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Ukraine Real Estate Report Q1 2011


Ukraine Real Estate Report Q1 2011

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Additional Information
Price $530.00
Meta Description No
Publisher Business Monitor International
Date of Report Aug 1, 2011
Quick Overview
After the global financial crisis, and with GDP shrinking by 15% in 2009, participants in Ukraine’scommercial real estate sector had to contend with a slump in rental rates of 25-40% – across all three subsectors– in the year. In early 2010, vacancy rates were running at 15-20% or worse in the three cities forwhich we gather data – Kiev, Kharkov and Dnipropetrovsk. The main exception to this appears to be theretail sub-sector in Kiev but, even there, rents have fallen by around a third.
When we interviewed them in early 2010, our in-country sources were confident that conditions wouldget better, even though the economy appears unlikely to regain the 6-7% growth rates that were the normprior to 2008. BMI expects that domestic demand will rise only slowly, given the over-leverage of theprivate sector, the under-capitalisation of Ukraine’s fragmented banking industry and the fiscalconstraints that have been imposed on the government. In essence, much depends on an export-led boom(which, in turn, is driven by the sharp fall in the hryvnia over the past two years) feeding through to thereal estate sector.
There is one other positive dynamic. Although not alluded to overtly by our in-country sources, theremust be pent-up demand for new and high-quality office and retail space (in Kiev, especially). Oursources are confident that the overall levels of rents will rise as a result of the completion of a number ofnew projects – including several that were frozen during 2009 as a result of the crisis. We agree that thisis good news, but caution that the implication is that there must be a lot of older real estate in the officeand retail sub-sectors that will prove very difficult to let.
The slump in rents in Ukraine – as in much of Central and Eastern Europe – caused yields to fall through2009. However, we suspect that the drop in rents relative to prices and capital values is, in part, due to thelack of transactions in what must have been a traumatised marketplace.
By mid-2010, it was apparent that rents and yields were stabilising. We are confident that much of thenecessary adjustment to prices and yields is now in the past. We anticipate that yields will adjustgradually so that they return to the levels prevailing prior to 2008. The biggest changes will be in theoffice and retail sub-sectors of Kharkov, where yields soared during 2009.
Table of Contents
Executive Summary ........................................................................................................................................ 5
SWOT Analysis ................................................................................................................................................ 6
Ukraine Real Estate/Construction SWOT ............................................................................................................................................................. 6
Ukraine Economic SWOT ..................................................................................................................................................................................... 7
Ukraine Business Environment SWOT .................................................................................................................................................................. 7
Regional Real Estate Overview ....................................................................................................................... 8
Table: Central And Eastern European Office Markets At A Glance – Rents, 2009-2011 (EUR per m2 per month) ............................................... 8
Table: Central And Eastern European Retail Markets At A Glance – Rents, 2009-2011 (EUR per m2 per month) .............................................. 10
Table: Central And Eastern European Industrial Markets At A Glance – Rents, 2009-2011 (EUR per m2 per month)........................................ 12
Real Estate Market Overview ........................................................................................................................ 14
Key Issues ........................................................................................................................................................................................................... 14
Comments And Data From In-Country Sources .................................................................................................................................................. 14
Table: Ukraine Real Estate Markets – Rentals In m²/month, 2008 And 2009 (US$) ............................................................................................ 15
Table: Ukraine Real Estate Markets – Net Yield (%) .......................................................................................................................................... 16
Table: Ukraine Real Estate Markets – Terms Of Contract/Lease ........................................................................................................................ 16
Table: Ukraine Real Estate Markets – Available Space (m²) & Vacant Space (%) .............................................................................................. 17
Industry Forecast Scenario ........................................................................................................................... 18
Real Estate Outlook ............................................................................................................................................................................................ 18
Table: Ukraine Real Estate Markets – Rentals in m²/month, 2009-2011 (US$) ................................................................................................... 20
Table: Ukraine Real Estate Markets – Forecast Net Yield, 2009-2015 (%) ......................................................................................................... 21
Construction Industry Outlook ............................................................................................................................................................................ 22
Table: Ukraine Construction And Infrastructure Industry Data, 2007-2015 ....................................................................................................... 22
Table: Ukraine Construction And Infrastructure Industry Data, 2012-2020 ....................................................................................................... 23
Macroeconomic Outlook ..................................................................................................................................................................................... 27
Table: Ukraine – Economic Activity, 2007-2014 ................................................................................................................................................ 29
Business Environment ................................................................................................................................. 30
Real Estate/Construction Business Environment Ratings ................................................................................................................................... 30
Table: Europe Real Estate/Construction Business Environment Rating .............................................................................................................. 30
Ukraine’s RECBER............................................................................................................................................................................................. 31
Project Finance Ratings: Outlook For Central And Eastern Europe ................................................................................................................... 32
Table: Design And Construction Rating ............................................................................................................................................................. 34
Table: Commissioning And Operating Rating .................................................................................................................................................... 35
Table: Overall Project Finance Rating ............................................................................................................................................................... 37
Ukraine’s Business Environment ........................................................................................................................................................................ 38
Table: BMI Business And Operational Risk Ratings ........................................................................................................................................... 39
Table: BMI Legal Framework Ratings ............................................................................................................................................................... 41
Table: Annual FDI Inflows Into Central And Eastern Europe And Central Asia ................................................................................................. 46
Table: BMI Trade Ratings .................................................................................................................................................................................. 48
Table: Top Export Destinations, 2001-2008 (US$mn) ........................................................................................................................................ 49
Company Profiles .......................................................................................................................................... 51
Aerobud .............................................................................................................................................................................................................. 51
Aisi Realty Public Limited .................................................................................................................................................................................. 53
Kyivmiskbud Holdings ........................................................................................................................................................................................ 54
Seven Hills LLC .................................................................................................................................................................................................. 56
TKS Management................................................................................................................................................................................................ 58
TMM ................................................................................................................................................................................................................... 59
XXI Century Investments..................................................................................................................................................................................... 61
BMI Methodology .......................................................................................................................................... 62
How We Generate Our Industry Forecasts ......................................................................................................................................................... 62
Construction Industry ......................................................................................................................................................................................... 63
Bank Lending ...................................................................................................................................................................................................... 64
Real Estate/Construction Business Environment Rating ..................................................................................................................................... 64
Table: Weighting Of Indicators .......................................................................................................................................................................... 65
Project Finance Ratings Indicators .................................................................................................................................................................... 68
Table: Design And Construction Phase .............................................................................................................................................................. 68
Table: Commissioning And Operating Phase – Commercial Construction ......................................................................................................... 69
Table: Commissioning And Operating Phase – Energy And Utilities .................................................................................................................. 70
Table: Commissioning And Operating Phase – Transport .................................................................................................................................. 71
Sources ............................................................................................................................................................................................................... 72




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