Overview Of The Commercial Real Estate Market In Ukraine

2023 Author: Douglas Hoggarth | [email protected]. Last modified: 2023-11-26 20:16

• The state of the commercial real estate market in Ukraine at the beginning of 2011
• Development trends of the commercial real estate market in Ukraine in the near future

Yakovenko Elena Nikolaevna. City landscape of Cherkasy.

Interestingly, in most large cities of the country, many department stores, palaces of culture and even kindergarten buildings that were unclaimed and later became office centers, supermarkets, entertainment centers and restaurants were rebuilt for commercial real estate. However, the construction of new complexes began, which offered premises for rent to representatives of small and medium-sized businesses.

The state of the commercial real estate market in Ukraine at the beginning of 2011

As you know, commercial real estate includes all real estate objects that are used not for living, but in commercial activities, that is, for the purpose of making a profit.

There are several main types of commercial real estate:

• trade - shops, shopping centers, warehouses;
• office real estate;
• hotel business facilities;
• industrial and logistics facilities - production shops, bases and other premises used in the production and movement of goods.

Speaking about each category of commercial real estate in Ukraine, it is worth noting that the lowest rates of development are observed in the construction of industrial and logistics facilities. This area is currently underdeveloped in the republic, and logistics terminals are just beginning to appear in the vicinity of such large cities as Kiev, Donetsk and Kharkov.

The retail real estate market in Ukraine is often called the “tenant market”.

At the same time, shopping malls belonging to such large hypermarket chains as Amstor, Metro, Auchan, ATB, Furshet and many others have each occupied their own niche in all fairly large cities of the country and successfully cope with the task of leasing space to smaller trading companies and private entrepreneurs.

Experts often call the retail real estate market in Ukraine "the market of tenants" as in most shopping and business centers they prefer not to buy space, but to rent it. Perhaps this is due to the rather unstable situation in the country's economy and the high cost per square meter of area, which is often too expensive for small and medium-sized businesses. In addition, almost all owners of retail real estate in Ukraine prefer not to sell space, but to lease it out.

The cost of 1 square meter in a shopping complex depends on the class of the premises, the size of the rented premises and the location of the building. So, the most expensive commercial real estate in Ukraine is premises in the center of Kiev, where the rental price can reach $ 300 per 1 square meter, and the purchase price ranges from 6 to 10 thousand dollars per square meter. In complexes located in other districts of the capital, the average rental price for premises is from 50 to 160 dollars per square meter, purchases - from 735 to 1300 dollars. In the regions, the cost of renting retail space is much lower - from 25 to 55 dollars per square meter, purchases - from 500 to 3000 dollars.

In general, over the past year, the rental price of retail space in Ukraine increased by 5-15%. This year, analysts expect further growth in value by at least 12%. Such an increase in rent in the field of commercial real estate is due to the fact that in most shopping centers areas are sold out even at the construction stage, and later they are only leased, and the demand has recently significantly exceeded supply.

With regard to real estate in the hotel sector, it was this area that was strongly influenced by the victory of Ukraine in the competition for the right to host the European Football Championship in 2012. The expectation of the arrival of 600 thousand to 1 million tourists, as well as team players, their families and UEFA members, has significantly intensified the process of building new hotel complexes, which until now were not so many in the republic.

Development trends of the commercial real estate market in Ukraine in the near future

After a significant recession that was observed in the real estate market of the republic in 2008 due to the financial crisis, which significantly reduced the demand for rent and purchase of retail and office space, and also led to the freezing of many facilities under construction, this year the market has become more active.

Revutsky Oleg. Lenin street. 2010

Such an increase in activity in the commercial real estate market was caused by the stabilization of the economic situation, an increase in demand for retail space and rental of premises in business centers, as well as preparations for the European Football Championship, which will be held in Ukraine next year.

Real estate specialists in Ukraine agree that the preparation for Euro 2012 had the greatest impact on the hotel business. Apart from the construction of such necessary facilities as stadiums, which are already fully completed in Donetsk and Kharkov and are in the process of being built in Kiev and Lvov, reconstruction of airports in all four cities - hosts of the Championship, as well as repair of existing tracks and construction of new roads.

Currently, 40 hotel complexes are under construction in Kiev, 24 in Lvov, 18 in Kharkov, and 14 new hotels are being built in Donetsk. The main problem of the republic is that most of the newly built hotel complexes claim the status of 4 and 5 stars and, accordingly, are distinguished by a rather high cost of rooms. The average price of an ordinary room in hotels of this class in Ukraine is currently about $ 245 per day. In some hotel complexes, in particular Donbass Palace in Donetsk and Premier Palace in Kiev, the cost of a room is about $ 500 for an average room.

According to experts, most of the fans will prefer cheaper housing, in particular, apartment rent. To solve this problem in Donetsk, for example, the reconstruction of dormitories of higher educational institutions is underway, where it is planned to resettle football fans.

According to experts, after such a construction boom in the hotel industry, after the end of Euro 2012, there will be a long lull, since at present the hotels in Ukraine are filled only by 53%.

Sokolovsky Vitaly. Andrew's Descent. 2010

The general trend of such reconstruction as a whole has a positive effect on the appearance of new retail space in large cities, because each reconstructed airport and railway station will necessarily acquire its own shops and cafes, and the repair of highways can have a positive effect on the emergence of new logistics centers.

However, the construction of shopping centers, which is currently being prepared for the Championship, could not have had a big impact - in this area of commercial real estate, the main stimulus for construction is the growth in demand for retail space and an increase in rent.

This year it is planned to commission the Mega City SEC, Continental SEC, the second stage of the Dream Town SEC in Kiev. The demand is quite high, so, in the Kiev shopping and entertainment center Ocean Plaza, which will begin work only next year, 70% of the space has already been leased. New centers are also expected to appear in other cities of Ukraine - the Ave Plaza and Magellan shopping centers in Kharkiv, in Donetsk - the second stage of the Donetsk-City shopping center and the Yuzhnye Slopes shopping center, as well as the Muravei shopping center in Odessa.