Get Updates

Emerging trends in the real estate market 2018

20 December 2017 | Wednesday
Business acumen from the winners of the Eastern Europe Real Estate Forum & Project Awards 2017

The end of the year is the time to sum up and determine the vectors of market development for the upcoming year. URE Club asked experts from leading consulting companies in the Ukrainian market to reveal forecasts and crucial trends of the real estate market.

Retail market

“Given the very subdued outlook, the great majority of commercial real estate market players would remain unchanged when increasing funding for new large-scale projects”, commented Vadim Neposedov, CEO and founder of UTG.  He expects, that 2018 will pave the way for new shopping and entertainment centers with GBA of up to 25 thousand square meters as well as massive reconstruction of facilities with the average lifespan of more than eight years. Furthermore, developers will be focused on maintaining of existing assets and completing the construction of large-scale shopping malls.

Dmitry Gavrylenko, head of the JLL office in Ukraine, also pointed out that strong retailer’s demand for premises amid the limited availability of GLA is pushing up rental rates by at least 10%. At the same time, according to Dmitry Gavrylenko's projection, the owners of existing shopping malls will keep on strengthening tenant-mix strategy by expanding the community of more recognizable and demanded brands while at the same time reducing the number of weak and little-known ones.

Different opinion was expressed by Nick Cotton, Managing Director of Cushman & Wakefield in Ukraine. The expert believes that despite the stabilization and development of the retail real estate market, the withdrawal of new properties is unlikely to lead to an increase in rental rates, while occupancy will remain at a high level in quality shopping malls.

Dmitry Gavrylenko also reminded that new global retail operators will enter the market in 2018. In particular, large Turkish department stores, namely DeFacto and Koton as well as Swedish H&M are expected to open in Ukraine. After that, we suppose to get more information from other retailers who were interested Ukrainian market previously, but delayed opening during the period of instability. By the way, operators will continue to expand, including through the development of new brands, he added.

Shopping centers will also implement new trend when increasing the part of food & beverage and entertainment operators. In according to the market researches, this approach positively affects the coverage area, duration and visit frequency of consumers.

Office property market

While preserving the positive dynamics of macroeconomic indicators in 2018, the office market will continue to recover and JLL experts in Ukraine expect a gradual increase in rental rates”, said Dmitry Gavrylenko. The vacancy rate, however, due to low new supply volumes and stable demand for the office space, will continue to decline.

Nick Cotton, Managing Director at Cushman & Wakefield in Ukraine, said: “From the occupation perspective, the office and most likely logistics market will demonstrate continuing falls in vacancy that will manifest itself in rental uplift. Whilst the retail market is strengthening new supply will likely dampen market average growth rates though occupancy is expected to remain high in well executed malls. From the wider development perspective, office and logistics pipeline delivery will remain nominal despite rapidly falling vacancy whilst retail pipeline delivery is material.”

Dmitry Gavrylenko also stated: “The capital market is quite saturated. That’s why the regional markets, in particular Lviv, Kharkiv and Dnipro, will be actively increasing next year. As in the past, the IT industry will continue to grow, retaining the leading positions in terms of occupancy.

Prospects of investments

Nick Cotton observed that investment activity is likely to further strengthen subject to continued economic stability, this being however driven largely by domestic investors of building lot values below $50 million.

According to JLL in Ukraine, the past year’s market transactions are expected to be closed. Banks (as sellers) and local developers and investment groups (as buyers) hold the strongest position among the key real estate players. Dmitry Gavrylenko believes that the private capital accumulated during the period of market stagnation will be the main driver of transactions for local players. In addition, significant proportion of transactions should be represented by end-user sales. The expert also predicts the increasing number of foreign institutional investors, who will more closely analyze investment options, but the probability of closing the deal is quite low.

"The main reason is the high level of political and economic risks as well as the lack of clear indicators / prerequisites for economic growth. Foreign capital will be presented in the form of private opportunistic investments of about $5 million" concluded Dmitry Gavrylenko.

2016 UREClub All rights reserved.
Website development WebLife