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Retail real estate, as the leading segment of the industry, raises a number of questions related to its further development in Ukraine. The problem to choose the shopping and entertainment centre format, project profitability and investment attractiveness of the retail facilities, as well as entry of the new retail complexes formats to the Ukrainian market will be discussed at the retail round table during CEO Networking Dinner 2013. The event, organized by URE Club, will be held on February 25th in the Premier Palace Hotel. Moderators of the retail round table will be Anna Chubotina, John Lang LaSalle Ukraine and Vladimir Bandura, GFive Development.
Today experts talk about constantly increasing competition among developers which develop retail real estate, and, as a consequence, the constant search for new means of attracting customers to the mall. Both marketing solutions and, actually, the initial choice of the future retail facility concept play hear an important role.
According to Anna Chubotina, Deputy Director, Head of Retail Real Estate at Jones Lang LaSalle Ukraine, «today, regional (area from 40 ths. sq. m) and super regional (area from 70-75 ths. sq. m) large format shopping centres are the most promising. First of all such situation is due to the high competition among retail objects. In such circumstances, only big shopping centres, leading in the primary and secondary areas of coverage, can bring a stable income to the owner for a long time, as they can attract flows of smaller objects and become the only consumers’ destination in a particular area».
According to Vladimir Bandura, Managing Director at GFive Development Ukraine, «in addition to the super regional malls (with professional architectural and commercial concept, good anchors and quality tenant mix as well as with GLA of more than 50 ths. sq. m) retail parks may become the most promising in the near future. It is very resistant format to a variety of market fluctuations, it can be implemented in secondary locations and it can work well, even in the presence of competitive facilities in the format of malls. Also they require less money and time. It is also worth mentioning the standing apart hypermarkets with stores in the checkout area. Developer probably will not earn much, leasing such objects. But if the operator or investor are willing to buy completed product, the economy of the project will be quite attractive, and the risks with proper structuring of transactions - minimal. Perhaps, we can add civilized formats of markets».
On the other hand, the expert expressed caution regarding any real estate development projects of relatively small shopping centres (with GLA of 7-12 ths. sq m.) situated in secondary locations with mediocre architectural and commercial concept. Especially if large-scale and high-quality malls already exist or are going to be built in their coverage area.
«In such a case, the risks of the project are very high, and the owner could face very low tenants’ interest / demand. At first glance, the comment about the mediocre concept may seem out of place, everybody seems to be interested in making it better, but in practice this is even so. The developer wants to save money on design and construction, and the result corresponds to it» - says the Managing Director at GFive Development, Ukraine.
Apart from the development of new formats, experts also note other important trends related to the development of retail real estate segment.
«In Ukraine, in my opinion, every new professional object significantly raises the bar for the market. This creates a noticeable problem for existing facilities. On the other hand, we see quite a difficult economic situation, which limits the purchasing power of the population. These two factors lead to one important conclusion. Now it is not the time to experiment - emphasizes Vladimir Bandura. - All elements of the project must fully comply with international quality standards. Such elements are location, commercial and architectural design, anchors, tenant mix and management. And if there is any doubt at least in one of the items, it is better not to build a shopping mall at all; the risks of the project will be very high».
In her turn, Anna Chubotina pays attention of the real estate market players to the fact that «developers and tenants continue to develop in the regions. Moreover, high quality projects and international tenants have started to develop their strategies not only for the million cities but for cities with a population of 350-500 thousand people. For example – entrance of the New Yorker brand to Krivoy Rog, the SEC «Solar Gallery», the Inditex Group led a number of brands in the «Factory» shopping mall and «Magitsentr» shopping mall - in Kherson and Vinnitsa, respectively».
According to Jones Lang LaSalle, Ukraine, at the end of 2012 the minimum rate of return for shopping centres in Kiev was 11.5%. This figure has been remaining stable since the end of 2011. In 2013, experts do not predict changes in rates of return, including commercial segment. This fact is due to the low dynamics of commercial real estate investment market, which does not provide the preconditions for the compression of yields in the future.
We would like to remind that the CEO Networking Dinner in 2013 with nine thematic round tables will be held on February 25, Monday, at the Premier Palace Hotel. This format is organized by the branch organization URE Club for the third year in a row and always has a high interest among top managers and owners of the companies participating in the Ukrainian real estate market.
For participation in the CEO Networking Dinner 2013, please contact the project coordinator Anna Nestulia URE Club:
+38 (066) 854-00-40
+38 (044) 227-67-53
A_Nestulia@ureclub.com
Related links:
CEO Networking Dinner 2013: the new format of a top management meeting | 21.01.2013
