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. Last Updated: 07/27/2016

Booming Shopping Centers to Get First Rating

VedomostiShoppers walking through the Magnit shopping center in southwest Moscow, one of the first to sign up for the new rating scheme.
A new scheme to rate Russian shopping centers, unveiled last week by industry group the Russian Council of Shopping Centers, or RCSC, aims to establish a recognized classification system.

Until now no unified classification or certification system existed and the rating, set to become annual, is going to fix that, its organizers say.

Earlier this year, Moscow's four leading real estate firms -- Colliers International, Jones Lang LaSalle, Noble Gibbons/CB Richard Ellis and Stiles & Riabokobylko, the local affiliate of Cushman & Wakefield Healey & Baker -- established a shared terminology and a building classification system for office space.

Now the country's retail market is mature enough to warrant its own classification as well.

According to a retail market report by Stiles & Riabokobylko, shopping center development has been booming in Moscow for the last few years. In 2002 alone, the number of new retail chain stores doubled compared to the previous year, the report said.

By the end of this year, the combined shopping center floor-space in Moscow is expected to top 1 million square meters -- over three times more than in 2000 and five times more than in 1999.

"The market desperately needs a rating of shopping centers," said Oleg Voitsekhovsky, the managing director of the RCSC. "This is very important for renters, investors and owners. It will ensure market transparency. The current situation, when any shopping center can pick whatever classification it likes best, must not persist."

The RCSC, a professional union of shopping centers' managers, developers, architects, owners and retail operators, was created in 2002. Among its members are IKEA, Ramenka, M-Video, Dixis, Rosinter and Kalinka-Stockmann.

According to the shopping center rating project's manager, Alexander Pypin, 12 shopping centers, including nine in Moscow, have already applied to join. It costs $1,700 to participate, he said.

"We expect that roughly 20 shopping centers will take part in this first rating," he added. While most participants of the rating are expected to be from Moscow, there are also contenders from St. Petersburg, Yekaterinburg and Samara.

Rating participants will be announced Oct. 30 during a conference on retail market investment in Moscow. The final results will be made public in December, Pypin said.

Prior to being rated by a 16-member strong jury, representing Russian and leading international developers, realtors and realty consultants, the shopping centers will be certified.

The procedure, meant to determine whether all modern requirements are met by a specific shopping center, will include assessments of economic effectiveness, marketing and management, architecture and planning, as well as customer service.

According to Pypin, there are 17 criteria that will be analyzed by the jury.

The best shopping centers will be determined in three categories: over 35,000 square meters of shopping floor-space, 10,000 to 35,000 square meters, and 4,000 to 10,000 square meters. Also, the best-managed companies and most-active tenants on the market will be awarded.

While the International Council of Shopping Centers has been awarding its European Shopping Center Awards for 28 years, this is an entirely new phenomenon for Russia.

"Russia never had anything like this," said Tatyana Belova, general director of Ermak that owns the Magnit shopping center in southwest Moscow, which intends to take part in the rating. "It means that commercial real estate is becoming an industry in the true sense of the word."

At this stage, the Russian shopping center rating is focused on classifying shopping centers and working out a unified terminology, to be used by market participants in the future.

"European ratings are used to mark something exceptional and unusual, but right now, for us, one of the main goals is to regularize the market and to make it more effective and transparent," Pypin said.

The general director of Colliers International, Sergei Gipsh, who is a member of the jury, said that even if only 20 shopping centers are rated, it would be a very positive development for the industry.

"In a civilized society, all goods and services must be certified. The creation of this rating is a good sign for the market," he said.

"It will not only allow a more structured look at the industry, but will give shopping center owners, developers and investors access to independent expert analysis."