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Retail property development slowed down in 1H 2014 News

Retail property development slowed down in 1H 2014

Retail market was the most sensitive to macroeconomic challenges in direct response to contraction of consumer demand. Consumer sentiment demonstrated a downward trend suffering from ongoing tensions in the East along with fundamental economic problems. The annual volume of organized retail turnover weakened markedly over January – May 2014 for the first time since 2009, having decreased by 5.7% y-o-y in Kyiv.

Mindful of such issues, retailers put their expansion plans on hold at least until the end of the year by focusing on optimization of their business through cost reduction. The most drastic measure in this respect was market exit or closing of unprofitable shops in order to cut down rent costs which rose dramatically due to currency depreciation. For instance, some retailers (Russian sportswear chain Bosco Sport, French footwear brand Minelli, American fashion chain Esprit, German DIY chain OBI, Russian food supermarket chain Perekrestok) could not withstand the impact of economic downturn and left the market in the first half of 2014. Other retailers closed those specific units which faced losses either due to a significant drop in sales or, a sharp increase in UAH rent payment or a combination of these two. Third option used by retailers was contraction of occupied space by 30% – 50% through renegotiation of smaller units with landlords.

At the same time a range of retail players were strong enough to open new stores or make expansion announcements for the year despite the subdued consumer sentiment. This is mostly true for food retailers (Auchan, Fozzy Group, Varus, Billa, Eko Market, Amstor, Furshet, Retail Group) and those international retailers from other segments who operate directly without involvement of local franchisees (L.P.P.Group SA, Punto Fa, JYSK, LC Waikiki, McDonalds). For example, Danish company JYSK Holding opened two new stores in Gulliver SEC (700 sq m) and Arkadia SC (850 sq m). Auchan Group announced plans to open a new food hypermarket (11,000 sq m) in Prospect SEC in H2 2014. In the fashion segment Turkish retailer LC Waikiki is planning to open its third store (1,100 sq m) in Sky Mall SEC, while L.P.P.Group SA rented 3,000 sq m space to open all five brands (Reserved, Mohito, Cropp Town, House, SinSay) in Prospect SEC, including the new Sinsay brand currently not present on Kyiv market. Spanish retailer Punto Fa announced plans to open its first Mango megastore (2,500 sq m) in Ocean Plaza in H2 2014.

On a further positive note, some new retailers opened their first stores in Kyiv in H1 2014 demonstrating their interest in the market. These brand names include British footwear chain Keddo, Spanish mid-range fashion brand Pedro del Hierro, Italian underwear chains Calzedonia and Intimissimi, as well as French bakery Paul.

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