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''We're at Forbes”. Test of strength. How the owners of shopping centers, hotels and offices survived the year of the pandemic.

Shopping center owners are coping with the pandemic better than other rentiers. The gambling business opens up new prospects for Ukrainian hotels. And the metropolitan office space market has groped the "bottom"

Presence effect

In February, the previously half-empty shopping and entertainment center, Blockbuster Mall, filled with people. The first offline IKEA store in Ukraine was opened here, which had been online for almost a year before. “People missed the physical contact with the purchase,” explains Alexander Chernitskiy, head of the Mandarin Plaza Group. The group also owns the Mandarin Plaza and Lavina Mall shopping malls.

Tenants followed the buyers in Blockbuster Mall, says Chernitsky. They go those whom the developer has been inviting for years. “Many predicted that it will not be the same as before: people are used to buying online and will not return to their usual shopping,” he says. "I can see that it is not." Pent-up demand and physical isolation fatigue are working to restore mall yields to the sagging 2020 profitability. Dream Town, a large metropolitan mall, has lost about 25% of its revenues over the past year, says its CEO Roman Yemets. “If we add up all the lockouts and short-outs of the weekend, we sat for three months without rent,” he says. Dream Town was the first to cancel rent for tenants. Following him, the management company Ocean Mall, Dragon Capital, which owns six shopping centers, and other operators did the same.

According to the estimates of the Ukrainian Council of Shopping Centers, in the first two months of quarantine alone, the owners did not receive UAH 7 billion in lease payments. Despite the fact that the attendance decreased by 26.5%, the average check increased by almost 26% compared to last year, to 4300 UAH. The length of stay in the mall has also increased: according to the consulting company NAI Ukraine, in 2019 a visitor spent an hour and 20 minutes there on average and visited two stores in 2020 - an hour and a half and went to three outlets. The activation of buyers partially compensated landlords for the losses from discounts on the fixed part of the rent, which were provided to shops between strict quarantines. According to Yemets, in November, Dream Town tenants had an average discount of 19.7%. In general, in the market, according to the NAI, discounts reached 30% in 2020.

Another source of losses for the owners of Kiev shopping and entertainment centers was the increased vacancy. According to the consulting company "Ukrainian Trade Guild" (UTG), by the end of 2020, the share of vacant space in the shopping and entertainment center increased to 13.4%. This is the highest rate since 2013.

This is partly due to the emergence of new large facilities, the same Blockbuster Mall and Retrovill, says UTG Director Evgenia Loktionova. The supply of new square meters in Kiev shopping centers, according to her company, increased by 327,000 square meters in 2019-2020. m, or 22%.

To insure against market fluctuations, many shopping and entertainment centers have focused on attracting large network operators. Dream Town's second phase, for example, is ditching small furniture stores in favor of big players. “Large companies, unlike a small entrepreneur, have a clear strategy and a“ fat reserve, ”explains Yemets. He predicts that shopping center revenues will return to pre-crisis levels by September-October 2021. If, of course, there are no new "black swans".

Play for high stakes

With the beginning of quarantine in the spring of 2020, operators of five-star hotels have temporarily closed some of their facilities in Ukraine. “I walk around the hotel, and it’s dark, dark and empty,” recalls Anastasia Zholinskaya, co-owner of InterContinental Kyiv. “The last time I saw her in this state was 11 years ago, before the opening.”

After the lockdown, hotels were opened, but at the end of the year, according to Zholinskaya, revenues dropped by 30-40%, at the beginning of 2021 the occupancy rate of InterContinental did not exceed 16% per month. “It is strange to see such figures, when back in February last year it was 45-50%,” the hotelier shrugs his shoulders.

The revenues of five-star hotels fell by almost half in 2021, says Natalya Chistyakova, director of the appraisal and consulting department at Colliers Ukraine. EBITDA profitability decreased from 46% in 2019 to 25% in 2020, says Alexey Revin, CEO of Smart Urban Solutions. This company is engaged in development and retail in Smart Holding and operates the Park Inn by Radisson Troyitska.

The hotel market suffered from the coronavirus crisis more than others, states the consulting company NAI Ukraine. Due to the restrictions, not only the demand for accommodation has dropped, but also for events, says Revin. According to Zholinskaya, during the days of major corporate events, the room stock could be 100% full. The average annual occupancy rate, according to Colliers, fell in expensive hotels from 45% in 2019 to 22% in 2020. In the middle price segment, the drop was even more steep - from 55–65% to 23–25%.

Hoteliers are cutting costs. Fairmont Grand Hotel Kyiv ditched the Conde Nast franchise for Vogue Cafe, as well as reduced part of the staff, andb transferred to a cut rate. Layoffs and salary cuts are the most common anti-crisis measure for hoteliers, Chistyakova says. However, Fairmont is already rebuilding the team. In February 2021, the occupancy rate of the hotel, according to its co-owner Elizaveta Yurusheva, began to grow. The Work From Home service has become popular - renting a room as an office for one day. You can rent a room for eight hours at the President Hotel for about 700 UAH, and in the Premier Hotel chain prices start from 600 UAH, depending on the hotel and the city.

The hotel market should be revitalized by casinos and slot machine halls, which can now be legally located in five- and four-star hotels. (And the halls of slot machines and in "triplets") In Belarus, where there are 27 casinos, this market is estimated at $ 20-25 million a year, writes NAI.

The gambling business opens up new prospects for Ukrainian hotels, says Yurusheva. Most of the visitors to luxury hotels are business travelers who stay in hotels during the working week. Rooms are idle on weekends. “At the expense of the casino, we will be able to offer people entertainment,” says Yurusheva. "They can stay over the weekend." The casinos at the Fairmont Grand Hotel Kyiv and InterContinental Kyiv are due to open in March, the co-owners say. Fairmont has allocated 1,100 sq. m, at InterContinental - 580 sq. m.

Rent or wait

One of the most active players in the Ukrainian real estate market - the investment company Dragon Capital - in March 2020 refused to buy the 101 Tower business center. Negotiations with the owners lasted for almost a year. It did not grow together.

This was not the last bad news for the owners of the business center Stepan Chernovetskiy and Igor Nikonov. Two large tenants, IT companies, left 101 Tower and transferred their employees to a remote location, says Andrey Levin, director of the asset management company Valprim, whose portfolio includes business centers in Chernovetskiy. The vacancy rate for 101 Tower increased from 5% in February 2020 to 20% a year later.

It also became more spacious in other office centers. According to the company Aurora Development, in the fourth quarter of 2020, the vacancy rate in class A facilities increased to 10% from 7.2% a year earlier, class B + - from 5.1% to 10%.

The income of business centers, according to Levin, fell by at least 15–20% over the year. Landlords gave discounts for the lockdown period and even after. As a result, base rental rates for 2020 fell by an average of 4.7% in class A, to $ 22.9 / sq. m, in class B + - by 14.2%, up to $ 19 / sq. m, states Aurora Development.

The bottom was groped in the second quarter. “People pushed around and realized they needed an office,” says Levin. The hottest offer in the business centers that his company manages is premises of 100-200 sq. M. m renovated. According to Aurora Development, the greatest demand is for premises with an area of up to 500 sq. m.

Alfa-Bank HR Director Maria Garavskaya sees this as a new norm. Company employees do not have to sit side by side during the work week. In 2020, Alpha rented mini-offices in the coworking network for part of the IT team. And in 2021, she launched a network of indoor coworking spaces.

Less than others, modern business centers in the center of Kiev or where it is easy to get to have suffered, notes Aurora Development. For example, in the IQ business Center of class A + not far from the Druzhby Narodov metro station, according to Levin, there is less free space than before the lockdown. “It was 10%, now it's 6.5%,” he says. Levin explains this by the fact that companies are taking advantage of the reduction in rates to move to higher-end offices. Levin's company is going to set up a park near the business center. Before the epidemic, the park was not planned.

Landlords are also testing technology solutions to reduce the number of contacts. Sergei Kovalenko, managing partner of the Vladimirskaya 38 and Fizkultury 28 business centers, says that his company's new facilities will provide access through turnstiles using Face ID and automated elevators so that people have less contact with surfaces.

Igor Mazepa, general director of the investment company Concorde Capital, does not expect major changes in the market in the foreseeable future. The main risk for the owners of office centers is the same - a new round of the virus or the ineffectiveness of the vaccine, says Levin. He doesn't believe in the death of offices. And he cites the example of the case of IBM, which began to transfer employees to telecommuting back in the 1980s. In 2009, 40% of the 386,000 IBM employees worked in this mode. Six years later, IBM began returning to the office to improve productivity.

Article author: Katerina Shapoval

Forbes magazine. Source link: https://forbes.ua/ru/company/nerukhomist-pandemiya...