By Shakko Hen
Self-storage in Russia is in its infancy. The concept was introduced in 2010 with a few poor-quality facilities in undesirable areas inside the Minsk Beltway. Currently, there are 12 operators in Moscow with more than 500,000 square feet in 25 facilities, excluding Mobius, which offers container storage at seven facilities. There are also two self-storage facilities in St. Petersburg and three others under development.
It’s expected that the Russian self-storage market will follow trends of other emerging markets and expand rapidly over the next 10 years. At this stage of development, establishing market-brand knowledge and maximum market penetration is critical to ensure long-term market dominance. Without a doubt, the market will develop one or two brand leaders and a tier of lower-division operators. Within a five- to eight-year period, consolidation will occur in the market, particularly because new sites are difficult to source and secure on acceptable terms.
A Growing City
With a population of 12 million to 14 million, including unregistered migrants, Moscow is the largest city in Europe and the sixth largest in the world. From an economic perspective, Russia’s gross domestic product (GDP) has been stable over the past three years, and is predicted to grow at around 4 percent to 4.5 percent per year, some three times that of the United Kingdom or the United States.
Moscow’s population has doubled during the past 50 years, with the city itself having expanded around 20 percent in the same period, significantly increasing population density. Plans released by the city’s mayor in mid-2011 for a “metropolitan federal district” predict the city will double in size again over the coming years. Population density is currently around 8,500 people per square kilometer, in comparison to London, which stands at around 550.
Although Russia’s inflation is currently at an all-time low of around 3.5 percent, historically high inflation and a general lack of trust in the banking system have deterred the population from personal savings in favor of consumer spending. This mentality has continued despite the lowering of inflation and improvements in economic stability.
This trend is apparent when one looks at comparative retail sales with the rest of Europe in 2011. It’s safe to say that Moscow is by far the largest retail district in the country, and a high proportion of this spending is being conducted within the city itself.
Moscow is not only a thriving economic center, it also represents Russia’s center for the arts. This mix of economic success and cultural elements has drawn many to the city to live and work. This increase in population has had detrimental effects upon infrastructure in the short- to medium-term, and despite the local authorities' plan to increase the capacity of 19 highways in 2012 alongside ongoing projects to increase road capacity and embracing park-and-ride facilities, Moscow still suffers from severe traffic congestion at almost any hour, day or night. It’s truly a 24-hour city.
Recent legislation has limited construction in the historical center of the city, with a move to concentrate the expansion to the southwestern outskirts; this lack of central supply has placed pressure on housing prices.
Despite the global downturn, house prices in the city have stayed relatively consistent within the past three years and had good growth in 2011, with forecasts predicting 10 percent growth in 2012 and as high as a 20 percent increase for the high-end housing market and city-center apartments.