|
 |
Real estate in Ukraine in 2007
The Ukrainian market investment climate and potential for foreign companies
There is no doubt that the potential of the Ukrainian Real Estate market attracts foreign investors. However, globally-recognized market players have advanced slowly in general and are only now taking concrete steps to move in with projects. Political risk has played part in this process, but it also takes time to adequately study a new market. Apparently this course has been finished, for more and more foreign companies have started appearing on the Ukrainian market. The profitability seen in Ukraine’s real estate projects makes the attendant level of risk palatable for foreign investors. The expectation of long-term growth for the economy is also an important point for those entering Ukraine. And though Russian businessmen have been investors in Ukraine and they have made some impact, the wholesale entry of foreign investors into Ukraine is only a matter of time.
Politics, Economics and Football
The President of Ukraine, Victor Yushchenko, considers political stability as the essential factor in the formation of a proper investment climate in the country. “I assume that if we wish to have a stable investment climate, first of all our country has to learn to provide a stable political situation”, the President said.
Nowadays, the developing market in Ukraine provides a wide range of opportunities for investors, and the commercial real estate sector ranks at the top of these options. Its main advantages are based on the fact that adequate investment rules have already been adopted, and in some ways, it is easier to enter the commercial real estate market than other segments of the economy. Also, this part of the market is well protected by the state regarding ownership and the respect of foreign investments. As a result the market is seen as largely having concrete and comprehensible rules of play that correspond with those used all over the world.
From the economic point of view the Ukrainian market is one of the most attractive in the world. Profitability in particular segments (retail, offices) is approximately twice that of the European Union, and on top of that, it features constantly growing demand. An annual 11-12 % yield is normal for the commercial property market and in some particular cases it can greatly outdo these rates. For instance, according to AT Kearney’s ratings, Ukraine’s commercial property market is 4th in the world as for its attractiveness to investors, and this has triggered moves into the market by a lot of players such as IKEA, Auchan, Tesco, Carrefour, OBI, Metro, Real, X5 in their rush to obtain a place in a European country that has constantly growing purchasing capacity.
The European football championship is definitely one of the most important factors that will give an extra impetus to the development of the Ukrainian economy for some years to come, and the commercial real estate market will be at the forefront of this development. This fact is difficult to overestimate. Properly preparing for the event will require almost 1bn Euros in investments, and these investments will come from domestic players as well as from international developers greatly experienced in handling business in similar conditions throughout CEE. Thus a lot of well-developed companies will take the opportunity to step into the market. First among these will be the companies that can bring hotel and retail projects to the table, and especially companies with experience in infrastructure development. The core idea would be to suggest sound decisions and projects that will become lucrative to the investor and at the same time useful to Ukraine as an investment recipient. There will be a great emphasis put on experience as well as mutual benefit.
One should also mention that among the main problems on the commercial real estate market that ought to be kept in mind is the implementation of a single proprietorship register accessible to anyone. The lack of it remains one of the principal factors affecting the investment climate in Ukraine and the possibility of creating high quality investment projects. In Ukraine currently there is no single real estate register that contains all of the information about a property and the rights for it. As a result the investor can’t easily find valid data about the vendor’s rights for the property. Another problem is that, for instance, the land and real estate situated on it are considered as two different types of property and as a result the ownership rights for them are listed in two different registers. Altogether this hinders the investors, both domestic and foreign, from taking more active positions in the country.
Kyiv, Odesa and Beyond
From the geographical point of view the most profitable location naturally remains the capital of the country, Kyiv. There’s a high deficit of office space and the annual yield reaches 20%. However, Kyiv isn’t the only city to take into consideration. Investors are paying quite a bit of attention to cities with populations of over a million people such as Dnipropetrovsk, Kharkiv, Donetsk and Odesa. L‘viv, the largest city near the Polish border, will be particularly important during the European football championship. Also, investors are starting to be highly interested in the hotel business in Crimea and in the Carpathian Mountains.
At present western investors coming into the market are mostly concentrating their attention on the Kyiv market though they are still very aware of the rest of the country. Only experienced companies well-acquainted with Ukraine are taking on business in the countryside. Above all, investors have been interested in the eastern portions of Ukraine. The industrial portion of eastern Ukraine has a certain accumulation of capital. To this list we may also include some southern port cities such as Odesa and Mykolayiv. At the same time one should remember that the west of the country is characterized by agriculture, and the east is known for metallurgy and heavy industry. That’s why one finds greater capital movement in the eastern and central regions.
Odesa Oblast and Crimea are perennially among the most interesting to foreign investors. And the real estate market both for commercial and residential property is one of the most attractive for their investments. According to the volume of foreign investments, Crimea comes ninth after Kyiv City, and Dnepropetrovsk, Kyiv, Zaporizhzhia, Donetsk, Odesa, Kharkiv and L’viv oblasts. But Crimea attracts mostly Russian investors, which can be partly explained by historical events.
In Odesa, which is not only a resort city but an important industrial region with highly developed transport infrastructure, the preconditions for commercial property development were formed a long time ago. Interest in commercial real estate is steadily growing, and one can find Russian, Polish, Czech and Baltic investors there already. Retail projects in particular are doing well in Odesa. Though most retailers are focusing on the Kyiv market, the opportunities available to those who look outside the capital are enticing, and 24% of retail network operators interviewed are interested in expanding into Odesa, with only Dnipropetrovsk ranking higher.
Nationwide, the most wide-spread proprietorship forms of land development are buying lots through acquiring the State Act of Proprietorship, or leasing the land for a period of 49 years by signing a land lease agreement with the owner. Forms such as leasehold (mostly of buildings) and Public Private Partnership, though popular practice in the European Union, are not yet dominant in the Ukrainian development landscape.
Attractiveness of various real estate market sectors in relation to investment projects
Residential property - Quick returns. Per capita living space half of western Europe. Local experience in this sector exists.
Retail - Great need for the development of retail spaces in cities with more than 200-300 thousand people. A first generation of trade centers exists. Highly developed retail networks within the country. Increase of personal incomes being felt.
Hotels - Shortage of good hotels. Increasing numbers of tourists and businessmen coming to Ukraine.
Warehouses (logistics corridors) - Beneficial geographical position of Ukraine. The development of warehousing has been triggered by the development of trade spaces.
Office property - Mostly concentrated in Kyiv where there’s a serious deficit of quality supply. A lot of projects to be implemented in Kyiv in the next several years.
According to the Ukrainian Investment Survey 2007 done by the Adam Smith Institute, foreign companies characterized the investment climate of Ukraine in the following way:
63 % of interviewed investors think that Kyiv has the greatest potential and the most attractive investment climate in Ukraine. 11 % preferred Donetsk, 10% Dnipropetrovsk, 5% Kharkiv, 4% - L’viv, 3 % - Odesa. The remaining oblasts attract only 5 % of investors.
In Ukraine the most attractive branch for investors is also Real Estate. It got 44 % of the votes; the second-favorite business is retail trade (15 %) and only after that - financial services (13 %).
The survey was held in February 2007 with 250 Ukrainian and foreign companies.
The Ukraine Market by Segment
Office property
The annual yield of Ukrainian commercial property investment is up to 10-15 % while markets of Poland and Czech Republic see 6 % less. To totally cover the invested money in Kyiv office property takes from 3 to 5 years while investors in European countries have to wait 12-15 years, which becomes a great advantage to foreign companies building office spaces in Ukraine.
Economic growth, reflected in positive trends for macroeconomic indices and an increase in the volume of foreign direct investment into the economy of Ukraine, has caused an even greater mismatch between supply and demand, particularly regarding A class business centers. This has resulted in a 17-33% increase in rents in A and  class business centers respectively, indicating one of the lowest vacancy rates, 1.7%, in Europe.
Foreign developers investing into office property may see high income but not as quickly as with a residential property investment, for instance. However, after delivery, the owner may sell it as a working business and see even higher income.
The increase in business activity that has been observed in recent years has led to very high demand for office property. Accordingly, this has become an incentive to investors and developers to bring about projects in this sector of real estate. The retail and office property segment, with its high rental rates and low supply of quality office spaces, will remain the top issue for investors in the short-term period.
Over the last 2-3 years one may observe that foreign companies have been buying active business centers that are already operating and that are filled with tenants. This is due in part to the fact that it’s much cheaper and certainly easier in Ukraine to buy an existing object than to get the land, to settle all of the issues regarding documentation, fill in other gaps such as project management and finally start building. Thus about 80 % of all office centers at the moment of being bought from domestic companies were ready to be delivered to the market or, in the case of older sites, were ready to undergo reconstruction. And only 20 % of Kyiv’s office centers were built from scratch by foreigners.
The demand for purpose built or dedicated business centers in Kyiv has continued to grow primarily due to the influx of foreign companies. These companies account for 71% of the tenants in class A and B+ office centers in 2006 in comparison with 62% in 2005. As of mid-2007, the vacancy rate for class A and B+ offices is 1.7% in comparison with 3% in 2005, confirming a continuing shortage of high class offices. There is also a trend now for domestic firms, especially business and financial services companies, to upgrade to better locations when possible. This tendency should continue for several years to come.
Retail premises
Retail projects in Ukraine are quite attractive for investors, and investments are completely covered in 5 – 8 years, or about half the time of the European average. Unlike warehousing and specialized industrial projects, domestic developers have some experience in meeting the requirements of building modern retail centers.
A look at 2006 shows how the retail market is evolving. The sale of Piramida – the first sale of a modern retail object in Ukraine - gives an example of yields, and the fact that 45 000 square meters of retail premises was delivered, both point to increasing and unsatisfied demand on the part of retailers. Taking into consideration the rise in the country's economy which in turn is increasing per capita income, developers expect the high demand for retail real estate to be maintained for several more years. The year 2007 has been characterized by the increase of developers' attention to the oblast centers of Ukraine though the retail real estate market in Kyiv remains undersupplied.
During 2005, Dnipropetrovsk Oblast led retail real estate development. Odesa oblast was the market leader for 2006. According to forecasts, L’viv Oblast should become the next hot spot for retail real estate development in Ukraine. A number of regional retail chains, such as "Intermarket" (L’viv), "Amstor" (Donetsk), "Tavria B", "Ideal" and "Kopeyka" (Odesa), "Soyuz" (Chernihiv) have declared their expansion intentions including the Kyiv market. It can be assumed that the tough competition and the shortage of vacant land plots in Kyiv itself will become a limiting factor, though building just outside the city limits is expected to pick up.
With the entrance of large foreign retailers on the Ukrainian market, the appearance of new formats and the strengthening of competition between domestic and foreign players is certain, and the need for purpose built retail sites will only grow.
Warehousing and logistics
Considering the fact that the warehousing market in Ukraine and in Kyiv in particular has just begun to develop it’s difficult to estimate its turnover. According to data from DEOL Partners, in the beginning of 2007 the capital’s supply of adequate warehouse premises meeting international requirements was about 184 000 square meters, despite a market capacity of about 0.85 – 1 million square meters. Class C and D class warehouses provided 70 % of the market space available. And this is despite constantly growing demand.
At the moment, all segments in Kyiv’s commercial real estate market, like that of Ukraine in general, are attractive to investors as the market is undergoing a period of high-speed investment development, but in 2007 the logistics segment is clearly becoming a favorite.
By the end of the next year developers hope to bring to market 4 to 6 warehouse complexes, with a total area of 230 – 370 thousand square meters. However, in 2007 only one A class complex, with a total area of 27 000 square meters is being put into operation. Major delivery slippages are the norm, especially for this market segment. The warehouse property market is the least developed major segment in Ukraine. There are a scant number of professional warehouses, so the potential for this segment is high. At present the potential demand for warehouses in the capital is a million square meters with 20 % an annual increase expected. The annual percentage yield is 12-15 % compared to other CEE countries, where it has dropped to only 5-10%).
In the next several years there could be built not more than 300 thousand square meters of modern sophisticated warehouses but upon the condition of realization of all declared projects at the moment, the influx of new investors on the market and growth of Ukrainian developers’ interest in this segment. In 2007 – 2008 the supply may become 400 – 500 thousand square meters but a lot of specialists are not so optimistic and call it in question. Nevertheless, disregarding its present lagging far behind the rest segments, real estate market analysts are unanimous as for booming development of this segment in the nearest future as western operators such as Ramstor, Auchan, OBI, and Praktiker have stated their intentions to come into the Ukrainian market within the next 2 years.
There is room for anyone who wants to enter the warehousing market, as the present demand for professional warehousing facilities exceeds the supply by a factor of two. Domestic developers do not have as much experience in the segment as in office or retail development, and foreign developers should take this into consideration when looking for a domestic partner.
As of the beginning of 2007, rental rates averaged $10-14/m2 monthly, excluding VAT. The rental rates depend on the location of the warehouse, infrastructure, technical characteristics and range of services provided. Along with the high demand for warehouse complexes, there has been a noticeable tendency for rental rates to increase.
Source URL: www.skalinin.blogspot.com/
Have a look at this:
| Today at 9 am Sonae Sierra officially opened the new shopping center Gli Orsi, in Biella, Italy, to the public. With a GLA of 41,100 m², Gli Orsi implied a total investment by Sonae Sierra of ˆ105 million, which will create 850 jobs after the opening. The center hosts 120 shops, including 18 restaurants and bars, with an innovative and complete commercial and leisure offer.
There are seven large shops, including a 13,700-m² Ipercoop hypermarket, owned and ... |
| Retailers and developers from across the Baltic States clashed yesterday at a conference organised by the International Council of Shopping Centers (ICSC)'s Baltic States National Committee in Vilnius.
After a 10-year period of rapid retail growth across Latvia, Estonia and Lithuania, retailers and shopping centre managers are facing an uncertain future as customers reduce their spending in the current difficult economic climate.
With fewer customers ... |
| Forum Duisburg, labeled the greenest shopping center in Europe thanks to its unique energy concept, opened its doors for the first time. The center encompasses about 57,000 m² of retail floor area, making it the largest inner-city retail project in North Rhine- Westphalia at the current time. Forum Duisburg is an attractive and modern inner-city regeneration project.
The concept puts an emphasis on the integration of the building into the urban structure. ... |
| Sonae Sierra, the international specialist in shopping and leisure centers, has presented three new projects for future Shopping and Leisure Centers in Leiria, Maia and Caldas da Rainha, representing a total investment of ˆ212 million. The three new shopping centers - Maia Jardim (Maia), Centro Bordalo (Caldas da Rainha) and LeiriaShopping (Leiria) - will create about 3,000 new jobs.
Sonae Sierra will thus become present in the Leiria and Caldas da Rainha regions, and will also reinforce ... |
| Desert Dream Real Estate & Investments, one of the fastest growing developers in the region, will launch Dream Harbour, a new AED 1.7 billion (ˆ290 mln.) residential development at Waterfront, a community by master developer Nakheel, on August 14 2008. Dream Harbour will be a 48 floor tower designed with a unique feel of Modern Arabia and luxury in mind.
The launch of Dream Harbour, already surrounded by predictions of high value sales, will be celebrated with ... |
| On July 3rd, 2008, Multi Turkmall celebrated the groundbreaking ceremony for a new project in Turkey. Forum Gaziantep Shopping and Lifestyle Centre is located in the city of Gaziantep in South East Anatolia. It comprises 44,000 m² of retail area and is scheduled to open in the third quarter of 2009. Forum Gaziantep will become the new shopping and leisure attraction in Gaziantep. The scheme is being developed for an investment subsidiary of Multi Corporation bv.
... |
| The S.I.T. Tower features an unparalleled combination of excellent business location at Dubai Silicon Oasis, world-class amenities and attractive payment schemes that make it highly attractive among investors and property buyers. Other key features of the S.I.T. Tower are a number of high-end retail shops and a full range of café's and restaurants.
Muhammad Nasir Muhammad Iqbal Falak, in collaboration with Sherwoods Independent Property Consultants and First ... |
| Institutional investors worldwide are being urged to engage with property fund managers to embed the UN-backed Principles for Responsible Investment (PRI) in their decision-making.
The call is being made today by the UNEP FI Property Working Group, whose European members include: AXA Investment Managers, Caisse des Dépôts, F&C Asset Management, Hermes Real Estate, Morley Fund Management, PRUPIM, and WestLB AG, amid concern that the property industry is moving far too slowly ... |
| The International Council of Shopping Centers, Inc. (ICSC) has announced that Jaap Gillis, Chief Operating Officer of Redevco and Chair of the ICSC European Board has been elected to its board of trustees.
“Behind every strong association is a strong board of trustees,” said Michael Kercheval, ICSC’s president and CEO. “Jaap Gillis has a strong background in the retail and real estate industry and I, along with the current board members, look forward to working with him during his ... |
| As Kyivans’ salaries grow, the demand for quality apartments is increasing and development companies are responding by building mixed-use real estate complexes that combine residential and commercial space in compact communities.
Among the biggest mixed-use development projects under construction is Holosiyevo, a 219,000 square-meter project at 13 Holosiyevska Street being developed by Miskzhytlobud, a private Ukrainian construction company.
“This ... |
| It is the third edition of the trade fair for commercial and industry properties and real estate investments which will take place from 27 to 29 May, 2008 at Vienna’s exhibitions ground Messe Wien. The name Real Vienna stands for a successfully established trade fair platform which especially scores internationally with its clear concept – the focus on the CEE and SEE regions (Central, Eastern and South-Eastern Europe).
Whereas in 2007 248 exhibitors attended ... |
| The world’s top ten most expensive office locations saw rents, a large component of occupancy costs, increase by an average 40 per cent last year, according to Office Space Across the World 2008, a global report by real estate services firm Cushman & Wakefield.
In this year’s ranking, London retains its title as having the most expensive office occupancy costs in the world, with one square metre of prime space in London’s West End at ˆ2,277 a year, or ... |
| A report, published by property international consultants GVA Worldwide, reveals that markets in Central and Eastern Europe, where economic growth is robust, will see stronger rental growth throughout 2008 compared to Western Europe.
The report, European Office Market Review Spring 2008, details how commercial investment property markets across Europe have suffered, highlights that occupier markets have remained relatively unscathed and reveals that many ... |
| The 111,690 m² Manufaktura shopping center in Lodz, Poland (developed by Apsys) took home the 2008 ICSC European Award for the best new development of very large centers. Winners of all the 2008 ICSC European Shopping Center Awards were announced on 17 April at the 2008 ICSC European Conference in Amsterdam.
Every year since 1975, ICSC has recognized excellence in new and refurbished shopping centers throughout Europe with the presentation of these ... |
| The fall-out of the credit crunch continues to impact the Central London commercial property investment market which saw just £2.83 billion (aprox. ˆ3.35 bln.) transactions take place during the first quarter of 2008, according to the latest Central London investment market figures from global property consultant Cushman & Wakefield. The figure is significantly down on the same quarter last year during which a total of £3.9 billion worth of transactions were traded ... |
| The appearance of the first professional shopping and entertainment centers several years ago helped Muscovites discover shopping as a leisure activity, while rising incomes of economically active residents made this form of recreation not only popular with them, but also pleasant and affordable. Developers in turn have been actively building and opening new shopping complexes for some time now, making them ever larger, higher quality, and more varied in concept in order to keep up with ... |
| The plot of real estate at Leipziger Platz generally referred to as the Wertheim site has come another step closer to development. It is one of the major properties in the heart of Berlin remaining to be constructed upon. In September of 2007, ORCO Germany and the Berlin Senate Administration for Urban Development initiated an urban design competition for a master plan for this prestigious and well-known property. On 18 March, 2008, the jury awarded first prize to the design by the ... |
| Not a single large property emerged on St. Petersburg's hospitality market in 2007, though many investors announced future plans for development. Meanwhile, a record-breaking number of properties are preparing to enter the market in the years 2008 and 2009. At the moment, 137 projects with more than 11,000 rooms are in various stages of completion.
Stormy Response
The latest large hotel to enter the St. Petersburg market is Kempinski, Moika, 22, which ... |
| Dawnay, Day Sirius Limited announces that it has acquired two freehold business parks located in Offenbach and North Berlin for a combined total of ˆ37 million, to be satisfied by cash from existing resources. The Company believes both acquisitions will be earnings enhancing, and represent an opportunity to increase NAV capital growth through further development and transformation of the sites.
In line with the Company’s strategy, both sites are well suited for rebranding, ... |
| Moscow is ranked as the top real estate market in Europe for both investment and development prospects according to the highly regarded real estate forecast, Emerging Trends in Real Estate® Europe 2008. The report, published today by the Urban Land Institute (ULI) and PricewaterhouseCoopers LLP, covers 27 markets in countries throughout Europe and is based on surveys and interviews with nearly 500 of the industry’s leading authorities.
Survey respondents point to ... |
Documents: 1-20, 21-40, 41-60, 61-80, 81-100.
|
|
click the text
Voting results
