Vacancy of shopping and entertainment centers in Kiev decreased from 16.3% in 2023 to 15.2% at the end of the first half of 2024, said the head of legal consulting department of UTG Konstantin Oleynik.
“At the end of last year, about 21.4% of space was de facto vacant, due to the closure of foreign department stores (IKEA, Inditex, H&M and others). The actual vacancy rate was 16.3%. Thanks to the opening of most foreign operators, the vacancy gap with actually closed stores has narrowed,” he said.
According to UTG research, the vacancy rate is higher in regional (18.4%) and district (17%) shopping centers, lower in specialized (9.8%) and district (7%) shopping centers.
The expert noted the trend of decreasing effective demand of the population. The growth of household expenditures on housing and utilities services and CP payment continues (at the end of 2023 this category was 18.8% and with the growth of electricity tariffs there is further growth), health care (4.7%), transportation (4.8%), communication (4.3%), education (3.6%). Cumulatively, these categories drain 36.1% from the family budget. Food and alcohol accumulate 43.4% of expenditures. The share of retail network (clothing and footwear, electronics, household goods, cafes and restaurants, entertainment, other goods) in the structure of expenditures is only 16.0% per family ($73.4 or 2,684.5 UAH per month). Inflation and rapid price growth lead to a reduction in individual savings (about 4.4% in 2023).
In general, general savings and cost rationalization are recorded, for the mall market this entails a decrease in attendance and adjustment of rental rates. Compared to pre-war rates, rates for some product groups have halved or more.
“Food supermarkets have become one of the few operators able to generate sustainable footfall and pay moderately high rental rates ($10-20/sq. m in August 2024), while most department stores, entertainment (cinemas, DDCs), fitness centers are aiming for a minimum fixed payment (around $1/sqm) with an additional RTO (fixed payments of $2 to $12/sqm prevailed before the war), shifting the risk to the developer,” Oleynik reported.
According to UTG research, taking into account the current income level of the population, solvent demand is able to ensure successful functioning for 2 million 313 thousand sq. m. in the capital, and in the second quarter of 2024 there were already 2 million 457 thousand sq. m. in operation.
Competition continues to intensify: large shopping centers with a total area of 250 thousand square meters are declared for opening in 2024-2025. Among them are Ocean Mall (GLA 110 thousand sq. m), Lukiyanivka (47 thousand sq. m), White Lines shopping mall (28 thousand sq. m), New Ray (34.5 thousand sq. m), April Mall (36.5 thousand sq. m), BalticSky (20 thousand sq. m). There is a possibility that most of the announced openings may be postponed to a later period.
According to Oleinik’s estimation, the commissioning of the declared projects will bring about a surplus of retail space and gradual redistribution of consumer flows between objects, vacancy growth and downward correction of rental rates. At the existing level of incomes and expenditures of the population, the vacancy rate may reach 17% in 2025.
UTG was established in 2001. It has developed more than 1300 real estate concepts. During the years of work with the company’s participation 4.7 million square meters of commercial space in Ukraine have been leased out.
KYIV, REAL ESTATE, UTG, Vacancy Shopping and Entertainment Center
