Boston, MA -- (SBWIRE) -- 04/10/2014 -- The Ukrainian real estate sector is slowly recovering from the effects of the global economic downturn, with the office and industrial sectors faring the worst, leading to high vacancy rates and low rents. Retail, on the other hand, provides more than a glimmer of hope, with the country tipped to have the fifth fastestgrowing retail market in Europe over the next few years. But, Ukraine is still battling against poor macroeconomic conditions, with bureaucracy and reports of corruption having a knock-on effect on investor interest.
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Ukraine is attempting to emerge from the economic doldrums that have sent rental prices in all three of the sectors covered in BMI's Real Estate report - office, retail and industrial - tumbling. Industrial has the lowest rental rates of the three, although reports of industrial cooperation between Ukraine and Russia could result in increases over the longer term. Market saturation is deemed to be one of the reasons why Kiev has a worryingly high vacancy rate in terms of office space. The city has been hampered by the creation of 12 additional business centres that are not needed and are likely to remain dormant, and there is concern the vacancy rate could reach as high as 10% by end-2014.
The retail sector, on the other hand, provides a more positive picture and has been garnering interest, particularly since Euro 2012, which generated sales through tourists. A plethora of projects have been announced over Q4 2013; however, the construction industry's reputation for incomplete projects precedes it, and doubts about whether these initiatives will be realised hang in the air.
Nevertheless, the country's volatile economic and political situation continues to pose huge downside risks, and we retain a broadly negative outlook across the short to medium term. The high risk of a currency devaluation will remain a major impediment to foreign investors, while domestic projects will remain constrained by high interest rates.
- Jones Lang LaSalle has touted Ukraine as the fifth fastest-growing retail market in Europe over the next few years, putting it almost on a par with regional powerhouse Russia.
- In November 2013, Viktor Oborsky, head of department for strategic consulting at UTG, said the rise in vacant office space in Kiev could reach 10% in 2014, with unfavourable market conditions primarily to blame. He stated: 'We're expecting the vacancy in this segment of real estate to increase by 5-7%; in some cases, perhaps by 10%, and this is a realistic scenario'.
- By end-2013, the capital's retail market is due to have 95,700m2 of additional retail space added, with Q4 2013 results expected to exceed the combined outcome of the previous three quarters.
- In August 2013, it was reported that there are almost 16,000 incomplete construction projects currently in the pipeline.
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