The pandemic severely brought the business of shopping malls down, but visitors quickly returned. Why? Explained by CEO of Arricano Real Estate
The Kyiv retail real estate market is close to saturation. As of the first half of 2021, there were just over 660 square meters of retail space per thousand residents of Kyiv, according to the Ukrainian Trade Guild. In Warsaw there were 925 sq.m, and in Prague there were more than 700. There will be more in 2022. Ocean Mall with a total area of 110,000 square meters is scheduled to open in the second quarter. As well as several smaller shopping malls — Lake Plaza in Obolon, New Way in Troieshchyna, and Olympic Park in Pozniaky.
There is no such saturation of shopping malls in the regions of Ukraine. But there are difficulties – poor consumers. In addition, their well-being is falling. According to the State Statistics Service of Ukraine, in 2021, the growth of spending by Ukrainians was higher than the growth of income. The pandemic has added challenges. Under quarantine restrictions, shopping malls were closed for several weeks or the flow of visitors was restricted.
How did the industry survive 2021? Forbes spoke with Arricano Real Estate CEO Anna Chubotina. Arricano is one of the largest operators of shopping malls in Ukraine. Its portfolio includes four shopping malls in Kyiv, Zaporizhzhia and Kryvyi Rih with a total area of more than 180,000 square meters. In addition, there are 49.9% in the capital's Sky Mall, which the company does not manage due to a corporate conflict.
The interview has been abridged and edited for clarity.
About the situation on the retail real estate market
Vacancy rates in shopping malls in Kyiv are 4-8%, and rental rates have increased to the level of 2019. Consumer demand did not decrease in 2021. Despite covid restrictions, the return of visitors to shopping malls has been faster this year. In 2020, our revenue declined by 13% in US dollars. In 2021, despite the fact that there were restrictions, the industry performed better. And we finished the year better: by mid-2021, we had revenue growth of +19% year-to-year in dollars.
The turnover of tenants in 2021 not only reached the turnover in 2019, but also exceeded it. Especially in the "sports" category and for some fashion tenants. We've seen the entertainment segment recover. Including movie theaters. Conversion rate, average receipt, and turnover increased. The visit has become more targeted. The consumer comes to the mall with a clear goal.
Anna Chubotina, CEO Arricano /Photo from the personal archive
About the role of the shopping mall in the fight against the Covid-19 epidemic
Shopping malls of Ukraine have taken over the functions of a vaccination provider. We united around our specialized associations and decided to defend the interests of the industry, because the situation was difficult.
We understood that only customers with vaccination certificates would be able to visit shopping malls. And it became obvious that the state does not have time to carry out a large-scale vaccination so that we have enough visitors. Therefore, our company has deployed vaccination points in shopping malls. For example, in Zaporizhzhia, in October-November, about 10% of all vaccinated people in the region were vaccinated in our shopping mall.
Why did district-scale shopping malls "rise" during the pandemic?
Consumers stopped traveling outside their homes at the time of the restrictions. On the one hand, this was due to a certain fear, logistics difficulties, and unwillingness to go anywhere. And on the other hand, with the fact that you feel maximum trust in your shopping mall and you are comfortable and calm there.
Therefore, our RayON in Kyiv is a shopping mall, which during these two years constantly showed positive dynamics of traffic. Last year, during certain periods, it grew to 20% year-to-year. At the same time, other projects could show a drop in traffic by 10-15% year-to-year.
About management in conditions of uncertainty
In recent years, we have reduced our planning horizons. From restrictions to restrictions. We have again approved the annual business plan for 2022. But we have become so flexible that we are ready to make changes at any time. In 2020, we worked remotely, but returned to the office as soon as we could. I believe that working in the office is more efficient. To maintain team spirit, you need to be together.
We have a few days a month when employees can work remotely, and the rest of the time we work either in the office or in shopping malls. The latter is very important: we see better how tenants work, and we understand the business better.
About the New Lukianivka shopping and entertainment complex
Lukianivka is scheduled to open in 2023. The retail area is about 47 thousand square meters. I really hope that we will make it in time.
Construction work is active. In one part, the shopping mall is already sewn up around the perimeter with sandwich panels, a parking lot and a second level have been built - this is where the cinema and entertainment area are planned to be. This year we plan to start negotiations with operators. But the anchor tenants were ready to sign up yesterday. There are three tenants who would like to open in this shopping mall.
We will strengthen the food court and entertainment area. And increase their share in the shopping mall. There is an interesting point here. On the one hand, over the past few years, during the pandemic, the food court and the entertainment segment in general have experienced more difficulties than other operators. On the other hand, it is food courts and entertainment that are the element that allows shopping malls to move away from online. Therefore, their share and their importance for projects like ours will only grow.