IKEA to invest over $2bn in Russian expansion

By bne IntelliNews June 22, 2016

Despite Russia's slumping economy, its largest shopping centre operator, IKEA Centers Russia, is investing at least $2.1bn to upgrade and expand its current portfolio of 14 locations across the country, the Wall Street Journal reported on June 22.

In Russia, where the shopping centres of Sweden-based IKEA are known as MEGA malls, the vacancy rate of its portfolio is now around 1.4%.

MEGA centres have an average of 200 stores and bring in 275 million visitors a year, IKEA said.

"More retailers want larger space to showcase their products," Olga Shevtsova, head of sales and commercial development at IKEA Centres Russia, was quoted as saying by the newspaper.

IKEA has long-term expansion plans further east in Russia over the next ten years, but currently will focus on more modest expansion of existing premises, including two malls in Moscow. As a result, their leasable space is expected to increase by up to 20%. Tenants in the fashion, toys, electronics, entertainment and food sectors are expected to also grow in the expanded malls.

Two months ago, Russia's Deputy Minister of Industry and Trade Viktor Yevtukhov said IKEA was among foreign companies looking to start production in Russia.

"With regard to IKEA, they are planning to produce up to 40% of their products at our facilities in the near future," he said. "Moreover, IKEA managers told us that they have started to sell abroad flax goods that they purchase [here]."

Meanwhile, IKEA has apparently resolved a land conflict in Khimki outside Moscow, near its first flagship location in Russia. A city court confirmed IKEA's rights to a plot of land on which it built the Khimki Business Park offcice centre a few years ago, Vedomosti daily reported on June 22.

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