JLL presents the Q3 2017 Kiev shopping centres market update
For the first time since 2006, no quality shopping centres entered Kiev market in the first three quarters, says JLL. Three objects have been announced to open in Q4: Smart Plaza SC (15,000 sqm GLA), , Phase 1 (22,000 sqm), Retail Park Petrovka, Phase 1 (11,000 sqm). Thus, total volume of completions in Kiev is at 48,000 sqm.
Decline in the volume of new supply is taking place on the back of the recovery in macroeconomic indicators. “Since 2016, real wages and retail turnover have been growing both in Kiev and in the whole country. At the same time, last year consumers were not ready to increase spending in proportion to real wages growth, this year we have seen comparable growth of these indicators in Kiev. This reflects the retail market recovery and facilitates new construction,” noted Darina Kulaga, Analyst, JLL, Ukraine.
JLL analysts expect the increase in SC completions in Kiev in the medium term. Thus, in Q3 construction of Ocean Mall SEC has resumed, Phase 2 of AprelSEC has been announced. If economic recovery continues, in 2018 the construction is expected to resume in other frozen projects.
“At the same time, owners of existing SCs, in anticipation of increasing competition, are updating shopping centre concepts and optimizing tenant mix. They focus on the increase of anchors share, primarily entertainment, and mini-anchors, including fashion brands. Timely work today will allow to increase the shopping centre attendance in the future and prolong time spent there, which will have a positive impact on retail turnover and stability of rental flow,” commented Ekaterina Vesna, Head of Retail Department, JLL, Ukraine.
Real growth of retail turnover and wages enhances the international operators’ confidence level in the prospects of Ukrainian retail market. In Q3 2017, seven new foreign brands entered Kiev market, which is the highest number in the last year. In July-September, a boutique of British clothing brand Superdry opened inTSUM, shops of Spanish jewelry brand Tous and Canadian retailer of kids clothes Hatley were opened in Gulliver SEC, Dutch Scotch & Soda and Italian Replaydebuted in Sky Mall SEC, Italian premium brand Liu Jo opened in Ocean Plaza SEC, and Japanese clothing retailer Miniso opened its first store on Khreshchatyk Street.
As a result of demand growth, vacancy rate in Kiev shopping centres dropped by 0.6 ppt, to 6.1 percent in Q3 2017.
Maximum prime base rents are increasing on the back of no completions and growth of demand. In Q3, prime base rents increased by 3 percent reaching $86/sqm per year ($72/sqm/month, excluding VAT and OPEX).