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The outgoing 2012 year turned out rather contradictory for commercial property market. Operators can’t definitely find out a particular activity in any segment. However, market stagnation is non-topical as well.
The first half of 2012 was notable for completion of a number of construction objects within preparation for EURO-2012. Correspondingly, the dynamics of construction market in commercial segment (which was supported generally by hospitality sector this year) significantly slowed down in the second half of the year.
According to managing partner at Ukrbudcontract Sergey Fedorik, there wasn’t a considerable growth of demand in any segment. Some projects were carried out in the hospitality, office, industrial and retail segments. The last one has developed in million cities. The hospitality segment, for historical reasons, was the most active in Crimea. As for retail, office, industrial and warehouse segments, they developed generally in Kyiv and Kyiv region.
«Definite tendency of 2012 was an increase of foreign customer presence in all segments, - expert comments. – There are point projects with foreign customers in industrial and in hospitality segments. However it is an exception to this regularity.
I think that revival of foreign customers’ real interest in local property market will be no earlier than 2013».
The real estate operators had to solve a number of problems against the background of ambiguous market dynamics. Sergey Fedorik defines two risk factors among such, they are: the customer nonpayment or delays in payment and difficulties with financial cushion which is necessary to maintain an activity between projects or during the period of underfunding.
As for pricing policy, expert says that there weren’t significant value fluctuations of construction services for this calendar year. For instance, when in 2011 the price for « turnkey» realization of 4* hotel complex project varied from $1800 per sq. m to $2500 per sq. m depending on occupancy, location and different requirements of the customer, in 2012 this price level was constant.
However, insignificant (against total value) for construction variations existed and they were provoked by two factors: concrete cost and cost of work force. Suppliers increased the concrete cost by 15% in March 2012 and by 7% once again in June 2012. It influenced the cost of monolithic work but it didn’t lead to the significant change in object realization cost in tote, taking into account the fact that such works are just a part of a construction budget. The growth of this parameter always was compensated by the customer.
The second factor, pointed by the expert (the cost of work force) had a negative influence on the prices in 2011 due to global employment of specialists-builders for construction of objects within EURO-2012. The resource became available and prices declined a bit by the simmer – reduction made up about 10%.
How difficult will be 2013 for construction market of commercial property? The managing partner at Ukrbudcontract Sergey Fedorik answered this question in the following way: «In 2013 the simultaneous construction of several large regional retail centers for the local and foreign customers will begin. One predicts revival of the local retail chains as well as construction of their new objects. We see considerable potential in the retail property segment and it will continue to develop next year. Particular activity will be typical for Kyiv, Lvov, Donetsk and Kharkov».
Information about the company
LLC «UkrBudContract» is a main general contractor company which has worked in the sphere of designing and construction of commercial property objects for more than 12 years. The company’s portfolio of realized projects includes more than 600 thousand sq. m of property.
