Kazakhstan

KazakhstanThe Republic of Kazakhstan, the ninth largest country in the world, is a transcontinental country in Central Asia and Europe, which benefits from its proximity to Russia, China and India, three of the economically active BRIC nations.  It is also bigger than Western Europe in size.  The capital was moved in 1997 from Almaty, Kazakhstan’s largest city, to Astana.

Kazakhstan became independent in 1991 and is the most economically advanced of the post-Soviet “Stan” countries. It has transformed from a predominantly centrally planned agrarian economy and raw materials supplier of the former Soviet economy, where the military industry played the dominant role, to a market economy. The country is rich in oil, gas, coal, minerals, metals and many other natural resources and has the highest level of GDP per capita in the region.

Kazakhstan is a growing retail market with high potential for further development. It has the third largest expenditure market in the CIS (Commonwealth of Independent States) after Russia and Ukraine and the 38.4% of the population is aged between 25 and 54 years.

ECONOMIC SUMMARY
ECONOMIC INDICATORS*20102011201220132014F2015F
GDP growth 7.37.55.16.04.55.5
Consumer spending 11.010.911.111.14.55.5
Manufacturing production 8.33.60.62.04.45.4
Capital Investment 3.83.63.46.04.55.5
Unemployment rate (%)5.85.45.35.35.35.4
Inflation 7.18.35.25.76.77.0
€/Tenge (average) 2195.405.5204.1191.6202.0240.5234.0
US$/Tenge (average) 147.5146.6149.1152.1179.5185.0
Interest rates 3-month (%) 3.741.923.004.40N/AN/A

Note: *annual % growth rate unless otherwise indicated. E estimate F forecast

Source: National Bank of the Republic of Kazakhstan/The Agency of Statistics of the Republic of Kazakhstan; Oxford Economics; Reuters

ECONOMIC BREAKDOWN
Population 17.2 million (Q1 2014)
GDP224.4 bln USD (2013)
Public sector balance -2.1% of GDP (2013)
Parliament Presidential Republic
Head of State Nursultan Nazarbayev
Prime Minister Karim Massimov
Election date 2016
RETAIL SALES GROWTH:
% CHANGE ON PREVIOUS YEAR
20102011201220132014F
Retail Volume25.320.911.816.6N/A
Retail ValueN/A N/AN/AN/AN/A

Source: The Agency of Statistics of the Republic of Kazakhstan

LARGEST CITIES (2012)
CITYPOPULATION
Almaty1.51 million
Astana825,400
Symkent689,300
Karagandy486,000
Pavlodar353,500
Taraz352,800
Semey337,100
Ust-Kamenogorsk325,800
Atyrau283,000
Uralsk279,600
Kyzylorda262,600
Kostanay222,600
Petropavlovsk208,900
Aktau184,400
Source: The Agency of Statistics of the Republic of Kazakhstan

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Kazakhstan: 48.019573, 66.923684

MAJOR DOMESTIC FOOD RETAILERS

Magnum, Arzan, Small, Interfood, Green, Ataba, Anvar.

MAJOR INTERNATIONAL FOOD RETAILERS

Ramstore, Metro.

MAJOR DOMESTIC non-FOOD RETAILERS

Technodom, Sulpak, Mechta, Planeta Elektroniki, Alser, BSB Group (Beautymania, French House, Planeta Krasoty), Mon Amie, Meloman Group (Meloman, Marwin, Komfort,), Intertop, Kimex, Grazie

INTERNATIONAL RETAILERS in KAZAKHSTAN

Louis Vuitton, Dolce & Gabbana, Saks Fifth Avenue, Prada, Burberry, Dior, Moschino, Stella McCartney, Fendi, Lanvin, Tommy Hilfiger, Inditex Group (Zara, Zara Home, Massimo Dutti, Bershka, Pull & Bear, Stradivarius, Oysho), La Senza, Marks & Spencer, Mango, GAP, Topshop/Topman, Aldo, etc

Food & Beverage Operators

International – Burger King, KFC, Hardee’s, Pizza Hut, Costa Coffee, Segafredo, Baskin Robbins
Local – Assorti, Il Patio, AB Restaurants Group (Coffemania, Cafeteria, Augustin, Del Papa, Bochonok etc.)

TYPICAL HOURS
SHOPPING CENTRESSTREET RETAILSUPERMARKETS
10.00 - 22.0010.00 - 20.0008/09.00 - 22/23.00

There are a limited, but steadily expanding, number of international brands operating in Kazakhstan. Many affluent shoppers prefer to travel to the Middle East, Turkey and Western Europe for branded goods and a more advanced shopping experience, despite improvements in domestic retail provision.

Research shows that the population of Kazakhstan is going through a phase of increased spending to the detriment of saving and urban residents tend to spend significant amounts of their income on clothing, accessories as well as the leisure facilities commonly present in many of the shopping malls.
The Kazakhstan retail market is very much in its infancy although the shopping centre sector is beginning to grow as consumers shift away from more traditional open-air bazaars and other informal markets.

E-commerce is very much in its infancy. Although accurate figures are not yet available buying goods via the Internet makes up only a very small part of the retail market. Growth is restricted by the both the country’s low population density and the vast distances between major cities.
It is possible to enter the retail market direct, though most franchise and enter with the help of local operators.

There are no restrictions on foreign companies either buying or renting property in the Kazakhstan. The Kazakhstan lease structure is generally considered to be more orientated toward landlords, mainly due to the limited supply of modern retail space across the country and the high level of interest from new brands wishing to enter the market.

The use of rents based on a percentage of turnover is becoming more common, particularly by international retailers entering the market. In addition, international retailers predominantly lease retail space as opposed to purchasing.

On average it will take 6-12 months from initialising the property search to taking occupation of an existing property. This includes time for considering location options, the identification of buildings or sites, negotiating leasehold and drafting of the appropriate legal documentation.

TOP SHOPPING CENTERS BY SIZE
NAMECITYSIZE (GLA SQM) YEAR OPENED
MEGA Alma-Ata, (1 & 2)Almaty81,0002006 (MEGA 1) 2013 (MEGA 2)
Khan ShatyrAstana80,0002010
A’port MallAlmaty63,6002009 (extended in 2012)
Esentai MallAlmaty55,0002012
ADKAlmaty37,0002012
KeruenAstana35,0002008
AktauAktau32,0002009
MEGA AktobeAktobe29.8002009
MEGA AstanaAstana22,7002007
Asia ParkAstana22,3002009

 

New Entrants to the Market

Prada, which opened a 740 sq. m store in Esentai MallPorche DesignMoschinoZara HomeOyshoM.A.C
Adidas Brand CenterF&FPepe JeansI amJack&JonesEtam
QuicksilverAntonio Biaggi

KEY FEATURES OF LEASE
ITEMCOMMENT
Lease TermsThe average lease term varies significantly between 7 and 15 years for anchor tenants and 3-7 years for small/medium-sized retailers, dependent upon the type of retail sector and type of tenant. Anchor tenants, which are key to the overall success of the scheme, will be able to negotiate preferential lease terms to offset longer leases. In the absence of a clear agreement in the lease, the tenant has no legal right to break so long as the landlord fulfils his obligations and break options are not common in the market. The authorised use will depend on the terms of the lease, which will also state the degree to which this may be varied by the tenant.
Rental PaymentRental payments are usually made on a monthly basis. Rents are normally paid on a fixed basis or by turnover rent (percentage of turnover). However, some retailers prefer to pay higher fixed rental rates rather than revealing trade volumes. A security deposit of 2-3 months is common, depending upon the lease length. This may be increased to 6 months upon signing the pre-lease agreement. Premium payments are common practice in the retail market at times of limited supply and vary on a case-by-case basis.
Rent ReviewIndexation is common practice if the lease agreement is quoted in or tied to a foreign currency, which can be as high as 12%. The basis of rental review is open market rental value (upward-only) usually annually or after the first 2/3 years.
Service Charges, Repairs and Insurance A service charge is usually payable in multi-tenanted buildings and is measured using a device of any type on the leased space. The landlord is responsible for external/structural works in multi-let buildings. The tenant is responsible for internal repair and insurance. The landlord usually insures the main structure and external fabric but will charge this back to the tenant through the service charge.
Property Taxes and other costs The local property tax is charged based on the residual value of the asset stated in financial reports. VAT at 12% is charged on rental payments.
Disposal of a LeaseThe tenant has a right to sub-let/assign their premises, subject to landlord’s approval. The landlord has a right to terminate the lease prior to lease end if the tenant does not fulfil his obligations under the terms of the lease. At lease end, the tenant is responsible for re-instating the premises to the same condition as at the start of the lease, subject to normal wear and tear. At lease expiry, the tenant is responsible for re-instating the premises to the same condition as at the beginning of the lease, subject to normal wear and tear.
Valuation MethodsThere are no special valuation methods attributed to retail premises. The common valuation is on an “overall” basis per sq. m. per month in either local currency (tenge) or US$. Retail space is measured on a net internal area basis excluding any common areas, services, internal walls etc.
LegislationAll leases are governed by the Civil Code of the Republic of Kazakhstan due to the lease agreements being negotiated between both sides. Both the landlord and the tenant are responsible for the registration of the lease agreement at the appropriate authorities and share the cost and all registration fees. However, this can be renegotiated at the time of the lease agreement where, in most cases, the landlord registers and pays all costs.


Kazakhstan Contacts

Steve Brown

Group Managing Partner, Veritas Brown
CDC 2 Business Centre, 240V Furmanov Street
Almaty, 050059, Kazakhstan
Tel: +7 727 334 4000
Mob: +7 701 266 8482