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Experts differ in opinions on Ukrainian market’s prospect – results of the UREC Real Estate Summit
Wednesday, 05 December 2012 10:48

 In spite of the fact that many analysts consider retail property segment during three quarters of 2012 as a leading on the real estate market, experts’ opinions on its prospective vary.

Speakers of the UREC Real Estate Summit had both optimistic and rather skeptical assessments of the Ukrainian retail market’s future development. Experts’ assessments are based on the fact that population of Ukraine has low purchasing power as well as there is lack of large retail companies in Ukraine that are able to become safe anchor tenants in the new shopping malls.

The UREC Real Estate Summit dedicated to the results of 2012 on the Ukrainian real estate market took place on November 22nd in the Fairmont Grand Hotel Kyiv. The organizer of the event was Ukrainian Real Estate Club.

According to the experts, retail property in 2012 has shown stable rental rates and become again a leader in terms of attractiveness for developers and investors. In spite of the fact that just two retail objects (with 74,5 ths.sq.m of the total shopping capacity) were put into operation during first nine months of the current year, specialists expect the increasing of new shops with  total retail space of around 300sq.m by the end of the year. So, one of the largest shopping malls in Ukraine Ocean Plaza have already opened (its retail space amounts to 72,2 sth. sq. m) and several other professional retail objects are going to start up soon. In fact, during three quarters of 2012 the level of demand for rental spaces remained stable and high. According to Knight Frank the vacancy in the capital shopping malls amounts to 1-3%.

According to the moderator of the second session of the UREC Real Estate Summit, General Director at Knight Frank, Yaroslava Chapko: «we may say that the retail property market has become a leader in 2012 both in terms of attractiveness of the projects and investors’ interests in this market».

The pragmatic optimism about retail segments’ prospects was stated by other speaker of the summit, Aleksey Chernyshov, Chairman of the Board at AVEC GROUP: «The retail real estate market has a huge potential.  Statistics, demand and other indices show that this segment isn’t saturated yet. However, the retail market will change evolutionarily: when earlier almost all constructed shopping malls operated, today only unique, professional and qualitative retail objects will be successful. Currently, among prospective objects we can define those of, so-called, regional format with 50-60 ths. sq.m of total area. This niche isn’t saturated in million cities, big cities and it’s obvious that this tendency are going to develop in the near future» - expert says.

Also, many experts say that one shouldn’t underestimate the purchasing power of Ukrainians on which the retail market’ success depends completely. It is proved by work of many foreign retailers on the local market who continue to develop their business in Ukraine.

Other speaker of the summit, Oleg Salmin, General Director at ХХI Century, has a more skeptical point of view: «I have a conservative approach to the issue and I want to note that today there are no qualitative anchor tenants in Ukraine for large shopping centers. To enter the regional market without such tenant means significant risks, first of all, for investor. Besides, today Ukraine has just three cities which are prospective for retail property development over the next 2-3 years, they are: Kyiv, Donetsk and Odessa» — Oleg Salmin states.

Experts also note that a development company which is going to construct new retail objects in terms of Ukrainian business reality should pay attention to the high prices for ground area, bureaucratization of licensing system and to the lack of qualitative management for such projects realization.

According to analysts, the key objects realized in I–III quarters of 2012 were shopping mall RayON (total area is 60 ths. sq. m, retail area – 23 ths. sq. m) and shopping mall Diamond (14,5 ths. sq. m and 10,15 ths. sq. m correspondingly). In November shopping mall Ocean Plaza has joined them (I stage with total area of 165 ths. sq. m and retail area - 72,2 ths. sq. m. According to data of Knight Frank, the rental rates in the capital shopping malls vary from 90 to 360 dollars for sq. m per year for anchor tenants and from 480 to 2700 dollars for sq. m per year for retail gallery operators.

Besides the tendencies in the Ukrainian real estate market's retail segment, in course of the UREC Real Estate Summit 2012, the experts also discussed legal aspects of the work in the sector as well as investment climate in the country and prospects of the project lending in the sphere of commercial and housing property. 

The material was prepared by URE Club

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