Ukraine retail market, May-August 2020
Supply and demand
Upon re-opening of the shopping malls in May, their footfall decreased by 10-40% year-on-year. However, in vast majority of the quality shopping malls the footfall dynamics gradually improved during the following months, and the conversion and average check increased, as the customers’ visits have now been more purposeful, and pent-up demand has formed during the quarantine period.
No new shopping centres opened in Ukraine in Q1 2020, but Q2 was more productive: the shopping and entertainment centre ‘Retroville’ opened on 30 May in Kyiv and is likely to become the only major retail property delivered in the city during 2020, and the phase 2 of ‘APOLLO’ was put into operation in Dnipro in June. Because of the uncertainty caused by the COVID-2019 and logistics difficulties, many occupiers were not able to undertake fit-out works in accordance with the contractual terms, and therefore, the new shopping malls, such as ‘Retroville’, has been opened gradually.
Rents and vacancy
During the quarantine period, after closure of entertainment facilities, non-essential retail stores and eateries, vast majority of the landlords of the shopping centres released these categories of tenants from rental payments, while service charges were obligatory often along with marketing charges. After opening of the shopping malls in May in part of their retail components, in relation to some categories of retailers rental discounts of up to 10-15% were agreed for the summer period with further revision planned in September. Any changes in rental conditions for the tenants have been subject to their individual negotiations with the landlords.
Despite the quarantine measures and the obvious negative impact the COVID-19 has had on purchasing power globally and in Ukraine, prime rents in the best shopping malls in Kyiv decreased by around 5%, while vacancy across the shopping malls in the city increased to 8.4% compared to 7.7% in early April 2020 and 9.3% at the end of 2019. In the quality shopping malls in other major regional cities of Ukraine rental dynamics was similar and increase in vacancy was largely minor.