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As companies are forced to transition to remote work and its continued implementation, 77 retail outlets located in Moscow City's multifunctional complexes have closed.
According to Knight Frank analysts, 20,400 square meters, or almost one-third of all street retail space, are vacant in the Moscow International Business Center. A study conducted by this international consulting firm showed that the share of vacant retail space increased by 12.9 percentage points over the past year.
Among them, the largest amount, namely 7,500 square meters, is empty in the Federation Tower mixed-use complex . As a result, it currently accounts for approximately 37% of the available supply. The Northern Tower also demonstrated high vacancy rates. While it was 100% occupied before 2020, today 42% of the space is empty. However, after the Federation Tower, the Gorod Stolits and Evolyutsiya complexes have the most vacant retail space.
The company's experts believe that the release of street retail space is due, firstly, to the commissioning of the second phase of Neva Towers with its retail space, and secondly, to the negative impact of the coronavirus pandemic. After all, most of the retail outlets operating in the City skyscrapers were targeted at employees of the companies located there. Their exodus from office space and the transition to remote work due to quarantine restrictions led to a loss of profitability for this type of business, and, consequently, the closure of 77 outlets. It should be noted that more than half of these were food service establishments.
It's worth noting, however, that new street retail establishments also opened in Moscow City in 2020. Around 72% of these openings occurred in the first half of 2020, bringing the total number of openings to 43. Therefore, if we analyze the situation as a whole, of the 99 locations that remained empty at the end of the year, 26 remained empty throughout.
A Knight Frank representative noted that mid-year, following the end of lockdown, there was an increase in the number of vacant retail spaces. However, by the third quarter, a recovery in business traffic had already led to a decline in vacancies. However, analysts believe a full recovery in traffic and a reduction in vacant retail space is not expected until the end of 2021.
The decline in business activity and the increase in vacant retail properties inevitably impacted rental rates. Therefore, as expected, the upper limit has fallen by 9% compared to early 2020 levels. A Knight Frank study showed that renting one square meter of retail space currently costs between 40,000 and 100,000 rubles, depending on the skyscraper, floor, and other factors.
