Ukraine Real Estate Report Q3 2012

Published : July 2012
No. of Pages : 68

Price:

The Ukraine Real Estate report examines the Commercial Office, Retail and Industrial segments throughout the country in the context of a property sector whose continued recovery is increasingly under threat.
With a focus on the principal cities of Kiev, Kharkov, and Dnipropetrovsk, the report covers the rental market performance in terms of rates and yields over the past 18 months and examines how best to maximise returns in the commercial real estate market, while minimising investment risk and exploring the impact of the Euro 2012 football tournament on a market which is losing momentum. The key growth areas driven, investor activity and the construction industry are also explored
On the back of stagnating exports, rising import bills, a crippled banking sector and our expectations for a hryvnia devaluation, we have downgraded our real GDP growth expectation for Ukraine to 2.5% in 2012 (from 4.1%) and 4.2% in 2013 (from 4.7%). While the ongoing global growth slowdown is largely to blame, domestic economic mismanagement by the government is also damaging growth prospects. A weakening global growth picture bodes ill for Ukraine''s export-dependent economy and a faltering domestic demand picture underpins our lower growth expectations for 2012, with negative knock-on effects on demand for real estate.
Key Points: 􀂃 We expect rental growth to remain flat over 2012., although we do see a recovering level of demand for, in particular, high quality property in the office and retail space.
􀂃 The short term opportunities on offer as co-host for Euro 2012 will give a welcome boost to consumer driven subsectors. However, we do not believe Ukraine will avoid the tournament curse which has seen other emerging market hosts of sporting tournaments experience a deep and sometimes prolonged dip in construction industry growth in the quarters following the tournament (South Africa being a case in point). Consequently, we have pencilled in a sharp slowdown for 2012 (2.3%) and a dip into recession in 2013 (-0.2%).
􀂃 Some Ukrainian property companies have never fully recovered from the global financial crisis and may still hold too much debt. If a downturn persists or worsens, they may be vulnerable.
􀂃 We have downgraded our FX forecasts for the hryvnia, anticipating a devaluation to UAH9.0000/US$ in H2 2012. We believe that building pressure on the balance of payments dynamics (including capital flight, domestic FX accumulation and FX-denominated repayments) will erode international reserves and expect a moderate devaluation as a result.
􀂃 To us, the key risk to our outlook for Ukraine stems from the possibility that returning economic growth saps momentum for the reforms mandated under the government''s IMF agreement. A breakdown in relations with the IMF would significantly dampen the outlook for Ukraine both in the short term through capital flight risks, and over the long term as structural reforms fall by the wayside.

Executive Summary ... 5
SWOT Analysis . 7
Ukraine Real Estate & Construction SWOT 7
Ukraine Political; SWOT ... 8
Ukraine Economic SWOT .. 8
Ukraine Business Environment SWOT ... 9
Real Estate Market Overview 10
Real Estate Market Analysis – Office ... 16
Supply and Demand . 16
Rents And Yields 16
Table: Historic Rents – 2010-2011 (US$ per m2/month) 17
Table: Net Yield, 2011-2012 (%) . 17
Table: Terms of Rental Contract/ Leases - Mid 2011 17
Industry Forecast Scenario ... 18
Table: Forecast Rents - (US$ per m2/month) 18
Table: Forecast Net Yield, 2008-2016 (%) 18
Real Estate Market Analysis – Retail 19
Supply and Demand . 19
Rents And Yields 19
Table: Historic Rents – 2010-2011 (US$ per m2/month) 20
Table: Net Yield, 2011-2012 (%) . 20
Table: Terms of Rental Contract/ Leases - Mid 2011 20
Industry Forecast Scenario ... 21
Table: Forecast Rents - (US$ per m2/month) 21
Table: Forecast Net Yield, 2008-2016 (%) 21
Real Estate Market Analysis – Industrial . 22
Supply and Demand . 22
Rents And Yields 22
Table: Historic Rents – 2010-2011 (US$ per m2/month) 23
Table: Net Yield, 2011-2012 (%) . 23
Table: Terms of Rental Contract/ Leases - Mid 2011 23
Industry Forecast Scenario ... 24
Table: Forecast Rents - (US$ per m2/month) 24
Table: Forecast Net Yield, 2008-2016 (%) 24
Forecast Scenarios .. 25
Infrastructure Report .. 25
Table: Ukraine Construction And Infrastructure Industry Data, 2007 - 2016 . 25
Table: Ukraine Construction And Infrastructure Industry Data, 2012 - 2021 . 26
Construction And Infrastructure Forecast Scenario 27
Macroeconomic Outlook ... 29
Table: Ukraine - Economic Activity . 31
Real Estate Risk/Reward Ratings ... 32
Real Estate/Construction Risk/Reward Ratings .. 32
Table: Real Estate/Construction Risk/Reward Ratings (%) . 32
Ukraine’s Business Environment . 32
Table: BMI Business And Operation Risk Ratings ... 33
Institutions ... 34
Table: BMI Legal Framework Rating .. 34
Infrastructure . 36
Table: Labour Force Quality . 38
Market Orientation 39
Table: Emerging Europe - Annual FDI Inflows ... 40
Table: Trade And Investment Ratings .. 42
Table: Top Export Destinations . 43
Operational Risk 44
Competitive Landscape . 45
Company Monitor . 47
Aerobud ... 47
Aisi Realty Public Limited . 49
Kyivmiskbud Holdings . 51
Seven Hills LLC . 52
TKS Management... 54
TMM .. 55
XXI Century Investments.. 56
UPD Dragon 57
Demographic Data 58
Table: Ukraine''s Population By Age Group, 1990-2020 (''000) ... 59
Table: Ukraine''s Population By Age Group, 1990-2020 (% of total). 60
Table: Ukraine''s Key Population Ratios, 1990-2020 . 61
Table: Ukraine''s Rural And Urban Population, 1990-2020. 61
BMI Methodology . 62
How We Generate Our Industry Forecasts 62
Construction Industry .. 63
Bank Lending . 64
Real Estate/Construction Business Environment Rating 64
Table: Weighting Of Indicators . 65
Sources 67Table: Historic Rents – 2010-2011 (US$ per m2/month) . 17

Table: Net Yield, 2011-2012 (%) . 17

Table: Terms of Rental Contract/ Leases - Mid 2011 . 17

Table: Forecast Rents - (US$ per m2/month) . 18

Table: Forecast Net Yield, 2008-2016 (%) . 18

Table: Historic Rents – 2010-2011 (US$ per m2/month) . 20

Table: Net Yield, 2011-2012 (%) . 20

Table: Terms of Rental Contract/ Leases - Mid 2011 . 20

Table: Forecast Rents - (US$ per m2/month) . 21

Table: Forecast Net Yield, 2008-2016 (%) . 21

Table: Historic Rents – 2010-2011 (US$ per m2/month) . 23

Table: Net Yield, 2011-2012 (%) . 23

Table: Terms of Rental Contract/ Leases - Mid 2011 . 23

Table: Forecast Rents - (US$ per m2/month) . 24

Table: Forecast Net Yield, 2008-2016 (%) . 24

Table: Ukraine Construction And Infrastructure Industry Data, 2007 - 2016 . 25

Table: Ukraine Construction And Infrastructure Industry Data, 2012 - 2021 . 26

Table: Ukraine - Economic Activity . 31

Table: Real Estate/Construction Risk/Reward Ratings (%) . 32

Table: BMI Business And Operation Risk Ratings . 33

Table: BMI Legal Framework Rating . 34

Table: Labour Force Quality . 38

Table: Emerging Europe - Annual FDI Inflows . 40

Table: Trade And Investment Ratings . 42

Table: Top Export Destinations . 43

Table: Ukraine''s Population By Age Group, 1990-2020 (''000) . 59

Table: Ukraine''s Population By Age Group, 1990-2020 (% of total). 60

Table: Ukraine''s Key Population Ratios, 1990-2020 . 61

Table: Ukraine''s Rural And Urban Population, 1990-2020. 61

Table: Weighting Of Indicators . 65

Ukraine Real Estate Report Q3 2012

Published By: Business Monitor International

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