Marketing report about the research of shopping centers of Kyiv

 20.08.2007 Socmart Company has carried out a marketing research in which 32 functional and 36 under construction shopping centers have been studied.

In spite of the fact that Ukraine cannot be referred to the countries which are stable in their development because of political situation in the country, it is one of the most interesting countries for investing in Eastern Europe anyway. Economics spheres show indicators of growth, residential and commercial real estate is developing, including trading. In 2006 retail goods turnover of Kyiv enterprises occupied 19,2 % in goods turnover of Ukrainian enterprises. Retail goods turnover of the city enterprises has made more than 23,7 billion hryvnias in 2006, that almost 51 % exceeds the indicator of 2005. 8,7 thousand hryvnias of official retail turnover fell per one resident of Kyiv in 2006.

In the first half of 2007 the volume of operations with the commercial real estate in Ukraine made about $293,75 million. Lion's share of this sum of $231,25 million  belongs to business real estate, the rest belongs to trading real estate. For comparison, according to the data of specialized consulting agency Jones LangLaSalle, during last year the volume of operations with real estate made $497,2 million, and in 2005 it has made only $22 million. More than 90 % of transactions were concluded in the capital of the country, in Kyiv.

The structure of trading real estate of Kyiv. The market of trading real estate of Kiev is presented by such formats as shopping centers, hypermarkets (and supermarkets), street retail. Now in Kyiv and its suburb 32 professional ShC function (ShC Komod, ShC Bil’shovyk, Ukraine Department store, Caravan, Kvadrat in Lukyanivka, Kvadrat in Borshchagivka, Ultramarine, Gorodok, Promenade Center, Interval Plaza, Children's paradise (Детский мир), Global UA, Metropolis, Makros, Pyramid, Aladdin, Alta Center, VMB, Plasma, Navigator in Druzhby narodiv, Metrograd, Globe. Line 1, Globe. Line 2, Globe. Line 3, Magellan, Arena City, Mandaryn Plaza, Central Department Store, Olympiys’kyy, Europort, Rhythm, Terminal), the total area of which is more than 556 thousand square meters. One can refer to small such shopping centers as Navigator in Shuliavka, Navigator in Glory square, Samson, Sirius, Clothes House. To large hypermarkets and supermarkets one can refer both hypermarkets and supermarkets of foreign trading networks presented in Kiev by Metro, Billa, and those of Ukrainian operators, namely Epicenter, Velyka Kyshenia, Fozzi groop, Furshet. The main street-retails in Kyiv are Khreshchatyk street, Chervonoarmiys’ka street, Shevchenko parkway, Chervonych Kozakiv avenue.

The offer of shopping centers market. At present distribution of shopping centers in Kyiv both according to quantity, and according to areas, is not uniform. On the right bank of Kyiv there are much more shopping centers (81,3 %, 26 ShC), than on the left bank.

However, the situation with quantity of ShC on the right and left banks will change in 3 years time, but it will not be considerable changes.

By 2010 there will be more than 68 professional shopping centers in Kyiv, or more than 1421 thousand m2 of trading areas. Boom because of putting into operation of shopping centers is expected in 2008 - more than 340000 м2. (Mega City, Dniprovs’ka Pryctan’, Multiplex Plaza, Kvadrat Avrora, etc.)

Rent rates. Due to great demand for trading areas, rent rates increase in a geometrical progression. An average occupancy rate of shopping centers in the capital is 98 %. In Kyiv it is possible to allocate two places of concentration of trading complexes - Petrivka and the city center. In the central successful shopping centers RR has come near to 200 dollars per meter. The same is cost of a square meter per a month in the successful suburban shopping centers (Magellan, Caravan). In the less successful ShC rent rates are much lower (50 dollars in suburban ShC, 100-150 dollars in the central ShC). In one of the most successful ShC they even practice an interesting thing, as Socmart company has learnt, as soon as a free area appears (what happens extremely seldom), between potential tenants, who have beforehand filled the questionnaire of a tenant, a tender by principle of auctions starts, where the minimum rate per meter is 157 dollars.

The structure of areas in shopping centers according to types of goods. Clothes and footwear groups are represented in the Kyiv shopping centers more than other (more than 40% by quantity of outlets), house wear goods and goods for entertainment follow after.

Basic tendencies of the trading real estate market of Kyiv:

1. Investments into the trading real estate of Kyiv. European indicators of profitableness and terms of return of investments stabilized long ago, since the market of shopping centers in the majority of the developed European countries is already filled. It is possible to speak about 5-7 % of profitableness for rent of shopping centers areas in the countries of Central Europe. A recoupment period fluctuates within 10-15 years. In the best shopping centers of Moscow average monthly rent payment for square meter makes from $140 to $180 (data of Cushman&WakefieldStiles&Riabokobylko). Profitableness of Moscow shopping centers is 10-12 %. The rate of profitableness of objects of the trading real estate of Kyiv is about 10 %. Further Ukraine will approach indicators of Near-Eastern Europe. A recoupment period of shopping centers of Ukraine makes 5-7 years. It attracts foreign investors, who are ready to buy either an already finished shopping centre, or a site for building. For example, Irish Quinn Group has bought two objects of the trading real estate in Kyiv, reconstructed Ukraine Department Store and Alta Center, for the last half of the year. And Vietnamese company N and K has bought four sites for building of shopping centers in Kyiv. On one of them in Syvashs’ka street reconstruction of an old building into a new shopping-business complex of more than 20000 square meters area is proceeding at full speed. But not all foreign companies manage to buy ground and obtain a construction permit. For example, Swedish company IKEA, which since 2005 has tried to receive a land allotment for building of MEGA complex of more than 200000 square meters (in Darnyts’kyy district of Kyiv), can not manage to do it till now. However, problems with land allotments and permissions are not happening only to foreigners, it is enough to recollect some trading complexes such as Trojits’kyy (former Olimpic Plaza) and Lybid’ Plaza, where Ukrainian companies act as developers. Moreover, Lithuanian Hanner company, which owned a joint interest on Trojits’kyy together with Neruchomist’ stolytsi company, has sold its shares, probably, they do not want to deal with the scandalous project more. Besides IKEA other foreign retail-operators have numerous plans in Ukraine, for example, French Aushan wants to construct some complexes in Kiev, the first of them is the shopping center in Moscows’kyy prospect.

2. Ukrainian developers, having expanded a field of commercial objects, do not forget about the trading real estate. Major investment-developer companies have several trading projects in their portfolio. For example, 21th century Company is going to construct 5 Kvadrat shopping centers in Kyiv till 2010 (but real construction is being proceeding only in Perova street, and something similar to building is beginning in Balzac Street). Also 21th century Company has begun expansion into regions. In plans of another major investment-developer company NEST (Neruchomist’ stolytsi) is to complete Trojits’kyy (though with erection of this complex problems constantly arise), to begin building of a multipurpose complex in Zolotoustivs’kyy. Consulting-developer companies also are building many projects around Kyiv now. The Ukrainian merchant guild develops concepts of new shopping centers in the crossing of Cimji Sosninych Street and 50-littia Zhovtnia Street, in the Circular Road (near Billa supermarket), in  Sviatoshyns’ka Street. Concorde Development has developed the concept of a large shopping mall in Sribnokil’s’ka Street, the project has recently been agreed on town-planning council of the capital. Under the concept of Real Estate Solutions the shopping mall Materyk is now being completed in Borshchagivs’ka street. Colliers International acted as a consultant at creation of the project Kvadrat Aurora (in Perova street).

3. Building of many shopping malls, commissioning of which have been planned for this year, has not even been started yet.

  Some years building of Oasis shopping complex in 1a Trostianets’ka street, and, accordingly, its delivery in operation are being postponed. Total area is 28 500 square meters. The four level shopping center with a food supermarket (3000 square meters), large-size perfumeries, audio and video equipment shops, a chemist's supermarket, a dry-cleaner, a clothes shop, a supermarket of sport goods, a clothes department store, large-size footwear shops, a children's supermarket. With a multiplex, a disco, food-courts (4 operators), a fitness and health zone, a children's entertaining center, an internet club. And a car park for 385 cars. First the object was planned to be put into operation in 2005. Moreover, new information has appeared that Billa supermarket has received a land allotment by this address.

   The building of underground shopping center Univer City in Volodymyrs’ka street near the Taras Shevchenko University have not been started yet also. According to the plan there have be a shopping mall which will be presented as the city cult youth centre with three main functions: trading, entertaining and function of provision of services for population. The shopping centre structure has to include a large book supermarket with the area of 400 square meters, a supermarket of stationery, a modern shop of computer technologies and mobile communication, a shop of multimedia production, a supermarket of gifts, a quarter of shops for extreme recreation and sports, a multi-brand stock shop (sales of things from shops of all city with a discount) and a unique for Kyiv two-level supermarkets of youth clothes and sports accessories with area of 3000 square meters.

    At the address, where several years ago had to appear the shopping center Odysseus in 12 Bulgakova street, building really take place but not of a shopping complex, it is an extension for school.

    The building of Lybid’ Plaza in Moscow Square is not being conducted till now. The shopping mall has to include a shopping mall itself with total area of 100 thousand square meters, as well as two high-rise towers of office centers, an underground car park for 1,8 thousand places, a network of restaurants, a cafe, halls with slot machines, a bowling hall, a fitness center, 11 cinema halls. Initially the complex building has been planned to complete in February 2006, however the exact date of the shopping mall opening is not known.

4. Active building of shopping complexes in the city centre and  near Petrivka underground is going on, but more projects have appeared on the left bank of Kiev. Kyiv communes of residence such as Desnians’kyy district, Dniprovs’kyy district, Darnyts’kyy district cannot boast of necessary quantity of shopping centers and trading areas, though more than one third of Kiev population (about 947 thousand of people) live in these communes. To functional ShC on the left bank of the capital one can refer such ShC as Children's Paradise (Детский мир), Alladin, Pyramid, Global UA and recently opened Komod. But during the years to come the situation will change cardinally. Presently Mega-city center, two Kvadrat centers (and 2 more Kvadrat Centers are designed on the left bank), Dniprovs’ka Prystan’, a shopping center in Mayakovs’kyy street,  Tel’bin shopping mall, Master Park are under construction. Shopping Centers in Sribnokil’s’ka street, in Balzac street and in Popudrenka street are being designed now.

The last important events in the market of trading real estate of Kiev.

-. Architectural town-planning council of Kiev has approved the conceptual project of Lybids’ka square development (the project of long-suffering Lybid’ Plaza). The project involves building of a multipurpose complex which includes a 4-storeyed part with a shopping-entertaining center, a covered skating rink, cinemas, restaurants, a bowling hall, courts, children's playgrounds and fountains, a multilevel underground car park for 7 thousand cars. The total area of  the 4-storeyed shopping-entertaining center will make 151,9 thousand square meters. Around the perimeter of the shopping-entertaining center many-storeyed towers of an “A” class office centre, a five-star hotel, as well as two residential buildings will be erected. The height of the highest tower will make 230 meters. The office centre will include a 29-storeyed northeast tower, a 49-storeyed east tower, a 22-storeyed southeast tower and a 30-storeyed western tower. The total area of the 42-storeyed hotel will make 56 thousand square meters, and the total area of the residential building with apartments will make 70,4 thousand square meters. The project has been developed by company CAW «A. Pashen’ko» together with Canadian company Brisbin and Company. LLC “Investment union “Lybid’” acts as a customer of the project. An estimated cost of the project is about $800 million.

-Architectural town-planning council of Kiev has approved pre-design offers on building of objects of social and residential assignment in a site near Lukjanivka underground (4,14 ha). The offer presented on town-planning council involves building of residential, office and trading objects with the total area of 317,4 thousand square meters. Among them there are 76,3 thousand sq. m of dwelling, 132 thousand sq. m of offices, 28 thousand sq. m of shopping complexes. Also a car park building for 1 970 cars is planned. The pre-design offer has been developed by LLC Architectural-building workshop "Zhezherin" on order of Main Department of culture and arts of Kyiv. The project assumes possibility of demolition of the Lukjanivs’kyy market.

-The owners of the shopping-entertaining centre "Caravan" will sell 10 % of the trading areas (about 4 thousand square meters). According to experts, at the present rent rate in the shopping center cost of 1 sq. m. will fluctuate within $5-8 thousand. The total trading area of ShC "Caravan" is about 40 thousand sq. m. The maximum quantity of visitors is 55 thousand people a day. It is one of the most successful projects in the Kyiv shopping centers market.

-Deputies of Kyiv council have leased out two sites in Dniprovs’kyy district with total area of about 8 hectares to the companies LLC "Mike" and LLC "LV-Holding". In the beginning of this year the town-planning council of Kiev has confirmed the project of development of the site. Here it is supposed to construct nine high-rise buildings and several low-rise buildings: a hotel-office complex which will locate in two 47-storeyed houses of a total area of more than 460 thousand sq. m, a shopping-entertaining center with area of 310 thousand sq. m, a residential complex for 650 apartments. The height of all buildings will be about 200 meters (43 floors). An estimated cost of realisation of the project makes $0,5 billion. The project has been developed by architectural workshop of the former main architect of the capital Sergey Babushkin.

Kiev city state administration initiates carrying out of audit and an estimation of expenses of the company-builder of trading-entertaining center "Trojits’kyy" in front of the National sports complex "Olimpiys’kyy". The city state administration proposes to create the governmental commission which according to results of the audit will submit them offers about necessity of expenses recovery to the developer connected with dismantle of the ShC. Then Kyiv city state administration will define the customer and the contractor on dismantle, will develop the schedule and will provide its performance. The task to dismantle the ShC has been put by the Cabinet.

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