The vacancy rate of shopping and entertainment centers in Kyiv decreased to 15%

The vacancy rate of shopping and entertainment centers in Kyiv decreased from 16.3% in 2023 to 15.2% at the end of the first half of 2024, said the head of UTG's legal consulting department, Kostiantyn Oliinyk.

“At the end of last year, about 21.4% of space stood de facto empty because of the closure of foreign department stores (IKEA, Inditex, H&M and others). In fact, 16.3% was vacant. Thanks to the opening of most foreign operators, the vacancy gap with the effectively closed stores has narrowed,” he said.

According to the UTG study, the vacancy rate is higher in regional (18.4%) and district-level (17%) shopping centers and lower in specialized (9.8%) and neighborhood (7%) ones.

The expert noted a trend of declining solvent demand among the population. There is continued growth in the expenses of households on housing and utility services and payment for communal services (in 2023 this category accounted for 18.8%, and with rising electricity tariffs further growth is observed), healthcare (4.7%), transport (4.8%), communications (4.3%) and education (3.6%). Together these categories drain 36.1% of the family budget. Food and alcohol absorb 43.4% of expenses. The share of the retail trade (clothing and footwear, electronics, household goods, cafes and restaurants, entertainment, other goods) in the expenditure structure is only 16.0% per family ($73.4 or UAH 2,684.5 per month). Inflation and the rapid growth of prices lead to a reduction in individual savings (about 4.4% in 2023).

Overall, general saving and rationalization of expenses are recorded, which for the market of shopping and entertainment centers causes a decline in footfall and an adjustment of rental rates. Compared with prewar levels, rates for some product groups have fallen by half or more.

“Food supermarkets have become one of the few operators capable of generating stable footfall and paying moderately high rental rates ($10-20/sq. m in August 2024), whereas most department stores, entertainment operators (cinemas, children's entertainment centers) and fitness centers aim for a minimum fixed payment (about $1 per sq. m) with an additional RTO payment (before the war, fixed payments of $2 to $12/sq. m prevailed), shifting the risks onto the developer,” Oliinyk said.

According to the UTG study, given the current level of household incomes, solvent demand can ensure successful operation in the capital for 2 million 313 thousand sq. m, whereas in the second quarter of 2024 as many as 2 million 457 thousand sq. m were already operating.

Competition continues to intensify: large shopping centers with a total area of 250 thousand sq. m have been declared for opening in 2024-2025. Among them are Ocean Mall (GLA 110 thousand sq. m), Lukiyanivka (47 thousand sq. m), the White Lines shopping and entertainment center (28 thousand sq. m), New Ray (34.5 thousand sq. m), April Mall (36.5 thousand sq. m) and BalticSky (20 thousand sq. m). It is likely that most of the announced openings may be postponed to a later period.

According to Oliinyk's estimate, the commissioning of the declared projects will bring closer a surplus of retail space and a gradual redistribution of consumer flows between properties, an increase in vacancy and a downward adjustment of rental rates. At the current level of household income and spending, the vacancy rate may reach 17% in 2025.

UTG was founded in 2001. It has developed more than 1,300 concepts of real estate projects. Over the years of its work, with the company's participation, 4.7 million sq. m of commercial space in Ukraine has been leased.