Russian luxury shopping center cancels rental payments of tenants during Covid-19
May 11, 2020
It’s no mystery that the outbreak of the coronavirus pandemic has taken its toll on the fashion industry. Countless fashion events were postponed or cancelled, while retailers saw their sales revenue drop as they closed shop.
Russia is no exception. The country has seen 209,688 confirmed cases, making it the fifth most affected country in the world. Moscow has extended its lockdown measures until May 31 and wearing face masks will be required by all residents in public places and transportation. These measures have hit small businesses the hardest, as work became scarce and they struggled to pay their employees.
Moscow-based luxury shopping center Vremena Goda Galleries has found a way to secure its tenants during these unprecedented times. Instead of continuing to charge rent, it has decided to cancel the rental payments of its leesees in April and May, as long as governmental restrictions are still in place.
Vremena Goda Galleries, which is located on Kutuzovsky Avenue, opened its doors in 2007. It now houses more than 150 fashion brands across 6 floors and 32,000 square meters. Among its tenants are Chanel, Dior, Louis Vuitton, Burberry, Breguet, Cartier, Valentino and Stella McCartney, as well as a beauty salon, cinema, international restaurants and the largest grocery store "Globus Gurme" in Moscow.
To provide further relief, the shopping center has recently announced its partnership with Globus Gourmet to donate food to those whose financial situation has become critical. More than 1,000 packages will be given to projects assisting the elderly and people with disabilities.
FashionUnited spoke with Lilit Adibekyan, CEO of Vremena Goda Galleries, about how lockdown measures are affecting the luxury shopping center.
What is the reality of the lockdown situation at Vremena Goda Galleries?
The shopping center is in restricted mode, which is sad to see. People can still visit the Globus Gourmet grocery store, AVE pharmacy and Vision optics, while the Spettacolo and Asia Hall restaurants are open for delivery. We saw these measures and restrictions impacting our customer traffic and now we are only getting about 800 visitors a day.
How is Vremena Goda Galleries handling its rental agreements?
Since we value our tenants, we are doing our best to reach a compromise with each brand and boutique. Currently, it is particularly important to maintain business ethics, professionalism and humanity. In order to support tenants, we have made the decision to cancel rental payments for April and May if current restrictions remain.
What is your forecast for the retail real estate market and what can shopping centers in Russia, in particular, luxury and premium classes expect for the future?
Regarding Vremena Goda Galleries, we predict an increase compared to the previous year. First, during the self-isolation period, our visitors will start missing offline shopping activities and especially the experiences that cannot be obtained when buying luxury goods from home. Second, most likely, it’s going to take some time for air travel to resume, so those who are used to flying for shopping will opt for a more local choice. I would also like to add that not everything depends on us, but also on the brands themselves. Unfortunately, many of them will not be able to produce new collections as planned for this year, due to delays in factories.
There are brands that are monitoring the market and deliberately reducing production since they are not ready to take risks. If all goes well, they will then increase production again at the beginning of 2021.
Have you decided to pay salaries to your employees in full volume?
We have saved all jobs and all salaries are being paid fully.
How did Russian authorities respond? Will there be any support from the government?
I believe that authorities are currently having a huge amount of urgent tasks and responsibility. The current situation is making it very difficult to help everyone at the same time, as they are forced to prioritize and take a balanced approach to each new step. Now we realize that no one knows our business better than we do, so we are trying to solve all issues ourselves instead of waiting for outside help. Our task is to find all the necessary solutions to respond as quickly as possible to all the changing input and work out each block in a targeted, more precise way.
What is your outlook for tenants - how many will leave and vacate the premises?
We are doing our best to keep all our tenants. We have made a concession with all our restaurateurs before the end of the year, and if necessary, we will support them in 2021 as well. It’s our collaborative effort. Without constructive dialogue and mutual understanding, this situation cannot be overcome.
How has the concept of the shopping centre changed since you came? And what changes do you expect to come from the uncertainty in the country?
We are negotiating with various brands to expand several boutiques so that companies can provide a wider range of goods. Recent events have forced us to adapt these plans. Some projects have been postponed for three to six months and some for a year, while some plans have progressed just a little bit. These uncertainties concern our work routine, but we continue to look positively at the future and will do our best to adjust.
What is the difference between Vremena Goda and other luxury shopping centers in Moscow (Russia)?
We are the only luxury shopping centre in Russia. All the rest are department stores. We don’t deal with procuring goods, but rather provide a platform for tenants. It’s an entirely different business. We merely act as intermediaries not only between the buyer and the brand but also between the brands themselves - we help them understand, for example, how comfortable, beneficial and profitable they will be in the close atmosphere, as well as whether their customers are alike.
What promotions are you currently carrying out? What do you do to continue connecting with customers?
We are active on social media, update our website on a regular basis and continue communicating with our customers remotely, which is seeing positive feedback. Despite all the circumstances, we are also devoting time to strategic customer relation projects that we plan to launch, particularly our loyalty program.
This interview was originally published on FashionUnited.RU by Galina Utesheva. It was translated and edited by Anna Zwettler.
Photo Credit: Vremena Goda Galleries