Activity of international and Ukrainian retailers has revived attention of developers to building retail real estate in all large cities of Ukraine, UTG consulting company (Kyiv) has told Interfax-Ukraine. “The decline in consumer confidence in Europe, the rapid development of online commerce, the high level of competition in the clothing and footwear segment, the growth of staff salaries led to a decrease in profit margins and a pile of inventory at the largest European retailers, forced them to look for new markets, stimulated exit and the opening of stores in markets of countries not previously covered,” Head of Strategic Consulting at UTG Kostiantyn Oliynyk said.
So, after many years of negotiations, the leading international retailers presented earlier in the country began to return to the national market of Ukraine: H&M, Decathlon, Koton, Defacto, Polo Ralph Lauren, Kilian, AllSaints, PennyBlack, Tru Trussardi, Laurel, XTI, Santoni, Jo Malone, Daniel Hechter and others.
According to him, by the end of 2019, at the various stages of implementation (construction, preparatory work, concept) in Kyiv and the nearest suburbs there are 44 projects with a total rental area of 1.46 million square meters, in Odesa – 15 projects with a total rental area of 419,400 square meters, in the Dnipro – more than 100,000 square meters, in Kharkiv – more than 124,000 square meters, in Lviv – more than 80,000 square meters.
At the same time, the purchasing power and potential of retail space is limited by the size of salaries (in Kyiv – UAH 16,249; in Odesa – UAH 9,473; in Kharkiv – UAH 9,453, in Lviv – UAH 9,729), the pace of their growth, and the size of consumer expenses (in Kyiv – 62.2% of total family income; in Odesa – 67.6%; in Kharkiv – 62.9%, in Lviv – 71.80%) and the growth of the cost of housing and utility services, maintenance/rental of housing, travel, transportation, communication, education, medicine, as well as the level of inflation and the exchange rate of the national currency.
In addition, the success and functioning of retail real estate is significantly influenced by the volume and structure of the existing supply. So, in Kyiv there are five regional, 27 district, 24 micro-district, 19 specialized and 32 separate hypermarkets with a total area of just over 1.6 million square meters. The current offer of Odesa is 449,100 square meters, Kharkiv – 503,400 square meters, and Lviv – 399,100 square meters.
At the same time, the retail real estate offer is constantly increasing. In 2019 alone, the Smart Plaza Obolon micro district shopping centers (GLA is 11,800 square meters) and the Oasis shopping center (GLA is 7,800 square meters) were opened in Kyiv, and the regional River Mall (GLA is 62,200 square meters) and Blockbuster Mall (GLA is 135,000 square meters), the Araks specialized center in Khodosivka (GLA is 10,000 square meters) and street retail located at 2, Kyrpy Street (GLA is 2,500 square meters).
In addition, on December 7, the Karavan Outlet updated shopping center (GLA is 45,300 square meters) was announced for opening after restyling and reconstruction.
“As a result, in the case of the implementation and commissioning of all declared large-scale projects in local markets, a surplus of retail space may occur, which will entail a redistribution of consumer flows between facilities, an increase in vacancy and a correction in rental rates downward, especially in obsolete facilities with serious conceptual flaws,” Oliynyk said.
In his opinion, the approach of saturation and changes in the market are already becoming noticeable, and some developers have begun comprehensive modernization, redevelopment, specialization, or restyling of their retail facilities. For example, such facilities as Karavan, Metrograd, Silver Breeze, InSilver, Lukianivka Kvadrat, Gorodok, Magellan, Marmalade, Dream Town and Sirius started the update. In addition, Oliynyk said that a number of owners of the malls plan large-scale changes in the near future.