On Friday, news outlet RBK reported that Swedish company Ingka Group, the parent company of IKEA stores and Russian Mega shopping malls, is planning to sell off all its real estate in Russia and withdraw from the nation, according to sources in the retail market.
According to the outlet, the company has begun searching for a buyer which could purchase its entire portfolio of real estate, consisting of over 2.3 million square meters of property. The portfolio includes 14 Mega malls, 17 IKEA stores, and several pieces of undeveloped land where projects had been planned, but had not yet broken ground.
According to sources, the company has already begun talks with at least two potential buyers. INFOLine-analytics data indicates the Ingka Group’s Russian real estate portfolio is valued at a minimum of $3 billion.
One of the biggest shopping center owners in the world, Ingka Group is the largest owner of real estate in Russia. Asked for comment the company’s press service declined comment, referring to the story as, “market rumors,” noting that all of its Mega malls are still fully operational, and that it continued to be focused on “ensuring the safety of operations and the quality of customer service.”
Since last year, all Ikea stores within Russia have remained closed, following a decision by company management, made under the pressure of Western sanctions imposed in response to the military conflict in Ukraine.
Marina Malakhatko, head of the retail department at consulting company CORE.XP, noted the decision by Ingka Group to sell off its Russian real estate may have been made in response to concerns over profitability. She noted that although the company’s shopping centers were not unduly affected by the Covid-19 pandemic, the Ukraine crisis as well as the Western sanctions “brought fundamental changes to the company’s business,” making it “too risky” to remain in the Russian market.
As Western sanctions took effect, many companies which rented space in Mega malls were forced to cease operations in Russia. Malakhatko noted that Mega has seen up to 50% of the brands it worked with lost to the company. And now with Ikea closing up shop, the company’s malls will have just lost an enormous amount of foot traffic which could have converted into customers at other stores in its malls.
Malakhatko noted, Ingka Group’s properties in Russia are attractive assets. However, “due to its size, such a deal is on the verge of being a fantasy.” She maintained the company needs to divide up its portfolio, and offer its shopping centers separately to various investors in stand-alone deals.
Recently Ikea had sold its factories in Russia, where where it had produced lumber, as well as furniture for its stores. A Russian government commission has approved the sale of the factories to two local buyers, Russian countertop manufacturer Slotex, and lumber producer Luzales.
