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Approximately one quarter of Russia's shopping centers face pre-bankruptcy conditions and risk closure by 2025, according to reports from industry leaders published by Russian media on Dec. 18.
The forecast comes as Russia faces record-breaking interest and inflation rates amid an ongoing economic crisis.
Representatives from the Russian Council of Shopping Centers (RCSC) said that about 25% of Russia's malls are at risk of closure in the coming year. The challenges stem from a combination of factors, including the departure of major foreign companies after Russia's full-scale invasion of Ukraine, rising operational costs, and increased competition from online marketplaces.
A significant rise in interest rates on commercial loans, driven by the Central Bank's policies, has exacerbated financial difficulties.
Oleg Voytsekhovsky, managing director of the RCSC, said that many shopping centers are unable to refinance existing loans or secure new financing. This has hampered profitability and the ability to maintain and modernize facilities.
Pavel Lyulin, RCSC's vice president, pointed to a sharp increase in property values, leading to higher tax burden on shopping centers. In some cases, taxes have increased by as much as tenfold over the past two years.
Lyulin estimated that about half of the income from malls is now consumed by taxes, with additional increases expected in 2025.
Russia's Central Bank raised the interest rate from 19% to 21% in October to curb inflation amid economic strains caused by the war in Ukraine. Central Bank chief Elvira Nabiullina said on Dec. 4 that further rate hikes are under consideration.
After the launch of the full-scale invasion, Russia saw an exodus of Western companies reluctant to contribute to the country's economy and war effort. The combined total of losses for foreign companies that exited Russia since the beginning of the full-scale invasion of Ukraine in 2022 has exceeded $107 billion, Reuters reported on March 28.
Alexander Mertens
