Lyudmila Vilischuk, Lavina Mall: The rental rates lowering is a step backwards
The Lavina Mall problems are connected with what, due to what the SEC management expects to correct the situation, what SEC want to achieve by the food court re-acceptance and whether it is negotiating with H&M.
The largest Ukrainian SEC Lavina Mall opened at the last year end, but still stands half-empty. Only a little over half of tenants opened its stores, and key fashion- anchors are still repairing locations. SEC attendance is far from the declared, respectively, and the current tenants turnover is low. Retailers themselves do not hide their frustration and ask SEC managers to lower rental rates even before reaching the declared attendance rates. rau.ua asked Lyudmila Vilischuk, who in April headed the Lavina Mall Lease Department, why their requests remain unanswered.
— From view your point, why is the Lavina Mall performance now far from expectations?
— You know that revolutions never pass quietly and peacefully. And Lavina Mall, of course, is a revolution in the retail real estate capital market. This object complexity is that this was not before.
Lavina Mall is a completely new SEC-format for Ukraine, which will not work under the old schemes. Unfortunately, not all retailers understand that it is necessary to change approaches and learn to work in a new way.
It is necessary to understand that the shopping gallery length in the mall is about 1.5 km. The shopping center visiting, you can easily find “Silpo”, but do not know that there is Benetton or Fellini in the mall. Therefore, if the tenant does not invest in marketing, will not scream about himself and attract visitors, then it may happen that he simply will not reach.
— What is the shopping center current occupancy on open doors?
— At the May end, the occupancy rate was 64%. Every week we open another 3-7 new stores and by the autumn we plan to open all the large anchors that have already rented our premises. Now repairs are being carried out in LPP Group stores. Reserved will be the largest in Ukraine and will take two floors. Mohito, Crop, SinSay, Terranova, Callio, Mango and others will also open in the new formats. We expect that these stores will attract even more buyers and SEC attendance will grow substantially. Also, repairs are already done in the Inditex Group stores. We will have the largest Zara in Ukraine with 3000 sq. m .square. In general, we offered to open stores in new formats to all our tenants, so that it stands out against others and motivate people to go shopping in Lavina Mall.
— Is Lavina’s attendance increasing, how active is it?
— The attendance is growing, but this growth is unstable. Lavina Mall opened with a low fill, but gradually the SEC is filled and the target audience, the visitors number, etc. changes with each new opening.
In April, Lavina SEC visited about 1 000 000 people. It is clear that this traffic part we get by the neighborhood with hypermarkets Auchan and Epicenter.
Considering that we are located between these two large trade objects, our average daily attendance cannot be lower than that of its. In any case, we have a traffic exchange both with Epicenter and Auchan, so we are negotiating with it about cooperation in this direction.
— What traffic does the Galaxy Entertainment Park have, which was to become one of the main complex anchors?
— Galaxy also started not in full. Only in March the entertainment center has earned completely. Now it covers 20,000 sq.m.square. Its average daily attendance is about 7,000 people, but we expect to reach 20,000. Most likely, after reaching this traffic, we will be able to increase the Lavina SEC attendance on weekdays. After all, if the Galaxy Park visitors need to stand several hours in line to get on the weekend on the biggest roller coaster, many of them will prefer to come to the park on a weekday when people in it will be less.
— As far as I know, not all food court tenants were happy with the move. At the same time, they all counted on the fact that the SEC compensates for the moving cost and will lower the rental rate. Was there any compensation?
— The conditions for moving with each specific tenant were discussed individually. Absolutely all tenants moved to new locations. This indicates that we managed to agree. However, the rental rates did not decrease.
I believe that rates lowering are a step backwards. We are moving only forward, we expect great changes and see that it is already taking place.
So now a step back take and say that we have reconciled with the current indicators, it would be wrong. We are fully aware that we now have many difficulties and we have to make many painful decisions. However, these decisions are based on in-depth analysis, fully justify themselves and provide an opportunity for whole SEC effective work in the near future.
— Many retailers believe that after some time the Lavina Mall will be successful, but at the same time they complain that SEC does not go to meet them now …
— Our position on rental rates does not mean that we are not ready to negotiate. Nowhere is it written that the rental rate should be $ 20/sq. m. or $ 200/sq. m. Rent is always a contractual condition and the lease is individual for each retailer.
If the tenant could not find an opportunity to reduce the rental rate or the recalculation condition — this is his defect including.
Any landlord always wants a higher rate. If you built a shopping center with hundreds of millions dollars invested in it, you would not give up $3 per square meter, assuming it opens with 100% occupancy. In my memory, no shopping center is not opened with zero vacancy. Even the Ocean Plaza SEC, which today shows tremendous turnover and traffic, at its work beginning was experiencing difficulties, like Lavina mall now. However, we are not afraid of these difficulties. And we ready to negotiate with tenants. Simply in our case, we suggest to reconsider the usual conditions and we not just give a discount, but we motivate by this discount.
— What square will be allocated for shops in the fountain zone and which of the foreign retailers do you want to see here? In the market there were rumors that the place is released specifically for H&M. Does Lavina Mall are negotiating with the Swedish brand representatives when they came to Kiev?
— Thanks to moving the food court, we will release 3000-4000 sq. m., and maybe more. As for possible tenants, we will be happy to welcome any international retailer that does not yet exist in Ukraine, be it H&M, Cotton, Decathlon or some other well-known international brands.
I think that in the fountain zone there will be 3-4 large shops with 500-1000 sq. m. square, as well as small boutiques for 60-70 sq. m. At the same time, this zone allocation will be done specifically for a particular tenant, so other formats are possible.
As for H&M, I am not aware about any negotiations fact, since I work with active tenants, while negotiations with potential ones can only be conducted by NAI Ukraine.
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