Anna Chubotina, СЕО Arricano: The opening of the shopping center Lukianivka is scheduled for 2023

CEO of the development company Arricano, whose portfolio includes Prospekt shopping mall and RayON shopping mall in Kyiv, City Mall in Zaporizhzhia and Sun Gallery shopping mall in Kryvyi Rih about the results of 2021, remodeling in 2022, consumer patterns and the market as a whole.

– How was 2021 for Arricano? What was the attendance, tenant turnover, vacancy?

– We will be able to announce the official results of the operation at the end of April 2022. As of mid-2021, our revenue has increased by 19% in US dollars year-on-year.

The occupancy rate of our shopping malls by the end of the year was almost 100%. This is a technical vacancy that allows us to improve the space of the shopping mall.

The year was productive both for the company and for the industry: new shopping malls were opened, and the vacancy of the leading shopping malls was either zero or technical. This confirms that the industry is recovering, there is a demand for premises, consumers have returned to shopping malls and, accordingly, the turnover of tenants is increasing.

– Did you manage to return to the pre-quarantine indicators?

– In our projects, the attendance exceeded the figures of 2020, but each shopping mall has its own patterns of visits relative to the pre-quarantine period. We analyze traffic both in general by year, and separately during periods without quarantine restrictions. If we talk about how we achieved such results, then quarantine restrictions in 2021 were not as dramatic as in 2020. We have all learned to work in the existing conditions, demonstrating maximum flexibility.

It should also be noted that the purchasing power of the population and consumer sentiment in 2021 were significantly higher than in 2020.

– Are the indicators for different shopping malls very different, where were traffic and turnover restored faster – in Kyiv or in the regions?

– Firstly, we have different projects by format, by cities and by the specifics of each region. In Kyiv, Prospekt and RayON are two shopping malls of different formats. In 2020, the increase in the attendance of district shopping malls was due to the fact that the visitor did not travel outside the areola of their residence, there were difficulties with logistics. Therefore, in RayON shopping mall over the past two years, despite any restrictions, attendance has been growing. In 2021, this figure, compared with 2020, was more than 6%. And compared to 2019 – more than 5%.

– That is, in quarantine, the best indicators were demonstrated by the district shopping malls, and not by the super-regional ones?

– If we consider the main trends in the attendance of shopping malls, the shopping malls of district significance work very well.  The consumer’s lifestyle has changed, a hybrid work format and distance learning have appeared. This means that our clients often work and study where they live and visit shopping malls at their place of residence.

In regional projects, the frequency of visits by buyers living in the coverage area is also increasing. Shoppers who live far from the mall visit the mall less often, but their visit has become more targeted. They come “with a shopping list”, which is confirmed by the growth of conversion and turnover of tenants.

– That is, they buy less often, but more? And how did this affect the turnover?

– As for trade turnover, the trend continues both in Kyiv and in regional projects. The trade turnover increased by 15-20% in US dollars compared to 2020, and by an average of 10% compared to 2019. Such categories as “Fashion”, “Sports”, “Electronics”, “Household goods”, “Jewelry” showed positive dynamics.

– What about the food court?

– In 2021, this segment also began to recover. For example, our food court in Prospekt shopping mall is completely full. The recovery of this segment is confirmed by the growth of trade turnover, including cinemas and entertainment centers. There is a separate situation with cinemas in general: they have suffered greatly from the quota of seats and the lack of premieres at the box office. We are very glad that the situation is improving. And this is confirmed by Multiplex in Prospekt shopping mall, which invested in the renovation of the cinema at the end of last year.

– Have you signed new tenants?

– We signed about 60 new contracts in 2021. This is over 20,000 sq. m. of retail space. This includes signing lease agreements with the Silpo supermarket chain in our regional projects. Among the most significant signings are Decathlon in Prospekt shopping mall and re-opening of LC Waikiki in RayON shopping mall. We continue to implement a strategy to improve projects through the prism of the life cycle, at each stage of which they need changes. In 2021, in RayON shopping mall, about 20% of the retail space was renovated and the operators of “Fashion”, “Electronics” and “Household goods” were attracted, giving the project a new impetus to growth.

– You recently announced the beginning of the “remodeling” of your shopping malls. Does this apply only to Zaporizhzhia and Kryvyi Rih, or are there the same plans for Kyiv facilities?

– It was a long-awaited project that we had been thinking about for several years. In April 2022, we plan to enter into renovation works to reduce the area of the existing hypermarket to 4,500 sq. m. in both shopping malls. We have already signed Silpo supermarkets in both projects. This will allow us to update the format of grocery retail that meets the needs of the target audience in terms of comfort and quality of service, as well as expand the shopping gallery by up to 30% in each shopping mall for product categories that show growth.

– Are there any other changes planned besides reducing the area of the hypermarket?

– The shopping gallery will be updated, we will work with interior solutions, recreation areas and facades.

– Are you planning similar updates in Kyiv?

– We are planning rotations that will strengthen the popular categories, expand the offer, the focus in RayON and Prospekt shopping malls in 2022 shifted to work with existing operators. We systematically work with our tenants to update and optimize formats.

– Why did you decide to replace the grocery anchor and greatly reduce its area in City Mall and Sun Gallery? And should we expect the same rotation in Prospekt in the future?

– In the future, we will be happy to cooperate with Auchan in other shopping malls. We decided to cooperate with Silpo, because the format of their supermarkets meets the needs of our consumers and will support the growth of turnover of tenants of the shopping gallery.

– At what stage is the construction of the Lukianivka shopping mall now? What are the forecasts for its commissioning dates and who has already been signed into the future complex?

– We continue to build this mall. In 2022, we plan to complete the structural design of the building, perform most of the volumes on the facade and begin engineering equipment. We also plan to complete the restoration of two architectural monuments that will be integrated into the project.

We are working with our Chapman Taylor architects to adapt the concept to meet the latest requirements and trends. We want to expand the food court areas and are considering the option of placing a food hall. We are working on increasing recreation areas and organizing green areas on the roof of the third floor.

In parallel, we are working on coordinating the concept of Lukianivska Square with the city, because in addition to implementing a professional shopping mall, we want to harmonize the territories adjacent to the shopping mall and create a modern, attractive space for all citizens. We have carried out transport modeling and we have certain proposals for the arrangement of this area, taking into account the latest urban trends.

Now we are building the Lukianivka shopping mall at our own expense and in the near future we expect to receive a loan for completion. I hope that in the second half of 2022 we will be able to return to negotiations with anchor tenants. The opening of the Lukianivka shopping mall is scheduled for 2023.

– What is the total cost of the project?

– We will be able to tell you about it after a joint statement with the bank.

– Tell us about the changes in marketing strategy and communication with consumers. What did you focus on last year and what are your plans for this year?

– In 2020, marketing demonstrated the magic of flexibility. Although, in fact, the strategy did not change, unlike tactics. The year 2020 showed that the team and all business units should be ready for quick, but balanced, decisions. The buyer remains at the center of our marketing strategy and we need to offer him optimal brand synergy, that’s why we work so much with tenant-mix, pay more attention to analytics, in particular, consumer surveys, analysis of the turnover of our tenants and global trends. Based on these data, it is possible to form an effective consumer path in the shopping mall, as well as a positive customer experience in our projects.

– In general, how do you assess the situation on the retail real estate market in Kyiv and your other cities of presence? How saturated is the market, or are there more companies willing to open new stores than there are available spaces?

– Shopping malls should be built, but the main question is – where exactly? We still have unsaturated areas in Kyiv, where the appearance of shopping malls is advisable. It is necessary to take a very balanced approach to planning and determine the optimal formats of the shopping mall and its area. I am sure that those projects that are at the stage of the land plot are rethinking their own concepts taking into account the latest trends.

If we observe the saturation per 1000 inhabitants, then we still have a lot to grow. But any growth must be supported by purchasing power. As for Kyiv, the population migrates here from other cities. Especially young people. Therefore, they will support the development of high-quality shopping malls.

If we talk about the regions, they are all very different. There is a low level of competition in the cities of our presence. We hold leading positions there and are shopping malls of urban significance. Of course, new projects will appear. This increases competition and the consumer benefits from it.

– Aren’t you considering going to other regions?

– We have a site in Odesa, and we will return to this project after the completion of the Lukianivka shopping mall.

– What are the biggest risks and challenges of 2022 and how are you preparing for them?

– Our main task is to maintain leadership positions and a high level of loyalty of our customers. We will continue to improve our projects to remain interesting and attractive to consumers. The main challenge is to manage changes in conditions of uncertainty, to make effective and efficient decisions to strengthen the company’s position in the future.

This year we will continue the construction of the Lukianivka shopping mall and strengthen our other shopping malls. The main trends of the near future, identified by experts of the world’s leading development companies, are the focus on the construction of multifunctional complexes that will help large cities ease the burden on infrastructure. The development of such projects is facilitated by a change in lifestyle, work and study; the expansion of food courts and food halls in the shopping mall to target the target audience and create additional shopping motives; the introduction of loyalty programs to personalize offers to customers; the growth of the social function of the shopping mall and sustainable development as part of the long-term strategy of companies. We also direct our focus to the implementation of ESG practices, including ensuring the energy efficiency of our projects.

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