Kiev Retail Market Overview

Kiev Retail Market Overview

Kiev Retail Market Overview Q2 2014 Kiev Retail Market Snapshot, Q2 2014 Supply Quality shopping centre stock* 753,400 sq m Completions, Q2 2014 ...

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Kiev Retail Market Overview Q2 2014

Kiev Retail Market Snapshot, Q2 2014 Supply Quality shopping centre stock*

753,400 sq m

Completions, Q2 2014

30,200 sq m

Quality shopping centre stock per 1,000

262 sq m

Vacancy rate

8.2%

Announced completions, H2 2014

39,000 sq m

Finance conditions Prime shopping centre base rent**

USD960 sq m/year

Prime street retail base rent**

USD2,160 sq m/year

Operating expenses

USD90-120 sq m/year

*Stock data was updated by clarifying GLA in some objects **Rents are given for a single unit of 100 sq m GLA located on the ground floor of a retail gallery. Rents exclude VAT and OPEX.

JLL – Kiev Retail Overview – Q2 2014

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Supply: Real Estate Development

Supply Dynamics, Kiev

In Q2 2014 only SEC Atmosfera (30,200 sq m GLA) entered the market. Till the YE2014 we expect only SEC Prospect (39,000 sq m GLA) opening. We suppose that 2014 completion will be 38% less than for the 2013 and will amount 69,200 sq m.

JLL – Kiev Retail Overview – Q2 2014

4

European Shopping Centre Stock Benchmarks Total stock*

Stock per 1,000 inhabitants, Q1 2014

The retail real estate market in Kiev is still undersaturated compared to other cities of Europe. We assume that for the YE2014 the total retail stock will grow only by 5% up to 276 sq m per 1,000 inhabitants. *Data for all cities except Kiev, St. Petersburg and Moscow are given for Q4 2013

JLL – Kiev Retail Overview – Q2 2014

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Map of Shopping Centres in Kiev. Existing Supply №

23 2 6

14

10

Globus

19,200

2002

Karavan

40,000

2003

3

Magelan

22,000

2003

4

Mandarin Plaza

10,400

2003

5

Ukraina

22,200

2003

6

Alta Center

16,000

2004

7

Promenada Center

17,800

2004

8

Aladdin

10,200

2004

9

Piramida

12,600

2004

10

Plazma

17,500

2006

11

Bolshevik, Phase I, II, III

43,000

2006; 2007; 2009

12

Komod

7,600

2007

13

Arkadia (former Materik)

15,800

2007

20

14

Sky Mall, Phase I, II

68,700

2007; 2010

8 9

15

Arkadia on Dneprovskaya quay (former Materik II)

18,400

2008

16

Kvadrat Aurora

19,000

2008

17

Darnitsa

5,800

2008

18

Promenada Park, Phase I, II

43,000

2009, 2010

19

Dream T own, Phase I, II

90,000

2009; 2011

20

inSilver

10,200

2011

21

RayON

24,100

2012

22

Ocean Plaza, Phase I

69,000

2012

23

Poliarnyi

8,600

2012

24

Silver Breeze

14,600

2013

25

Gulliver

45,500

2013

26

Manufactura, outlet center

15,000

2013

27

Art Mall

37,000

2013

28

Atmosfera

30,200

2014

16

5

18

12

1 4

17

25 24

22

15

3 27

Neighborhood

28

Community Regional Superregional

26

Year

2

7 11 13

GLA

1

21

19

Name

Specialty

JLL – Kiev Retail Overview – Q2 2014

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Map of Shopping Centres in Kiev. Future Supply №

27 5

26

4

20

25 12 6 8 7

22

21

9 14 28 3

15

32

2 13

23

11 19 36

35

29 1

10 31 30 17 18 16 33

34 Neighborhood

Community Regional Superregional

24

Outlet center

Name

1

Prospect

2

Respublika

3

GLA

Year

39,000

2014

135,000

2015

CUM

22,500

2015

4

Retrovill

91,300

2015

5

Lavina Mall, Phase I

115,500

2015

6

BlockBuster Mall

93,700

2015

7

Lukianovka

47,100

2015

8

Podol

23,000

2015-2016

9

Hartz

95,180

2016

10

Kiev IDEAL

35,000

2015-2017

11

Ocean Plaza, Phase II (Oceal Mall)

45,000

2016-2017

12

Petrovka Moll

n/a

n/a

13

Kiev City Mall

n/a

n/a

14

Leninskaya Kuznitsa

n/a

n/a

15

Avenue

n/a

n/a

16

Kiev MAll

n/a

n/a

17

River Mall

n/a

n/a

18

Vyrlytsia

n/a

n/a

19

Manhattan Mall

n/a

n/a

20

Akademia Paladina

n/a

n/a

21

Sky Mall, Phase III

n/a

n/a

22

Nivki City

n/a

n/a

23

Happy Mall

n/a

n/a

24

Kiev E-95 outlet centre, Phase I

n/a

n/a

25

GorodOk, phase II

n/a

n/a

26

Mall of Ukraine

n/a

n/a

27

Forum Plaza

n/a

n/a

28

Univer City

n/a

n/a

29

Kvadrat on Lesnoy

n/a

n/a

30

Boulevard on Pozniaki

n/a

n/a

31

Amstor

n/a

n/a

32

Sovskie Prudy

n/a

n/a

33

SC on Kollektorna St.

n/a

n/a

34

City Shchaslivoe

n/a

n/a

35

Detskiy Mir, Phase II

n/a

n/a

36

Central bus station

n/a

n/a

JLL – Kiev Retail Overview – Q2 2014

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Retail Stock Breakdown by Districts Quality retail breakdown by the districts, sq m*

Quality stock per 1,000 inhabitants, sq m*

In H1 2014 30,200 sq m entered the market in Goloseevskiy district and 39,000 sq m is expected in Desnianskiy district for the YE2014. Goloseevskiy districts is the most saturated (716 sq m of GLA per 1,000 inhabitant). *In Podolskiy district quality SC/SEC supply is absent

JLL – Kiev Retail Overview – Q2 2014

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Demand: Consumer Sector and Retailers Activity

Wages and retail Turnover in Ukraine Wages and retail turnover, real growth, %, YoY

National currency devaluation (in January-June 2014 around 48%) and limited ability of the government to use fiscal stimulus caused the narrowing of domestic demand. In January-June 2014 retail turnover growth was at 0.8%, which is comparable to mid 2010 and is significantly lower than for the same period last year (11.2%). For the first time since late 2009 real wages growth rate in Ukraine has became negative. In January-June real wages fell by -0,4%. Source: Ukrstat

JLL – Kiev Retail Overview – Q2 2014

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Wages and Retail Turnover in Kiev Wages and retail turnover, real growth, %, YoY

For the first time since H1 2010 the retail turnover growth rate in Kiev has became negative. In January-June 2014 the retail turnover fell by 4.6% (YoY). In January-June 2014 real wages fell by 0.7% (YoY). Source: Ukrstat

JLL – Kiev Retail Overview – Q2 2014

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Retail Chains on the Market: Anchors Type

Food

Key Retailers

Format

Amstor, ATB Market, Billa, Furshet, Fora, Kray, Silpo, Eko-market, Velyka Kyshenya, Cosmos, Topmart, Novus, VARUS

Supermarket

Auchan, Fozzy, Metro, MegaMarket, Krayina, Karavan, Novus

Hypermarket

White & brown

Foxtrot, Eldorado, Comfy

Multibrand

Cinema

Butterfly, Liniya Kino, Multiplex, Odessa Kino, Oscar, Planeta Kino IMAX, Cinema City, Kronverk Cinema

Multiplex

DIY

Novaya Liniya, Epicentre, Leroy Merlin, Praktiker

Fashion

Marka Ukraina, Delta-Sport, Inditex Group, LPP Group, LC Waikiki, New Yorker, Mango

DIY Multibrand/ Monobrand

In H1 2014 new formats entered the market: Intertop Outlet. The hypermarket chain Tam-Tam is planning to enter Kiev market. Top Secret plans to develop the chain of stock shops.

JLL – Kiev Retail Overview – Q2 2014

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Retail Chains on the Market: Retail Gallery Type

Key retailers

Format

Fashion

Benetton, Bershka, Cacharel, Calvin Klein, Colin's, Cropp Town, Diesel, Gant, Guess, House, Lacoste, Lerros, Mango, Massimo Dutti, Mohito, Motivi, OGGI, O’stin, Oysho, Phard, Promod, Pull&Bear, Stradivarius, Tommy Hilfiger, Topshop/Topman, US Polo Assn.

Monobrand

Perfume and cosmetics

Cosmo, Eva, Watsons, proStor, L’Etoile, Bonjour, Brocard, L’Occitane, MAC, Bomond, Yves Rocher, Glossary

Monobrand/Multibrand

Sports goods

Arena, Adidas, Columbia, Nike, Puma, Reebok, Sportmaster, Sportland, Megasport, New Balance, Northland, Marathon

Monobrand/Multibrand

Shoes

Aldo, Antonio Biaggi, Carlo Pazolini, Centro, Chester, Ecco, Egle, Geox, Luciano Carvari, Respect, Tosca Blu, Welfare, Intertop, TsentrObuv, KARI, Plato

Monobrand/Multibrand

Goods for children

Antoshka, Budynok Igrashok, Planettoys, Pelican, SMYK, Tigres, Chicco, Mothercare

Monobrand/Multibrand

Books, music

KS, Chitay-gorod, Empik

Accessories, jewelry, gifts

Accessorize, Almaz, Attributes, Clair’s, DEKA, Diva, I am, LuxOptika, Pandora, Seta Décor, SIX, Swarovski, Swatch, WOW shop, Sekunda

Monobrand/Multibrand

Food-court

Coffee House, Pechena Kartoplya, SushiYa, Shokoladnitsa, Yapona Hata, L’kafa, Mafia, McDonald's, McFoxy, Kredens

Monobrand

Mobile phone

Ringoo, Allo, Mobilochka

Multibrand

Monobrand/Multibrand

Source: JLL

JLL – Kiev Retail Overview – Q2 2014

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Retail Chains on the Market: Franchising vs. Direct Market Entry Franchising

• Local retail chains explore new business areas:  The owners of the restaurant chains Mafia and Casta plan to open seven sushi markets under the brand “Sushi Market” stores.

Direct market entry Retail gallery operators

Marks & Spencer

GAP

s.Oliver

New Look

Mango

OGGI

Guess

Karen Millen

Stradivaius

Promod

Tommy Hilfiger

Reserved

Accessorize

Naf Naf

Cropp Town

Befree

Jennyfer

United Colors of Benetton

Desigual

 Baltika Group sold its Ukrainian division “Baltika Retail” (17 stores under the brands Monton, Mosaic) to Osaühing Ellipse Group

Mothercare

Cacharel

Oasis

Sisley

 Empik Media & Fashion Group, the owner of Maratex company (Esprit and River Island stores chains), putted on sale River Island stores chain.

Love Republic

Nike

Orsay

Claire’s

 Fozzy Group plans to develop the travel agencies chain under the brand “Silpo Voyage”. The first travel agency office was opened in Q2 2014. • In H1 2014 the following retailers leave the Ukrainian market: Bosco Sport, Spar, Perekrestok, OBI, Minelli, Esprit • Helen Marlen Group reduced the number of stores and focused on its online store. • M&A:

Zara Inditex

LPP Group

Massimo Dutti Bershka

Mohito House

Baltika Ukraine

Monton Mosaic

New Yorker, Adidas, Motivi, Kira Plastinina, Mango

Luxury retailers Dolce & Gabbana, Valentino, Yves Saint Laurent, Philipp Plein, Burberry

Dior, Louis Vuitton, Chanel,

JLL – Kiev Retail Overview – Q2 2014

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Newcomers to Kiev Retail Market Prada, Valentino, Dolce & Gabbana, Baldessarini, Agent Provocateur, Oviesse, Diesel, Napapijri, by paprika, Michael Kors, Reiss, Denis, Why Denis, Marina Rinaldi, Patricia Pepe, MaxMara Weekend, Strellson, Cinque, Stefanel, Stones, Rebecca Sanver, Furla, s.Oliver, TJ Collection, Suvari, Suiteblanco, Caterina Leman, bebe, Armani Jeans, Armani Collezioni, Atelier, Formarina, Karma of Charme, Evita Peroni, Amstor, Real, Happylon,Cinema City, Kentucky Fried Chicken, Hesburger, Kredens Cafe

2012

Jack Wolfskin, LC Waikiki, Hadley, Black Star Shop by Timati, Z-Generation, Petit Bateau, Collezione, Cinnabon, Style Avenue, Panty, Yamamay, SmartGuy Group (ecommerce), Camper, DESEO, Texas Chicken, Coyote Ugly, Antica Murrina, Fabs, Versace Collection, Nautica, Camicissima, Vogue Café

2013

Entered the market

Pedro del Hierro, Star Burgers, Rоdizio, Keddo, Calzedonia, Lamoda (ecommerce), Bottega Verde, Glossip, Paul, Alberta Feretti

SinSay, Violeta, Cortefiel, Mega Ice, Vapiano, Subway, Zara Home, Mango Megastore (H.E. by MANGO, MANGO TOUCH), Converse, Helly Hansen , Peacocks

H1 2014

Future

Plan to enter

In Q2 2014 it became known that H&M, Decathlon and Body Shop postponed entering the Ukrainian market. Violeta, Mega Ice, Zara Home have announced openings in SEC Respublica, the commission of which has been deferred to March, 2015.

JLL – Kiev Retail Overview – Q2 2014

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Market Balance

Vacancy Rate Dynamics, Kiev

Vacancy rate in Q2 2014 was 8.2% that is 190 bps more than for Q1 2014. We attribute much of this high vacancy rate to the following factors: new supply in Q2 2014, low occupancy dynamic of some new shopping centres and high vacancy rates in shopping centers located near areas where there have been political demonstrations in late 2013 and at the beginning of 2014.

JLL – Kiev Retail Overview – Q2 2014

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Prime Base Rents: European Benchmarks

In Q2 2014 Kiev prime base rent decreased up to USD960 sq m (excluding VAT and OPEX) and became one of the lowest among European capital cities rents.

JLL – Kiev Retail Overview – Q2 2014

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Base Rents by Tenant Format, Q2 2014 • In H1 2014 prime rent decreased to USD960 sq m due to the national currency devaluation, consumer spending activity reduction and retailers development plans optimization. • Due to the overall economic situation in the country in H1 2014 the retail real estate market was faced with a new market practice where many f landlords and tenants agreed individual conditions for rental rates.

Profile

Area, sq m

Rental rate, USD/sq m/month

Rental rate USD/sq m/year

Hypermarket

> 7 000

8–14

90–170

Supermarket

1 500–5 000

15–25

180-300

DIY

8 000–15 000

7–10

80–120

White & brown

< 2 000

15-20

180-240

Cinema

> 2 000

8–11

90–130

Entertainment

> 700

6–10

70–120

Food-courts

40–90

45–60

540-720

Restaurants

250–600

20–30

240–360

250–450

45–60

540–720

50-100

60–70

720–840

> 1 500

12–18

140–220

< 300

30–40

360–480

> 1 000

15–20

180–240

300–600

20–30

240–360

70-250

30–40

360–480

< 2 000

10–12

120–150

1 000–2 000

15–20

180–240

300–600

25-35

300-420

150–300

35–50

420–600

100–150

70-80

840-960

• Forms of individual agreements:  Rent fixing in Hryvna  Rental discounts (commeasurable with Hryvna devaluation rate)  Partial rents shift to the % of turnover •

Terms of individual agreements: 1-3 months.



Rents in existing malls under the signed lease agreements for the H1 2014 have not changed since the end of 2013. Thus, the prime base rate under the contracts remained stable at USD1,200 sq. m/ year. At the same time, due to the individual arrangements, we see a significant decline in rental payments. That is why we consider the prime rent at USD960 sq m/year for Q2 2014.

Perfume and cosmetics

Sporting goods

Goods for children

Household goods

Fashion and apparel

JLL – Kiev Retail Overview – Q2 2014

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Standard Lease Terms for retail Premises Kiev Lease length

Retail gallery: 3-5 years; Mini-anchor tenants: 5-7 years; Anchor tenants: 10-15 years.

Payment terms

Fixed; Combined (3-5% for anchor tenants; 10-15% - retail gallery); rare % of turnover (for anchor tenants)

Rental deposit

Deposit: 1-2 months. For anchors: bank guarantee 1-3 months.

Rental indexation

USD (rare Euro): CPI minimum – 3%. Rent increases my be pre-agreed for several years; afterwards a CPI indexation is applied.

OPEX

90-120 USD/sq m/year.

Other payments

VAT – 20%.

JLL – Kiev Retail Overview – Q2 2014

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Street Retail

Street-retail Kiev, Q1 2014 Submarket

Center 1

Center 2

Rezidential area

Retail corridors/zones

Demand

Kreshchatyk st.



Passag



Arhitectora Gorodetskogo st.



Bolshaya Vasilkovskaya st.



Lesi Ukrainky blvd.



Bohdana Khmelnytskogo st.



Saksaganskaya st.



Tarasa Shevchenko blvd.



Basseinaya st.



Pozniaky



Obolon'



Teremky



Sviatoshyno



Prime rents*, USD/sq m/month

150-180



50-70



25-40



Demand and prime rents dynamic

*Rents are given for a single unit of 100 – 150 sq. m GLA with basic repairs. Rents exclude VAT.

 - decreasing  - increasing  - constant

JLL – Kiev Retail Overview – Q2 2014

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Thank you!

© Copyright 2014 Jones Lang LaSalle. All rights reserved. The information contained in this document is proprietary to Jones Lang LaSalle and shall be used solely for the purposes of evaluating this proposal. All such documentation and information remains the property of Jones Lang LaSalle and shall be kept confidential. Reproduction of any part of this document is authorised only to the extent necessary for its evaluation. It is not to be shown to any third party without the prior written authorisation of Jones Lang LaSalle. All information contained herein is from sources deemed reliable; however, no representation or warranty is made as to the accuracy thereof.