Presentation Transcript

1. Real Estate in Kyiv

   Market Overview Natalia Marianchyk, OlenaZagrebina, OlexandraRomanovska
2. RESIDENTIAL At the end of 2008, Kyiv residential market in the first time after 8 years of a positive growth had witnessed prices decline in all its segments. Average prices on the mainstream market, forced by decreasing demand and economic downturn in the country, dropped by 25-27% in autumn 2008 and on 15 -25% in 2009. Due to crisis customers’ interest for residential projects at initial construction stages had extremely decreased. At the begging of 2009 many developers had revised their projects’ development plans and delayed their new projects.
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4. RESIDENTIAL While the prime market in Kiev ($500,000+ ) has led the mainstream market price decline, the pace of decreasing was relatively fragile. The price decline in Q4 2008 was less than 1%, and by the end of 2010 Kiev prime house prices were only around 23% below their 2008 peak. Current average prices on deluxe new built complexes in Kiev vary from $5.000 to $10.000 per sq. m. After a decade of rising prices in Ukraine, which had seen growth of 30-90% per year, such a decline doesn’t actually seem like a catastrophe. Resilient household wealth at the top of the market has had a direct and positive impact on liquidity in this segment.
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6. RESIDENTIAL RISKS The Kiev residential market is undoubtedly in a stronger place than it was in mid 2008 or 2009, but as we move through 2011-2012 the number of risks to the sector seems to be rising. The main factors are economic situation and sovereign debt. However, the one of the most critical factors for the Ukrainian housing market is the cost of mortgage finance and availability of bank financing for developers. Interest rates for mortgage loans in Ukraine are very high compared to most European markets, with rates of between 17% and 25% not being uncommon.
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8. RESIDENTIAL PRICES Prime market segment will show more positive price dynamics. The price growth will be at around 35% in 2011. The key reasons are pent-up demand and the outlook for supply. Since the spring 2010 all activity measures in the prime residential market have pointed towards continuing growth. By the autumn, buyer numbers were 30-40% higher year on year and sales volumes more than 25-30% higher over the same period.
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10. OFFICE PREMICES New supply of professional office space in 2010 totaled approximately 110,000 sqm, which is identical to new supply for 2009, but 45% less then of 2008. The total stock of office premices in Kyiv reached just over 1,200,000 sqm. In terms of square meters per 1,000 residents, the amount of office space in Kyiv now stands at 430 sqm, less than ¼ available in Warsaw. In 2010 most construction was financed by equity. Construction volumes remain relatively low, but comssioning dates are constantly being revised.
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13. OFFICE PREMICES The ratio of consumption of office space between the financial and non-financial sectors is almost back to its traditional proportions, on the order of 1/3. In 2010, the share of the financial sector’s demand surpassed previous moderate expectations, and returned to the mark of 36%, as opposed to 6% in 2006. 90% of tenants who moved in 2010 simultaeously expanded their occupied areas. The leaders in consumption of office space were companies of the financial sector (36%), the IT sector (15%) and the manufacturing sector (14,5%)
14. OFFICE PREMICES RENTAL RATES Growing demand in the context of decreased commissioning tempos for professional office buildings has led to a decrease in the vacancy rate, from 20% to 14%, over the course of 2010. As a result, basic rental rates for high-quality office space in Kyiv increased slightly, in the range of 5-10%. Recovery Phase
15. OFFICE PREMICES Prognosis The growth of new supply of office space in comparison to 2010 by more than 1.5 times, with large projects commissioned. Similar or slightly larger than in 2010 volume of take-up of office space, or within the range of 140-170.000 sqm Similar or slightly larger than in 2010 volume of purchases of office space in 2011, primarily by end-users Further moderate decrease in the average market vacancy rate to 12-13%
16. RETAIL PREMICES In 2010, new supply of retail space in Kyiv were limited to commissioning of the second phase of the regional shopping and entertainment Centre Sky Mall with gross leasable area (GLA) of 45,500 sqm. This is the lowest indicator of new supply in four years. Total stock of Kyiv’s shopping centers and malls reached approximately 600,000 sqm. Commissioning of many SCs planned for 2010 was postponed due to delays in construction financing. Owners continue financing, schedule is dependent on tempo at which owners accumulate financial resources.
17. RETAIL PREMICES In 2011-2012, there are plans to commission new shopping centers with a combined GLA of 330,000 sqm. On the basis of past practice, the most likely situation is that where the commissioning of major projects is delayed by more than 2 years. Realistic future- less than ½ pf planned amount. Recent Best Examples: SEC Sky Mall / GLA 45 500 sqm (2010) SEC Dream Town/ GLA 45 000 sqm (2009)
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19. RETAIL PREMICES Main Consumers of Retail Space: Grocery stores (hypermarkets, supermarkets, convenience stores, discounters) Appliance and consumer electronic stores Specialty shops (children’s goods, sporting goods, furniture) Clothing, footwear and accessories, designed for mass market (“average” and “average minus” price segments)
20. RETAIL PREMICES Market Entry: DIY LEROY MERLIN, part of the French GroupeAdeo company, opened its first store in Ukraine (17 Polyarnaya Street) Forth largest player in the world, areas 6000 to 19 000 sqm The INDITEX international group (Zara, Stradivarius, Bershka…) presented MASSIMO DUTTI, new brand for Ukraine (Sky Mall) in “average plus” segment. DELTA SPORT launched affordable British appeal brand New Look “average minus” price Topshop first store in Ukraine (Sky Mall) The MARATEX brought a new brand to Ukraine- River Island (UK), clothes and accessories for the whole family (Dream Town)
21. RETAIL PREMICES Rental Rates As of the end of 2010, average monthly rental rates for retail areas for sections of 100-300sqm in successful shopping centers in Kyiv increased by 13%, to 85USD per sqm. (level of 2007)
22. HOTEL MARKET At the end of 2010, Kyiv can boast a total of 48 1-5 star hotels, which together provide 6,061 rooms to the market. 2.2 rooms per 1000 inhabitans, in Warsaw its 5, in other European cities its 10. The upscale hotel market in Kyiv started its active development (new construction) in 2005, marked by the delivery of 4 star Radisson SAS (currently Radisson BLU) , then Hyatt and InterContinental 5 star hotels appeared. No more international operators.
23. HOTEL MARKET At the beginning of 2010, developers continued the construction of on-going projects in the hotel segment. The Fairmont Hotel (5 stars, 257 rooms), located on 1a Naberezhno-Kreshchatitskaya street, is in final stages of construction. Hilton (5 stars, 257 rooms) will be located on 28-30 Shevchenko Blvrd. Swissotel (5 stars, 513 rooms in Sky Towers on Sholudenko street)
24. HOTEL MARKET Demand for hotels is driven by foreign guests and domestic travelers. 80% foreigners. During the economic downturn of 2008-2008, the number of guests in Kyiv’s hotels decreased, due to the reduction of business travel to the country, as well as the decline in activity of domestic businesses In 2010 – 40% increase.
25. HOTELS, ROOM RATES Historically, 4-5 star hotels in Kyiv enjoyed high room rates and occupancy, due to an undersupplied hotel market. The minimum rack rates in 2006-2007 reached 340-550USD per room for top hotels (Premier Palace, Hyatt, Opera, Radisson BLU) The market situation changed at the end of 2008 and in 2009, when waning demand was followed by 20% increase in room supply,following the entry of InterContinental into Kyiv market. New tendency in 2010 was towards expanding the range of available tariffs, in order to allow operators to use a flexible pricing policy, depending on the season and occupancy rate.
26. HOTELS, ROOM RATES Average annual occupancy in Kyiv’s top hotels in 2010 was 50-55%. In 2009 this indicator was 45-50%, compared to approximately 65-70& for 2008.
27. HOTEL MARKET Forecast: Moderate growth of new hotel supply in all pricing categories, in the short and medium-term perspectives Moderate growth of both occupancy and average daily rates in upscale hotels, due to increasing business activity in the country Resumption of construction on previously frozen hotel projects, although only a few will be commissioned by 2012 Further interest in Ukrainian hotel projects on the part of international operators, especially with the UEFA 2012 European Championships on the horison.