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Economic basic conditions of transition in Czech Republic
Tuesday, September 22nd, 2009 | University | No Comments
In this post I`ll continue the series “Retail in Prague” and focus on economic basic conditions of transition in retail in the Czech Republic.
Because of the centralistic economic structures before 1989 it has been a radical turn towards the market economy during the period of transition. The relative stable economical situation as well as the high acceptance in the population made Vaclav Klaus (financial minister of Czechoslovakia from 1989-1992) to choose the radical strategy of the so called “shock therapy”. One in all the liberalization of the prices and markets showed a positive development of the GDP especially in the end of the 90ies and 2000 (see c
hart).
The main reform in the economic restructuring plan has been the privatization. Private ownership should be replaced by public ownership to get the basics for market competition. Coupons and restitution made sure to involve every Czech into this process. By the end of 1992 there have been about 100 000 units of small and medium-sized enterprises being privatized (so called “small privatization”), mainly enterprises of the retail, gastronomy and hotel sectors. Therefore the part of the tertiary sector rose to 68%.
Privatization reform in the retail sector had a strong impact on the commercialization and formation of a city in Prague (in terms of a CBD). The demand of foreign companies for modern office and retail estate in the old town center grew steadily from the beginning of the 90-ies. To preserve and to avoid the modernization of the old city structures the old town has been declared as UNESCO world cultural heritage by the city administration.
In these times the „ decisions of the central government as well as local politicians have been grounded in a neo-liberal approach, which has seen the free, unregulated market as the only mechanism of allocation of resources, that would generate a wealthy, economically efficient and socially just system” (Sykora). This reserved point of view in terms of market regulation as well as the lacking competence of this stakeholder group is typical for the institutional reorganization during transition, which will be discussed in the next posts.
Democratization and Transition from Plan to Market Economy
Tuesday, July 28th, 2009 | Film Reviews, University | 2 Comments
To understand the still ongoing political and economical processes in Eastern Europe (or especially in Czech Rep.) since 1989, we have to know something about the existing transition theories. This post gives you a short overview about the main theories predominating the transition research.
Basically there are four directions, which are of importance. It started in the 60-ies with the Systems-Theory of Talcott Parsons which postulates the development of so called ” evolution universals”. He argued that, like Darwin`s evolution of biological organisms, societies progress through their “capacity for generalized adaptation” to their environment. This is achieved mainly through the development of specialized institutions to perform the social functions necessary to meet increasingly specialized needs (structural differentiation). Evolution is then from traditional to modern societies, and progress can be charted via bureaucratic organization, money and market complexes, social stratification, cultural legitimation and the emergence of generalized universalised norms.
Seymor M. Lipset advanced Parsons` theory and developed a casual connection between economical development and democratization. According to this, a growing GDP entails a better education, growing prosperity, tolerance, moderate working style of policy, a consolidation of civil society and eventually democratic structures. This steps of development are essential for the neoliberal paradigm which focuses the free market economy with its constitutive criteria ( e.g. private ownership, free price formation, freedom of competition).
This so called Theory of Modernization and Parsons` Systems Theory expanded into the paradigm of the neoliberal institutions like the World Bank and the International Monetary Fund (Bretton-Woods institutions). While this neoliberal model of development has been implemented on several countries of the third democratization wave (like India, Latin-America, Portugal) more and more criticism began to rise. Mainly the over- simplification as well as the missing explanation for the economical development without further democratization such as in several Arabic countries have been criticized.
New approaches in the transition research began to become more and more accepted. The publication of Huntington`s “Clash of Civilization” in the beginning of the 90-ies focused on the cultural aspects of countries in transition. Cultural theorists assume a close relationship between the secularization of a society and its ability and success in developing democratic structures. Therefor some societies just cannot be democratized because of their special religious-cultural roots which cannot be just replaced by new institutions and values.
Another branch of research are the stakeholder theories, which look on the microscopic level at the small elite-groups which seem to control the transition processes in a country. According to this, different stakeholder combinations can be identified as well as possible activities and developments be fore-casted. This is the main advantage over the Systems and Modernizing theories.
All in one the four theories complement one another so that a stakeholder analysis cannot be made without a system theoretical background. The multidimensional question of the success of the Czech transition strategy as well as the initial situation at the retail market will be targeted in the next post.
Transition of Retail in Prague- A Stakeholder Analysis
Monday, July 27th, 2009 | University | No Comments
Thesis is done! Now I`ve some time to write about it…Let`s start then!
The collaps of the old socialistic system ushered the former Eastern Bloc states in a new era. The transition from the command towards a free market economy has been a tour de forces which ment a radical social and political change.
This thesis focuses on the transitional process at the retail market which is supposed to be “most sensitive to changes”.
Due to the political and economical changes in the Czech Re-public in the beginning of the nineties, this market underwent significant re-structuring, which had an impact on the real estate market, the supply and demand situation as well as on the spatial structure of the city of Prague.
The co-operation between the major stakeholder groups – urban planning, developer, real estate and trading companies – is of primary importance for the empirical analysis of the thesis. Several experts have been interviewed concerning the above mentioned context in Prague.
In the first place it`s intresting to look at the theory, which I`ll introduce to you in the first part of this post-series.
Then we`ll have look at some examples of retail projects in Prague to visualize the current situation.
In the third part, I`ll analyse the stakeholder co-coperation as well as the impact on the urban planning in Prague.
Retail in Transition – Case Study Prague
Sunday, December 14th, 2008 | University | No Comments
In terms of my thesis, which is in process right now, I`ll introduce the theme to you in this new series of upcoming posts!
During the economic transition in the Czech Republic since 1990 there`ve been started reforms on several levels. Restructuring processes in policy, economics, society as well as administration have been initiated by Vaclav Klaus and the so-called “Shock-Treatment”. This transition methodology should guarantee a fast transition from a centrally planed- into a market economy.
A significant role played the restructuring of the retail sector, which is very sensitive to economic changes. It`s sudden expansion had several impacts on real estate markets as well as the city structures. Most important processes if the transition in retail are first, a creation of a estate market, second, a diversification of city functions, third, a scarcity of land in the city. The logical consequence of this development is a dislocation of retail to the periphery of the city (”Greenfield Site”) and therefore a declining buying power in the city.
Parallel to structional changes in the retail sector, an alteration process started also on the state-administration level. The abolishment of socialistic planning ministries and the formation of new governmental bodies led to several administrative gaps, which diminished just years later. Deficiency of competence and force of achievement as well as the absence of a city development plan gave international investors plenty of rope in their location decision strategies.
In the course of reform consolidation and elaboration of a strategic city development plan for the next two decades until 2020, the line-up of stakeholders in Prague retail began to change.
In the context of those developments the exiting question of distribution of power and competence in terms of location decision processes in Prague retail sector will be analyzed and partly answered in my theses.
By means of 4-5 retail projects out of different phases of transition (break, growing, orientation, modernization) shall be exemplified the formation and change of stakeholder line-up as well as their location decision processes.
Changes of the spacial retail allocation structure (city vs. periphery) and its importance in terms of city planning strategies are further aspects of transition of retail in Prague.
Retail in Eastern Europe – Czech Republic
Tuesday, October 28th, 2008 | University | No Comments
From the mid-1998 the Czech retail market showed a continuous growth which speeded up sharply in 2005. Retail sales increased by 4,9% in 2007. Since then, this dynamic growth has apparently slowed down and the market especially for shopping centres and hypermarkets reached saturation at least in cities like Prague.
The allocation of retail area is dominated by the metropolitan region of the capital Prague, the Moravian-Silesian Region, Ustecky Region and South Moravia (see fig.1) with 120-150m²/ p.c.
It is not so long since 1998 there have been just 7 hypermarkets in Czech Republic, whereas the number increased to 231 hypermarkets in 2008. By now the penetration of hypermarkets is the highest in the Central Europe region (16 per 1 Mio. inhabitants). An important reason for this continuous expansion is the high preference for large-area shopping places for grocery by the Czech. With 38% market-share hypermarkets dominate the grocery shopping, followed by the discounters (25%) and supermarkets (16%). Especially in the category of durable food products hypermarkets retain their top position (33-39%). Generally, large-area food retailer (hyper-/supermarket, discounter) have got high preferences with 75-83%. Smaller specialized stores have an inferior position but play a big role at the fresh-food market segment.
Consumer Market Trends
In future increasing per-capita incomes will change the demand situation at the retail market in Czech Republic. The needs and motivations of customers will become more and more diversified. Their increasing interest in “life quality” products such as bio-food and generally quality fresh food (bread, pastry, meat etc.) will strengthen the position of specialized shops with more service and personnel quality. Approximately one half of Czech prefers to purchase those goods in small non-self-service stores or smaller groceteritas (e.g. butchers`s). The growing request for “new/affordable luxury”, covering also the higher interest in health-conscious life, and the preference for specialized drugstores, contribute to the withdraw of hypermarkets at those sensitive good categories. The change for better, in terms of smaller store formats, a more diversified range of products, better service and performance characterize the main brand change strategies of big retail chains in the near future.
The concentration of trade will go on and a small group of three or four retail chains will get segregated. In 2005 the competitive Czech market pulled out major retail chains (Carrefour, Edeka, Delhaize) hence about 45% market-shares are held by just a few retailers (Metro, Ahold, Schwarz, Globus). Besides the consolidation of the existing retailers many experts anticipate the entry (through acquisitions) of retail giants, as Wal-Mart or Aldi.
According the project “Retail Vision 2010” by INCOMA Research and Blue Strategy, the fastest growth is expected with discount stores from current 13% to 17% in 2010 and small-scale hypermarkets (up to 4 000 m²). Several retail chains build new hyper-/ and supermarkets in smaller versions to make it possible to operate in areas with a smaller number of customers or in city centres. A shift of destination for new openings of hypermarkets is expected. Townships below 50 000 inhabitants and even with only 15 000 inhabitants are targeted on by big retail companies as Kaufland, Hypernova or Tesco.
Retail Market – Slovakia
Wednesday, October 15th, 2008 | University | No Comments
Slovakia records one of the fastest growing rates of retail sales in Europe. An increase of 5,5 % in 2007 (7,5% in 2006) shows the dynamic development at the retail market in Slovakia. Most activity in country is still concentrated in the capital Bratislava. The International Survey 2007 ranked Bratislava at the forth position right after Moscow, St. Petersburg and Prague in terms of the attractiveness for international retail companies (inside CEE). The two NUTS2 regions Bratislavskiý Kraj (around Bratislava) and Stredné Slovensko (Košice, Žilina) will experience most of the investments in retail in the next ten years (see Fig. 1). Retail planning environment remains favourable, with currently no size limits or restrictions on retail development, albeit with bureaucratic intervention from public bodies.
There are three main groups of retailers in the country: co-operative societies, international players and domestic independents (small shops/kiosks). Western grocery retail companies like Tesco, Rewe (Billa) and Schwarz Group (Kaufland) expand in Slovakia since 2000. By now there are about 293 outlets in Slovakia. Most of them are large-area hyper-/supermarkets or discount stores. None the less the Slovak retail market is still dominated by a Slovak co-operative Jednota Slovensko with 2 318 small format outlets (mostly supermarkets / cash & carry). The dominant preference position of self-service stores with 35% market-share, followed by the supermarkets (29%) and hypermarkets (23%) mirrors the scheme of the retailer market-shares. Although the number of hypermarkets increased from 10 in 2000 to 91 in 2006, many customers still prefer grocery shopping at small-format stores. For reasons of time-saving especially smaller households favour self-service outlets which offer a sufficiently wide range of foodstuffs and basic non-food products.
Market Trends & Retail Formats
Though smaller supermarkets remain a very strong sales channel at the Slovak retail market, mainly because they meet the demand of smaller towns and municipalities, the latest trend indicates a change in purchasing behaviour of Slovak households. The preference for shopping in large-scale shopping centres and hypermarkets, particularly in the capital Bratislava is to be anticipated. Galleria shopping centres in the city centre, anchored by a hyper-/supermarket, and four western-style shopping malls at the “Greenfield-side” of Bratislava build the starting-position for the further retail development in the country. The year 2006 marked a significant turning point in terms of the number of newly-opened shopping centres. Four middle-sized (up to 24 000m²) were built in Tranava and Martin. Six large-scaled (up to 88 000m²) shopping malls will be opened until 2010 in the vicinity of Bratislava and one in Žilina.
Retail in Eastern Europe – Poland
Thursday, September 18th, 2008 | University | No Comments
Polish retail market has gone through a rapid transition over the past 15 years. In 2006 sales in retail increased by 8 % and 2008 more than 1 Mio. m² new, modern retail area will accrue. The number of outlets for food-retail also increased up to more then 120 000 units in 2006 with more then 3400 hypermarkets (410) and supermarkets (3003).
With 137m² modern retail space per 1 000 inhabitants Poland has further potential for retail developers (Western Europe average is 200m²/1000 inhabitants) especially in smaller towns since the markets in larger cities are saturated (with 600-800m²/ 1000 inh.). Further constraints for developers result from new (planning) regulations concerning “trade during certain holidays” and “building approvals” for new shopping centres.
The internationalization of the Polish retail market compelled domestic food retail companies to a consolidation process. Emperia Holding is one of the largest Polish retail/wholesale companies which is at market since 1990 and ranks on the 7th position (by profits) among the Top ten retailers at the Polish retail market in 2006.The market leaders are represented by well-known international retail companies Metro (1), Tesco (3), Carrefour (4) and Auchan (5). A Portuguese retailer Jeronimo Martins Dystrybucija (JMD) is the second-largest retailer with more than 1100 outlet-stores across Poland. As the research of GfK indicates, Biedronka (store-chain name of JMD) is the most deeply rooted chain of stores in the customers’ awareness. As small-format supermarkets with an area below 100m² still dominate the Polish market, the Biedronka remains the most popular shopping place for over 55% of the customers.
At the moment, about 94% of total retail outlets have still a trading area below 100m². The greater part of the people (36%) prefers still small stores to make their shopping. On the other side about 24% of Poles prefer the hypermarket as the main shopping place for food. The strong competition from modern (western) companies is continuously weakening the position of traditional distribution channels. Statistics indicate that more shoppers are turning to hypermarkets and the number of people who visit a hypermarket more than once a week doubled compared to 2000 from 19% to 40% in 2005. The number of hypermarkets increased in 2006 by 12 % as well as the amount of supermarkets with an 11% increase. Concerning big retailers as the Metro AG (Real) , Tesco or Carrefour who represent the retail market mostly by hyper-/supermarkets the future development at the Polish market will certainly be positive.
Consolidation among foreign retail chains already straightened the market position of Metro AG, through acquisition of Geant (Casino) and Carrefour of Ahold (NL) in 2006.
The next five years will see very dynamic structural changes in retail trade. Hyper-/supermarkets and discounters will become the leaders in food-retail. The two last-mentioned distribution channels are predicted to develop quicker than other shops. The number of specialized stores will decrease as well as corner grocery stores. Especially, the increasing competition in larger cities from foreign chains will contribute to the withdraw of domestic small-area shops. In rural areas the trend is in contrary the growing number of small shops by domestic retailers. In response to this, foreign companies adjusted their strategies and introduce also smaller shop formats outside urban areas. So the French purchaser Carrefour set up mini-hypermarkets and Carrefour Express with sales-areas of 800-2000m² and announced to continue its expansion.The intense competition adds to more diversity of marketing strategies in terms of quality, brands, efficiency and service.
Andrei Schleifer – A Normal Harvard Prof?
Thursday, June 26th, 2008 | Book Reviews, University | 1 Comment
Bei Vorbereitungen auf eine Abschlussprüfung bin ich zufällig auf ein Buch von Prof. Andrej Schleifer gestoßen – Russia A Normal Country after Communism”. Zwar habe ich bis dato nur das dritte Kapitel daraus gelesen, aber bereits genug, um an dieser Stelle einige brisante Informationen zum Autor und dessen Werk zu berichten.
Zunächst einmal zu dem Inhalt des Kapitels, welches die Privatisierungsreform der 90er Jahre in Russland behandelt.
Der Autor idealisiert den Erfolg der russischen Reform, die sich seiner Ansicht nach vor allem durch die hohe aktive Beteiligung der russischen Bevölkerung sowie die schnelle Durchführung auszeichnet und einen wichtigen Schritt zur Ent-Politisierung der Unternehmen geleistet hat. Als wichtigste Aspekte zur erfolgreichen Durchführung benennt Schleifer: Privatisierung, Wettbewerb auf Märkten und Eigenkapitalbeteiligung. Er thematisiert die Notwendigkeit der Privatisierung zur Steigerung der Effizienz von Unternehmen, sodass die Kosten der Politisierung (Subventionen, günstige Kreditvergabe oder illegale Zahlungen) von Unternehmen steigen. Auf diesem Wege wird es für die Politiker immer ungünstiger ihre Machtstrukturen zu erhalten und Kontrolle auszuüben.
Das Privatisierungsprogramm, dass unter Jelzin 1992 gestartet wurde, ist vor allem durch die Voucherausgabe (1 Voucher hatte einen Wert von 10 000 Rubel) an die gesamte russische Bevölkerung, bekannt geworden. In den s.g. Voucherauktionen wurden zehntausende Staatsunternehmen privatisiert. Diese erste Etappe der Massenprivatisierung brachte dem Staatshaushalt nur geringe Einnahmen ein, weil die Unternehmen weit unter ihrem Wert verkauft wurden. Zudem schwankte der Wert ein und derselben Aktie von Region zu Region. Die ab 1994-96 durchgeführte zweite Etappe der Privatisieung sollte dem defizitären Staatshaushalt höhere Einnahmen sichern, was durch die berühmt berüchtigten Pfandauktionen erreicht werden sollte.
Soweit ein kurzer Abriss des besagten 3. Kapitels…
Was mich aber beim Lesen stutzig gemacht hat war, dass Schleifer in seinen Ausführungen mit keinem Wort folgende Fakten erwähnt hatte:
1. Desinteresse großer Teile der Bevölkerung an Voucherauktionen und Tauschhandel mit Vouchern (1 Voucher = 2 Flaschen Vodka)
2. Das Entstehen von Investmentfonds und Banken, die sich durch Aufkauf großer Voucherpakete Mehrheitsanteile an Großunternehmen erwarben
3. Entstehen einer reichen Oberschicht der Oligarchen und von ihnen initiierte Pfandauktionen, in deren Rahmen Unternehmen der Erdöl-und Gasindustrie zu Schleuderpreisen erworben wurden
4. Die Verarmung großer Teile der Bevölkreung und den Verslust ihrer Bankguthaben
5. Den Ausschluss ausländischer Auktionäre
Und es gibt siherlich noch mehr Fakten, die das von mir vervollständigte Bild der realen Geschehnisse, noch ergänzen. Diese Fakten sind kaum zu widerlegen, belegt durch Zeitzeugenberichte und zahlreiche wissenschaftliche Veröffentlichungen. Wie und aus welchem Grund hatte Schleifer bei seiner Analyse der russischen Privatisierung diese wichtigen Tatsachen unterschlagen?
Um diese Frage beantworten zu können ist es vielleicht ganz interessant, wenn man ein Paar Details aus der Karrierelaufbahn des Autors – Professor Andrej Schleifer- recherchiert.
Andrej Schleifer emigrierte 1976 mit seinen Eltern (jüdischer Abstammung) in die USA. Dort studierte er Mathematik und Wirtschaft an der renomierten Harvard University. Hat dort eine glänzende Karriere gemacht und mit nur 29 Jahren eine Professur an derselben Universität erhalten. 1991 fuhr er im Auftrag der US-Regierung mit mehreren Kollegen des Harvard Insitute for International Development (HIID) nach Moskau um die neue “demokratisch” gewählte russische Regierung Sachen Etablierung marktwirtschaftlicher Strukturen zu beraten. Er arbeitete eng mit den Reformisten Egor Gaidar (Ministerpresident unter Jelzin) und Anatolij Chubajs (Vorsitzender des GKI – Privatisierungskommitees ) zusammen. Konnte durch seine muttersprachlichen Russischkenntnisse Insider Kontakte knüpfen. Da im Auftrag der US-Regierung tätig, war es ihm und seinen Kollegen strengstens untersagt sich an Privatisierungsauktionen zubeteiligen und auf dem neuen Markt Investitionen zu tätigen. Gegen diese Regel hat Schleifer, sein Kollege und Vertrauter J. Hay und ihre Ehefrauen verstoßen indem sie Millionen von Dollar in russische Erdöl-und Gasindustrie investierten.
Erst 1997 flog der Skandal durch US-Revisoren auf und es folgte 2005 in den USA ein Prozess gegen Schleifer und seine Kumpanen. Sie und die HIID sollten 30 Mio.$ Schadenersatz an die US-Regierung zahlen. Entgegen der Erwartung, dass Prof. Schleifer seinen Titel los ward, konnte er die Professur weiterhin an der Harvard University behalten.
Und nun 2005 dieses Buch, wo er die russische Privatisierung als gelungen glorifiziert. Will er damit vielleicht seine Spuren verwischen und die Raubwirtschaft der 90er Jahre an der er sich beteiligt hat in Vergessenheit geraten lassen? Man mag sich gar nicht vorstellen wie viele solcher “wissenschaftlichen” und “auf Fakten” beruhenden Werke die “Harvard University Press” noch auf den Markt bringt bzw. schon gebracht hat und welche Lehren solche “Professoren” an dieser renomierten Uni angehenden Ökonomen vermitteln!Ist es normal?
This Post will be translated in English soon!
Moscow`s Retail Sector (Part II)
Tuesday, May 20th, 2008 | University | No Comments
Eventually I found time to continue my post about the Transition of Moscow and the outstanding position of the retail sector.
A
number of Russian online-newspapers report, that in 2006 Moscow’s estate market and the supply of areas for retail experienced an accelerated growth. About 2.5 Mio. m² area for retail and just 4-6% vacancy are a quite good starting position for further expansion of the young retail market. As measured by other European metropolises, e.g. Berlin (360m²), Prague or Warsaw (620m²), Moscow (110m²) ranks last, comparing the retail area per 1000 inhabitants. Because of that fact, the expansion to Russian markets is one of the strategies many leading international companies like Tesco, Carrefour, Real or Marks & Spencer pursue. The growth forecasts sound quite auspicious. In the years 2007 and 2008 the retail area has increased at 958m² and 707m².
At present time the development of Shopping Centers is one of the big businesses with more than 35% annual rate of return and only 6-8 years Pay-off period. The high rents of 600-4000$ per m² (for comparison only, in Prague 120$ in 1A location!) in popular shopping centers like the “Evropejskij TZ” and 500-2000$ inside the “Garden Ring” underline this high level of demand. This impressing comparison reflects the high potential of demand in Moscow`s retail sector.
The current Europe-wide trend to develop not simple shopping centers to shop there basic goods but to make people stay there for longer time hence to entertain them inside those palaces of Glass and Mirrors. Multiplex Cinemas, bowling, fitness and casinos supplement the new strategies of the center developers. Those new build multifunctional centers are bigger then ever with up to 200 000m² for retail, offices and parking space. To name some of the most popular ones in Moscow: “Oruzhejnyj” , “Zwenigorodskij”, “Chuka” or as mentioned before “Evropejskij” (see picture). But by now there about 100 shopping centers in Moscow.
The wealth of the Muscovite’s is growing steadily, that is one important factor for the developing of the retail sector. Moscow as a high-price shopping destination like there`s London, Paris or Milan, that is probably the future trend in city tourism which will certainly be a magnet for people from all around the world.
Transition of Moscow and the Retail Sector (Part I)
Wednesday, April 9th, 2008 | University | 1 Comment
In 2007 Russia`s capital counts more then 14 Mio. inhabitants, the city ranks first in terms of expensiveness and offers the most dynamic investment activity in the country. This exceptional position of this Megapolis is due to Moscow`s history and the specific spacial structure of Russia. For Moscow is a very complex subject of study, this article picks out just one field to show some (partial) main difficulties of city. The urban management deals with typical changes (and problems) of cities in transition – formation of a real estate market, gentrification, residential-to commercial-conversions, growing of the Tertiary sector, growing traffic volume and the weakness of state authorities to name some of them. On the basis of retail the question of a possible implementation of western patterns will be exemplified.
The historical core forms the 
Kremlin (fortress), the old slawistic word for ring fence, which was build in the 15th century. The wooden basic fabric of the city (100 000 inhabitants) has been burned down first time by the Tartars in the 16th century and second time by the army of Napoleon in 1812. The reconstruction, which started in 1813, included modernization and expansion of Moscow. The revolutions in 1902 and 1917 entailed that St. Petersburg has been replaced by Moscow as Russia`s capital city in 1918. The socialistic centrally planned economy of the Soviet Union conducted Moscow an outstanding status in terms of political, economic and social role model.
The urban planning which played an important role of the socialistic ideology and was implemented to influence the co-habitance of people demonstrates a very interesting example in the Transition process from plan to market economy. Closely related to the estate market and retail industry, urban planning in Moscow has experienced the most impressive visible change during the past two decades. The privatization of government property contributed to the building of a real estate market where people now are able to buy and sell flats and Dacha’s without the usual counter trading. The privatization of real estate had also a very strong effect in the transitional society for it out marked and opened a gap between the winners and the losers of the transition. The new price level for flats in the city raised at a 1000-fold (gentrification) but also in the suburbs as well as the vicinity of Moscow rents grew exuberantly.
Gated communities for the rich high class (”New Russians”) are built near the central district or in the western part of Moscow e.g. Vorob’evy Gory or Kvartal 75. The poorer (and major) part of Moscow`s inhabitants lives in Komunalkas (flat sharing), small flats or just in the vicinity, oscillating between the city and home by Metro.
In line with the change in housing situation, the growing importance of commerce especially in the city (defined by the Garden Ring) is worth to be mentioned as it is actually a response to the changing demand situation. This theme will be explained in detail in Part II.
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