What will become of Moscow’s street-retail market?

The removal of many small retail establishments (kiosks) in Moscow has coincided with an increase in the lease fees charged for these premises. This, in turn, has led experts to believe that the government has found a formal way to drive sub-lessees (subtenants) out of business.

Ivan Korolev, an Associate in the Real Estate and Construction Practice Group at ART DE LEX, believes that the increase in fees for leasing premises in Moscow is actually a prohibitive measure: “This could possibly be connected with the recent inspection on how retail premises are used. Given that most of these premises are typically subleased, with mark-ups of 10 to 12 times over the original lease fees, this is most likely an attempt to make subleasing unprofitable”.

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“A retailer’s line of business and the location are used to calculate the lease rate. Obviously, a kiosk located in an underground walkway in the less-prestigious South-eastern Administrative District of Moscow should be charged less for rent than a similar kiosk operating in an underground walkway along centrally located Tverskaya Street. Similarly, a grocery shop should pay more in rent than a newspaper stand”, added Mr Korolev.