Mall Developer Gives Moscow a Shot

Sweden's Centrumutveckling, the leading developer of shopping centers in northern Europe, has opened a representative office in Moscow.

Founder and owner Hakan Karlsson, 61, said the company has been involved in almost 400 shopping center projects in 15 countries since it was founded in 1969. It plans to employ 25 to 50 people in its Moscow operation within three to five years.

"We are looking for partners; we are looking for talented people to employ. We are looking for financiers and investors who would like to use our skills," Karlsson said last week at the launch of the representative office.

Centrumutveckling, which is Swedish for "center development," has been advising furniture retailer IKEA in Russia for two years and is currently working on IKEA's MEGA mall project in the south of the city.

Centrumutveckling's largest clients are financial institutions, insurance companies, pension funds and municipalities, Karlsson said.

A private company, Centrumutveckling does not release its financial performance, but Karlsson said sales last year totaled about $5 million.

"We are not a big company, but we are involved in big projects," he said, citing a Warsaw development valued at $80 million and several projects in Stockholm worth about $500 million.

The company anticipates strong demand for its services in Moscow. In many European countries, shopping centers represent 20 percent to 30 percent of total sales in a country, Karlsson said. But in Moscow, less than 2 percent of retail sales are made in shopping centers. "We assume that within 10 years, it will be 7 percent to 10 percent of retail sales," he said.

"Russians are big spenders. They spend the money they earn. They are looking for more better, cleaner, better-organized places to shop," he added.

Yulia Nikulicheva, research analyst at Jones Lang LaSalle, and Natalya Oreshina, retail consultant with Stiles & Riabokobylko, the local affiliate of Cushman & Wakefield and Healey & Baker, said Centrumutveckling's combination of services are provided by others in the Moscow market, but no one else provides them in the particular configuration that it uses.

Centrumutveckling's approach "starts with sociological studies and a market analysis of the consumers' needs and desires. After that, the concept development -- what sort of services, what sort of goods should be there," Karlsson said.

"We work out the layout and the design with our own architects, and we do the leasing, financing and management," he added.

Stiles & Riabokobylko's Oreshina said architects are not always able to offer concepts that are commercially successful. "What is needed is to put forward a theme for the shopping center that is coordinated with the architecture and the needs of the people in a particular area," she said.

Centrumutveckling seems to be positioned between niches occupied by developers and real estate companies that are involved in marketing and leases, Oreshina added.

Karlsson said it has no relations with the Moscow city government but Centrumutveckling has good relations with administrations elsewhere and that it wants to contribute to good city planning. "If we work together with the authorities, public transport can be provided and we can have a building structure that fits in with the structure of the area," he said.

Centrumutveckling has worked in as varied places as the Czech Republic, Saudi Arabia and California and found that people's needs were very much the same all over the world, Karlsson said.

But Nikulicheva of Jones Lang LaSalle cautioned that the Moscow market is not as developed as other parts of Europe.

Centrumutveckling's method could probably improve the operations of shopping centers because some clearly are badly designed, she said, but the market is not yet at the stage for Centrumutveckling to introduce its investment partners to Moscow.

"I think that people are the same everywhere, but there are so many poor people [in Moscow] who just cannot afford to go to shopping centers, so they go to open markets. The open markets will continue to exist because they are cheaper," she said.

Oreshina agreed, saying Moscow customers' behavior would converge toward that of consumers elsewhere, but that it would take some time before this process is complete.