Shopping Centers Today International

DEC 2015

Shopping Centers Today is the news magazine of the International Council of Shopping Centers (ICSC)

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Page 134 of 143

Peace has not yet broken out in Ukraine, but property devel- opers are betting that the time is right for some new malls in Lviv, this beleaguered coun- try's westernmost city. Lviv, part of the Austro-Hungarian empire until World War I, and also Poland's third-largest city before its annexation by the Soviet Union in World War II, is clearly no stranger to geopo- litical conflict. Still, given that the current civil war in eastern Ukraine between Ukrainian nationalists and Russian- speaking separatists is being waged some 1,200 kilometers (about 745 miles) away, two developers have calculated that the city of 750,000 could do with new retail. Until recently, Lviv had only 112,000 square meters (roughly 1.2 million square feet) of quality retail space, according to JLL analysts, including its only regional shopping center: the 52,700-square- meter King Cross Leopolis. Lviv is about 30 percent less saturated with shopping centers, per every 1,000 inhabitants, than Odessa, and almost 50 percent less than Kiev, according to JLL. "The Lviv retail market is really fundamentally undersupplied compared with other Ukrainian cities," said Anna Chubotina, JLL's head of retail in Ukraine. This is changing, though. Forum Lviv (a 35,000-square-meter-GLA mall from Amsterdam-based Multi Corp.) opened 90 percent leased in September, and Victoria Gardens (a 54,000-square-meter-GLA project developed by Kiev investment bank Phoenix Capital) is scheduled to open in February and is now 50 percent leased. Per capita income in Lviv is only about $255 per month, according to JLL, Victoria Gardens' leasing agent, but the city actually has several things going for it, including UNESCO World Heritage status for its baroque architecture — a tourist draw in a region largely leveled in World War II — and the fact that it is a mere 40-kilometer hop from Poland, where people earn nearly three times as much. Forum Lviv is the first Ukrainian pro- ject for Multi Corp. — which manages 84 malls across Europe and Turkey — but this was not for lack of trying. "Multi en- tered Ukraine in 2007, the high tide in the market," recalled Arvid Krechting, project manager for Multi Ukraine. After a suc- cessful 15-mall expansion into Turkey, Multi executives had hoped to repeat the trick north of the Black Sea. "At that mo- ment, we thought that Ukraine would be a second Turkey for us," said Krechting. In Lviv, Multi, which specializes in urban in-fills, found a brownfield located next to the historic center. But when the global financial crisis hit, the project was put on hold. In 2010 retailers began expressing interest in the city again, and over the next 30 months, Multi negoti- ated the financing for the €90 million (nearly $100 million) project with Uni- Credit Group and the European Bank for Reconstruction and Development. Only in 2013 did Multi begin building alongside its two local minority partners. "When we started building, the country was not at war," Krechting said. But then, just after the developers broke ground, the storm burst. The Ukrainian currency plummeted by 75 percent — a serious problem in any case, and no less so be- cause Multi's leases were denominated in euros. But those leases were eventu- ally renegotiated, the Ukrainian hryvnia recovered about half its strength, and con- struction resumed. Happily enough and despite the scare, few lessors pulled out. Of course, the war continues to cast some- thing of its sad shadow. "In the end," said Krechting, "the only tenants that we lost were Russian tenants." — Bennett Voyles O N T H E G R O U N D : L v i v , U k R a i N E Retail blossoms in a city far from the war D E C E M B E R 2 0 1 5 / S C T 135 F o r u m L v i v i s m u L t i C o r p . ' s F i r s t p r o j e C t i n

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