Conversation with the CEO of MFC Gulliver on prospects of commercial real estate in Ukraine
Multifunctional Complex Gulliver impresses with its grandeur. It is located in the historical, cultural and business downtown of the capital, close to the key metro stations.
The complex includes “A” class business centre consisting of two towers and the 10-storey shopping centre. MFC Gulliver is one of the tallest buildings in the capital. The height of 33-story “A” class tower of business centre is 141 meters. A total area – 157,400 square meters.
Today, the position of CEO is occupied by Iryna Kruppa, who in 2014 joined the team and headed the company’s commercial department, and a year later became the CEO of the complex. We met with Iryna and learned why guests like Gulliver so much, what new brands didn’t afraid of the crisis and came to Ukraine in 2016, and what is the secret of this complex’s popularity.
Lawyers Daily: MFC Gulliver, being opened in late 2013, has quickly gained success on commercial real estate market. Location in Kyiv’s downtown and convenient transportation are your main advantages. Tell us, did you really managed to enter the Ukrainian retail market without any problems?
Kruppa:Opening of Gulliver was a landmark event for us. We believed in the success of the project, which did happen later. But first we faced many difficulties. For each shopping centre, the first year is always economically difficult.
A stable operation level usually begins from the second year. With Gulliver everything happened differently.
The notorious events began at the end of 2013 in Kyiv on Independence Square. Since we are in the capital, they affected our work as well. Therefore, the first year was difficult. The required period of stabilizing of complex came in the second year after opening. And in the third year, the project started to conquer the capital’s market of commercial real estate. But I want to note that this crisis has a positive impact not only on the operation of Gulliver but on the Ukrainian retail in general.
Lawyers Daily: According to your observations, did the crisis in the country alter the work of your complex?
Kruppa:The crisis is the period that makes businessmen work two to three times more intense not only for profit but for the sake of keeping business. The first year since the opening of the Shopping and Entertainment Centre was difficult for many of our tenants.
Despite the economic situation, we attracted new tenants, interesting for our visitors, especially in 2014 and 2015, when we had to make every effort to supplement and improve tenant mix of the complex
Reconceptualization of the Shopping and Entertainment Centre was one of the riskiest and at the same time the most important decision. Considering all the pros and cons, we took a chance and changed the anchor tenant of the shopping centre’s ground floor – supermarket Furshet. Under a lease contract, Company Furshet fully rented a ground floor in the Shopping and Entertainment Centre and subleased the space alongside the cash desks. This is a standard business model for this supermarket chain. Unfortunately, the design of our ground floor completely contradicted the whole concept of the Shopping and Entertainment Centre, what drew the attention of our target audience as well. Therefore, we conducted a market research and find out which supermarket they would like to see at the mall.
Based on results, we decided not to change or improve a supermarket, but to change management of the space alongside the cash desks. We signed the lease contract with supermarket Silpo, carried out a reconceptualization of the space alongside the cash desks, which is leased directly now. Currently, footfall at the shopping centre increased by 30-35%, while only 20-25% were expected. On example of this situation, we concluded that the shopping centre is a live organism requiring constant work and adaptation to necessities of modern life and today’s realities.
Lawyers Daily: After another economic crisis in Ukraine the retail market has frozen. What is the situation now?
Kruppa:For a long period, the commercial real estate market really hasn’t developed in the country: well-known brands did not enter the Ukrainian market, new shopping centres lingered to open. In 2016, the situation has improved, dozens of new brands entered Ukraine, and in Kyiv, for example, two high-profile shopping facilities opened.
I believe that the opening of new shopping centres has a positive impact on our market, it gives development opportunities to the already existing brands and attracts new trademarks as well.
Lawyers Daily: Did many new brands appear in Ukraine in 2016?
Kruppa:The previous year was productive in terms of the franchising development. Foreign companies rated the prospects of the Ukrainian market highly, and they did not afraid to open their representative offices. Very demonstrative for us is that these brands opened their first Ukrainian stores in our mall. Convenient location and equal footfall any day of the week, including weekdays, is our advantage over the other shopping centres. A number of brands opened over the past year in our Shopping and Entertainment Centre, among them:
- German brands Steiff, Falke, Rodenstock, Sanetta, Roeckl,
- Italian man’s brand Maestrami,
- monobrand store Eterna,
- French brand Sandro.
Spanish group Inditex didn’t get afraid to bring its new brand Uterque on the Ukrainian market as well.
Important is the fact that the American cosmetic brand Kiehls, previously represented only by a counter, opened its first store in our mall.
Lawyers Daily: Every year a number of European and American competitors of our Ukrainian tenants increases. Do you think this competition has influenced the formation of a new business climate in the country?
Kruppa:For a long time among the Ukrainian businessmen there was a steady trend – to sign any contracts without looking. Retail market faced this problem quite often as well: formerly a potential tenant, taken with the idea to open a shop in the mall, was ready to sign the contract immediately and without thorough reading. And then such irrational decision was becoming a source of conflict between tenant and property owner. But now, retailers have a more responsible approach to this issue. It should be noted that our local tenants gradually learn from their competitors to run their business as Europeans.
Furthermore, there are noticeable changes in the behaviour of buyers themselves. Marketing studies show that Ukrainian consumers gradually give up emotional purchases by making a choice in favour of quality things. Before the crisis, Ukrainians buy many goods both needed and of no use. But in recent years, shoppers have learned to count money, to assess their needs and buy only essentials. Thus, Ukrainian consumers started to buy less. But they began to think as the European buyers, that is better to buy one more expensive thing, but of a good quality.
Interview by Maryna Shashkova