Theoretically work in the warehousing sphere is organized in two ways: either every tenant receives a share of a unified warehouse or works on his own rented zone. The latter variant is the more common, with the aggregate of storage facility property occupying between 20% and 30% of rented space. The owner of any shopping center is interested in renting out as much shopping area as possible for the highest price, and this is causing less and less of these properties to be used for storage.
Deficit on Discount
The area of an internal storage area at any specific shop, as a rule, depends on the positioning of the tenant. Its size depends in large part on the volume of the facility and the level of goods traded, as well as the organizational scheme and the shopping centers rules and regulations. According to specialists, the layout of a warehousing property with large volumes within shopping centers is considered to be more economical on the whole. “The average rate for renting warehouses and shopping areas is considered to be at a minimum 3 to 3.5 times in favor of the latter. This is why the individual warehousing spaces on shopping centers is so rarely carried out,” comments Vadim Prikhodko, deputy general director for RTM Development for marketing and leasing. “Indeed, there are certain small exceptions for large shopping centers and supermarkets. Natalya Oreshina, director of the commercial property department for Cushman & Wakefield Stiles & Riabokobylko, points out that, “Everything depends on the marketing policy of a specific property.” According to her data, the cost of a lease for an internal warehouse may run from 20-30% for the average commercial property.
“The level of area for storage must be set aside during the planning phase for all the logistical elements of a shopping center,” comments Andrei Grigorev, general director of 2L and expert for Logistics Field Audit. “More precisely, the parameters of a warehouse are drawn up after the creation of a rough tenant list and the architectural planning set s everything in stone.” During the solving of the tenant question, potential leaseholders weigh the decision as a unified business, with the area for offices, warehouses, and pre-sale prep being weighed against the actual trading space. Most often the ratio of support zoning to trading space may be 30%-70%, plus or minus 5%. “As a rule not one of the product categories really forces tenants to sacrifice their commercial zone for storage,” explains Nadezhda Senyuk, director of social relations for Technosila and TC Development. “Naturally, during the specification of places for office areas and utilities, these issues must be worked over.” So that the parameters of the shopping center’s general storage area can be determined, it is necessary to know the volume and intensity of goods flowing through the warehouse as well as the value for the tenant. To determine the flow of products, one might survey the tenants independent of the value of the warehouse’s usage or run test models. “As far as I know, these models are very rarely used, and this is why work with them has not started in our company either,” notes Andrei Grigorev.
Professional hypermarkets were once forced to use from 30%-40% of their available space for storage: for example, if the area of the hypermarket does cover 10 thousand sqm, then the technical areas might cover from 3-4 thousand sqm. Now, as this technology zone is reaching levels of 3 to 3.5 thousand sqm. “Supermarkets as always are being divided into storage and product prep spaces on 40% of their area, independent of the operator, because the format does not allow for larger product volumes directly within the retail hall,” observes Alexander Obukhovsky, deputy director of commercial property for Colliers International.
“The commercial area of a hypermarket is occupied at a minimum on a two thirds basis, with the rest being devoted to production and technological assistance,” points out Maria Voronova, head of marketing for RosEvroDevelopment. “But these figures are always approximate, though at a minimum cost must be recovered. It is important that operational reserves be covered at least.
Nataliya Oreshina reminds us that the prediction of future product flow is determined by the popularity of the trading space, assumed revenue, and competitive environment. It is practically impossible to determine the exact sum of a planned shopping center, as the majority of companies simply don’t have this level of experience. This is why today the retailers focus on the experience of their individual shops, and skimp on warehousing even when it may not be justified.
Inconclusive Experience
According to Ms. Oreshina, the warehousing property on a shopping center in the first place is required by a fashion operator on a large complex and by those who pay the highest leases: “This might be small complexes on small lots in the center of the city, where the square meters are very expensive.”
In the majority of shopping centers, there is very little difference between the storage zone and the trading space. “The planners of a project always use the maximum area for a shopping space,” says Mr. Obukhovsky. “We don’t make distinctions for the warehousing area, but rather use as much of our leased area for shopping, giving the tenants the option to choose where their warehouse will be and how it will be laid out,” explains Vitaly Yefimkin, vice president of Tashir. The exception is made for hypermarkets, where for obvious reasons exceptions are made for a storage space. “Our strategy is to rent out our Real Hypermarket and designate a storage area during the planning stage,” says Jens Potten, director of development for Real Hypermarket. Beside the grocery anchor, the warehousing reserve must be maintained by operators of sporting and children’s goods, domestic appliances, and DIY shops. In its time, the Starik Khottabych network once operated in Mega-Tyoply Stan. After working for several years, in October of 2006 Starik Khottabych closed and moved. One of the basic reasons for the hasty retreat was the capacity of Evropa, which lacked any of the customary retailer infrastructure and a sharp lack of warehousing area, as well as a lack of necessary production within the storage space. “Starik Khottabych positions itself simultaneously as an interior consultant and therefore runs with a more flexible policy, attempting to tailor retail space for more concrete situations,” comments Alexander Obukhovsky. DIY operators like OBI, Leroy Merlin, and Castorama prefer free standing spaces from 12-15 thousand sqm, with 5 thousand often given over to the storage space. The specific rules for product storage require specialized technical conditions set by the laws for pharmacies and jewelers. Sometimes there are problems with the DIY format as a whole, especially regarding flammable products. “But in Russia today there are no such limitations, which cannot be overcome with properly designed conditions during the planning phase,” emphasizes Mr. Obukhovsky. “During the technical prep phase the size of the trading gallery must not surpass 3 thousand sqm.” From the point of view of the landlord, the internal warehouse on a shopping center simply cannot be called useless area. The tenant might pay rent for it just as he does for his ordinary retail area, and a professionally managed and utilized warehouse might be traditionally rented out for lower rates, while the landlord might find this generally less appealing. “Though the quality and equipment of such warehouses might not be perfect,” explains Maria Voronova, “The retailers want to use a small warehouse as a part of the shop and additional warehousing area within a logistical park, if they need it.”
Far from everybody is taking advantage of this type of model, however. Many are simply moving away from the center of Moscow or already have a single warehouse that operates throughout the region. “We have outsourcing for the distributional warehouses, in which the individual parties might take their goods to the shops,” explains Nadezhda Senyuk. “This makes the logistics significantly cheaper.” In any event, the proprietor does not need a warehouse if the tenant has one himself. According to Mr. Prikhodko’s experience, if the tenant has several shops, he generally uses a warehouse and arranges delivery on a daily bases.
According to Potten, this situation can barely be called a trend, but rather hinges on the internal logistical organization of individual tenants. “If a company is actively working on the regional market, the volume of necessary warehousing area in a shopping center in the cities depends on where the main logistical center and warehouse may be located. If this includes central regions of Russia, then the warehousing can be reduced for near by regions thanks to the operational flow of goods. If centered on the Volga or in the South, however, then the center and western regions will certainly need more warehousing.” The expert notes that on the whole only a retail park format, which is just starting to develop in Russia, will allow all tenants the desired amount of storage space. “As land in Russia is expensive and the basic revenues are acquired by any proprietor on account of his shopping gallery, we can speak with certainty about the retail park format in Russia, which is not developing,” says Vadim Prikhodko. Sometimes the area initially planned for the internal warehouse might be rented out as retail space by the developer. For example the shopping center, Atrium, includes a lot of warehousing area planned for supermarket space, and when the size of the supermarket shrank, the chance of renting the property out for clothing and other types of services such as cosmetics, dry cleaning, or locksmith services was truly less likely. Naturally, a developer might successfully amend these oversights only after concluding work with a previous tenant.
Logistical Logic
Andrei Grigorev admits that there are no known cases where the internal logistics of a shopping center were realistically planned for during the conception phase or even during later planning: “The fact is that planners plan based on their experience, constructors do what they can, and the management of the company has to settle everything at the end. The trucks can’t get close enough, they break the mountings, there is overflow or overloading somewhere, the service elevators are too small or far from where they need to be, the doors are narrow or open wrong, and so on.” Experts are absolutely confident that only integrated solutions can solve logistical woes, both internal and external, while the earliest phases of planning allow developers to avoid mistakes of all kinds and raise the effectiveness of their shopping center.
The entrances often are located at the back of the building, adjacent to the hypermarkets and vertical traffic appliances, such as the service lifts. “The dimensions of the parking lot must match the complex’s area, in order to guarantee it the normal functionality,” notes Yefimkin. The basic mistakes during planning in the sphere of storage infrastructure include separation from the cargo elevators or improper planning regarding the number of cargo elevators, as well as logistical disengagement from the basic consumers, and the improper formation of loading times and delivery preparations. Vadim Prikhodko adds that delivery to large shops on a shopping center has a great deal to do with the individual service corridors. “This is essential for the comfort of tenants and for the safe functioning of the shopping center. For small shops, cargo flow is possible during non-work hours through the shopping gallery.” The expert points out other planning mistakes include events when the debarking measures are planned as a part of the shopping center’s basic schematic, when the service corridor and large tenant operate on another part of the complex. In this situation, it is necessary to plan a minimum of two loading zones.
The anchor tenants also see error on the part of developers during the planning of internal logistics, according to Ms. Senyuk, which can also be thought of as an absence of individual loading zones, exits, and lifts. For grocers, for example, there is no such problem, while the remaining types of retailer certainly require them. Vadim Prikhodko points out that, “The parking in front of the storage entrances must allow for three or five vehicles. The management company creates a strict schedule for goods and accounts for strict penalties in the event that these channels are blocked.” These docks might occupy two or three thousand sqm in and of themselves. In turn, Mr. Grigoreve considers this sort of generally vague advice to be useless: “It is essential to compile answers for dozens of questions regarding a single specific property. All this information must be a part of the logistical conception, as well as for the shopping center’s basic plan.”
After assembling the totals, Andrei Grigorev reminds us that he buildings used as individual warehouses within a shopping center are formulated as a rule according to the following principle: “For the most part nobody is too concerned with what will happen on that particular area.”