Snapshot: Ukraine retail market, January-May 2020
Supply and demand
The period in Q1 2020 before the outbreak of COVID-19 was largely positive in terms of occupier demand on the retail property market across Ukraine. In Q1 2020, prior to the outbreak of COVID-19 and the lockdown in Ukraine, many chain retailers, entertainment operators and major eateries had positive expectations regarding their development, and planned further expansion throughout the country not only in major cities, but also in smaller cities. At the same time, Cushman & Wakefield noticed the drop in sales of some fashion and footwear retailers due to warmer than usual winter.
The COVID-19 quarantine commenced in Ukraine on March 12, 2020 with some activities being prohibited, including operation of retail and entertainment facilities, except for essential retail (i.e. food products, fuel, medical products and devices).
Because all leisure, dining and non-essential retail facilities were not operating for 2 months with no significant support provided by the government, the retail property market in Ukraine has been hit hard, and the effects of COVID-19 are likely to lead to long-term transformation of the industry in view of ‘new normal’ and heavier health & safety regulations.
No new shopping centres opened in Ukraine in Q1 2020. Presently, the shopping and entertainment centre ‘Retroville’ scheduled for opening in Kyiv on 29 May is the major retail scheme in pipeline for Q2 2020 in Ukraine. In Kharkiv the shopping centre ‘Magellan’ was closed for extension, upon which the property will re-open as the shopping and entertainment centre ‘Planeta Mall’.
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. At the same time, any changes in rental conditions for the tenants remaining open were subject to individual negotiations between the landlords and such tenants.
In Q1 2020, prior to the COVID-19 quarantine measures, prime rents in the shopping malls in Kyiv were stable, while vacancy gradually decreased and reached 7.7% in early April 2020 compared to 9.3% at the end of 2019. In other major regional cities rental dynamics remained unchanged, and vacancy was nominal at below 1% in the best shopping centres.