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What Crisis? Biggest Mall in Europe Opens in Moscow on Friday

At a whopping 2.48 million sq ft  (250,000 sq. m.) with over 550 stores and development costs at $1 billion, investors make a very bullish move amongst economic naysayers, like Bloomberg here

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According Ivan Fedyakov, a random and comically obscure director of research in St. Petersburg for INFOLine, "this is not the best time for opening a large venue".

REALLY Bloomberg? If you are going to spin something this big as a "bad thing for Russia's bad economy" you will have to do better than that.

<figcaption>Russians are mall-crazy</figcaption>
Russians are mall-crazy

The people behind opening literally THE biggest mall in all of Europe probably know better than your researcher. This is a bullish move not a bearish one.

This article originally appeared at Bloomberg

This week’s opening in Moscow of Europe’s biggest shopping mall comes at an inopportune moment for investors backing the project.

The Aviapark mall opens its doors Nov. 28, just as Russia is headed toward recession and its businesses are contending with international sanctions over the conflict in Ukraine. Meantime, the ruble’s plunge to record lows, rising interest rates and the fastest inflation since July 2011 are eating into consumers’ finances.

“It’s not the best time for opening such a large venue,” Ivan Fedyakov, general director of St. Petersburg-based researcher INFOLine, said by phone.

At 230,000 square meters (2.48 million square feet) of space for about 550 stores, the glass-roofed Aviapark mall will overtake the MetroCentre in northeast England when it opens for business. It’s triple the size of the nearby Metropolis mall, acquired last year by Morgan Stanley (MS) for $1.2 billion in Russia’s largest ever real estate deal.

The development may have cost as much as $1 billion, including land and planning permits, Colliers International estimates. Investors include Igor Rotenberg, whose billionaire father Arkady Rotenberg is a childhood friend of President Vladimir Putin and is on U.S. and European Union sanctions lists.

Stagnant Growth

Russian retail sales growth stagnated at 1.7 percent in October from a year earlier as joblessness rose to the highest since April. There’s a 70 percent chance of a recession in the next 12 months, according to the median estimate of 27 economists in a Bloomberg Survey, published on Oct. 30.

More than 85 percent of Aviapark’s space is rented out to retailers including Groupe Auchan SA, Decathlon, Obi AG, Hoff and Media Markt-Saturn SA, according to broker Jones Lang LaSalle Inc., the mall’s leasing agent. Global brands from Inditex SA’s (ITX) Zara to Adidas AG have expanded in Russia over the last decade as developers have built malls to replace the open markets of the 1990s.

About 100,000 people can walk to Aviapark from their homes within 10 minutes or less, according to a promotional film about the building. Even so, the mall may struggle to retain tenants, said Nikolay Kazansky, managing partner at Colliers International in Moscow.

“Gigantomania is always a risk,” Kazansky said by phone. Aviapark needs to keep rents low enough “in order not to scare off tenants amid the challenging economic environment.”

Domestic tenants include Russia’s, Sportmaster, Detsky Mir and the Karo cinema chain, according to Aviapark.

While the timing may not be ideal, larger malls tend to attract customers even in times of crisis, Fedyakov said.

“People may not be able to afford a foreign trip or a new apartment any more, but they still can please themselves with some shopping,” he said.

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