International expert - partner EnterInvest: Belarusian shopping centers have some defects in the concepts.

 An expert in commercial real estate development, head of the Stockholm office of the international consulting firm DTZ Tobias Fröberg visited Minsk in July. Mr. Fröberg came to Belarusian capital in order to assess the market by the invitation of EnterInvest, Swedish specialist visited a number of shopping centers and gave his opinion on the state of the local retail market and forecast its future development.

You have experience of SC projects development in Russia, China, Sweden. How would you describe the current status of retail RE in Belarus?

What I have seen so far in Minsk – SC “Corona”, “Arena City”, “Europa”, “Expobel” -  I can draw a parallel between regional towns in Russia in the beginning of 2000s. The situation looked pretty like you have now in Belarus. There were neither big international retailers, nor famous foreign brands. Shopping centers were developed in some Slavonic way…

I’d like to notice that commercial RE has its classical way of development common for most of countries: from open air markets to no name pavilions and then – to modern shopping centers. As I see, Minsk is somewhere in the middle of this way.  

What points of Belarusian retail should be developed in the nearest future?

To my mind, almost everything needs to be enhanced in those centers I visited in Minsk.  The projects have a lot of evident mistakes in their concept design. Mistakes touched both architecture and tenants. Sales area is also used inefficiently. There are errors in space organization, for example, exits and stairs are placed in a wrong way and so on.

Arrangement of goods falls behind from European standards and nowadays Moscow shops. Range of products choice is very restricted especially in fresh group. It’s clear Belarusian retailers should enrich goods lines and increase the number of suppliers.

It is interesting that in Belarus some product shops are called hypermarkets but they are not in fact.  In Europe the term “hypermarket” means the shop where food and non-food are equal. In Belarus for some reason supermarkets are named hypermarkets. 

But still Belarusian SC work successfully and profitable despite mistakes…

In my opinion the situation will continue till international developers come to Minsk and offer much more advanced projects. Existing SCs will be losing their clients as far as customers goes to more comfortable shops.

What about local SC income - to my mind, their owners should analyze the current concept design and identify ways to increase their income from every square meter. 

How to develop the proper concept? What kind of analysis should be carried out, before developer or investor picks up the final decision?

It’s really not a rocket science. First you have to analyse the current market situation – exisiting retail market, competition, benchmarks etc. Then you analyze the sites market potential by studying the purchasing power/catchment area and that should give you the size and type of center, of course depending on the sites physical constraints. After this you develop your concept, design and tenant mix. It is important to choose tenants on the base of serious marketing research not for some other personal reasons and gut feeling.

I’d like to point out that there’s certain pattern of SC development. It’s built on the choice of so called anchors like food shops, DIY shops, electronics and furniture. But the major profit pool is fashion. Belarusian developers shouldkeep in mind this international experience while creating SC design. For Belarus it’s also burning to work on famous brand engaging.

How to attract international operators to Minsk? What are the major challenges?

Firstly, it’s important to start negotiations with foreign companies being armed with serious project concept not with the breakthrough idea on 1 pager. It’s essential to understand all the requests and criteria of international operators. Besides professional team with experience of communication with international retailers is also vital.

Secondly, Belarusian developers should demonstrate that local risks would be covered by economic profit of SCs. It’s evident Belarus retail has big market potential that could make local risks much softer. You need to show it efficiently.   

Similar way has being passed in Russia. There was a moment when foreign investors were in doubt about the retail market, huge, but risky. 

But Russian companies were able to attract investor’s attention and persuade in the potential of local market.  

How would you forecast the development of SCs in Minsk in the next years?

As I’ve said the potential is great. New up-to-day shopping centers and famous brands coming is a matter of time. But the current SC owners should be a bit stressed about this as it will not be so difficult to top them with nowadays design, range of goods and brands.