Astana Market View Residential

Transcription

1 SCOT HOLLAND CB RICHARD ELLIS Astana Market View Residential Q Quick Stats Prices Absorption Hot Topics Change from Q2 Q Investments in residential construction in Astana during the period Jan-Aug 2010 comprised KZT 38,231 M, which represents an approximate 23.1% increase y-o-y; At the same time, the total housing stock commissioned in Jan-Aug 2010 comprised 928,743 sqm, which is a 1.2% decrease y-o-y; The average Primary and Secondary market selling price levels changed insignificantly compared to the Q2 of OVERVIEW Kazakhstan is the largest country in Central Asia. The relocation of the capital city functions to Astana in 1998 offered long-term growth and development opportunities for the city. According to the updated information from the Statistics Agency of the Republic of Kazakhstan, the population of Astana as of the 1 August 2010 was 708,794 people. The fixed capital investments in the period Jan- Aug 2010 comprised KZT 219,728 Mln, which represents a 17% increase compared to the same period of In addition, the combined industrial output of Astana in the period Jan-Aug 2010 increased by 3% on a y-o-y basis. Investments in residential construction during the same period comprised approximately KZT 38,231 Mln, which represents a 23.1% decrease compared to the same period of In the period Jan-August 2010, the total volume of residential construction in Kazakhstan decreased by 4.2% compared to Jan-Aug 2009, with the largest shares of space commissioned in Astana (25.1%), Almaty (19.6%) and Almaty province (12.7%). The total housing stock commissioned in Jan- Aug 2010 in Astana comprised 928,743 sqm, representing a 1.2% decrease y-o-y. It should be noted that the Almaty District of Astana accounted for the largest portion of newly commissioned residential space 55%, against 25% in Saryarka DIstrict and 20% in Esil District. Today the overall market sentiment is becoming more positive thanks to certain favorable developments in the global and local economies, and due to the reaching of the price rock bottom on the Astana property market. However, given the objective factors directly affecting residential demand, such as low income levels of population and unaffordable mortgage lending, it is obvious that the market will most likely keep a stagnancy pricing trend in the medium term. 200, , ,000 80,000 40,000 Investments into residential construction, Astana, KZT mln 54,289 95, , , ,182 54,300 38, Jan- Aug 2010 Source: Kazakhstan Statistics Agency 10,000 1, Completed Residential Buildings ('000 sqm) Jan-Aug 2010 Kazakhstan Astana Source: Kazakhstan Statistics Agency Residential space commissioned in Astana, by district Saryarka 20% Esil 25% Source: Kazakhstan Statistics Agency Almaty 55%

2 Q Astana Market View Residential Currently, the main activities under the state program include the buy-out of unfinished residential developments, their completion, and subsequent sale of economy-class housing to the population. The State Housing Construction Program ( ) sets a plan to commission about 6,000 apartments worth a total of KZT 25 bn. According to city officials, there were 266 residential developments with more than 37,000 interest holders at the time when the liquidity crisis occurred in mid A total of 62 developments (with 12,574 shared interest holders) were completed in It is planned that 61 more shared interest construction developments (with 12,933 shared interest holders) will be finished in 2010, thus completely solving the problem. As of 1 st September 2010, the number of incomplete shared interest construction projects in Kazakhstan was 97 (20,722 interest holders), including 42 projects with 8,774 interest holders in Astana. In general, the implementation of incomplete residential projects in Astana is currently performed through the following schemes: completion with the assistance of the Samruk-Kazyna Real Estate Fund; buy-out of apartment units in residential developments by city akimat; completion of residential complexes by AKKB Jana Kurylys LLP; completion of residential complexes by the developers unassisted. As part of the efforts to solve the issues on the real estate market, the Samruk Kazyna Real Estate Fund uses the mechanism of completing the developments in Astana and Almaty through second-tier banks and the real estate fund. In particular, BI Group has completed the Gulder residential complex. This is a 12-storey building (190 apartments) located in the centre of the Old City part of Astana, with a total area of 11,000 sqm. Overall, the Samruk Kazyna Fund finances 8 projects of «BI Group» with a total of 2,722 interest holders. Additional budget allocations for the solution of issues of shared interest construction will amount to KZT 17.7 Bn, of which KZT 7 Bn will be used for the completion of the Grand Astana residential complex in Astana. In addition, KZT 8 Bn will be allocated for the development of engineering infrastructure in the Kosshi settlement, one of the large satellites of Astana. The funds will be used for the construction of the Lesnaya Polyana residential project, as well as for the general development of the settlement, including individual housing, construction of roads, centralized boiler plant, development of a power supply network, water treatment facilities and sewerage system. The trend of stable and in some cases decreasing prices on the residential market of Astana continues, due to the fact that sellers of residential space are still keeping overestimated prices, as a result of which the majority of potential buyers simply cannot afford purchasing property without a bank loan/mortgage. The prices on the primary and secondary residential markets of Astana have changed insignificantly during Q3 of Despite official optimistic announcements, the building activity on many construction sites is low. At the same time, there is certain demand coming from solvent property buyers, but this category prefers to study closely all available options, and bargain actively when making a purchase. During the reported period, the trends of the mortgage lending market have remained unchanged. The volumes of the loans still persisted at fairly low levels, as most mortgage lending programs have either been closed, or continue to work under terms, restrictions and conditions that most of the potential property buyers find unacceptable or financially unviable. However, this is not the only cause of low mortgage lending volumes. Many potential buyers of residential units are in a wait-and-see position, awaiting an even further price decrease on the real estate market. It is expected that the relatively low purchasing power of the population caused by the current economic situation, combined with the growing unemployment rate in the country as a whole and in Astana in particular, will exert an additional pressure on the residential market of Astana in the coming months. The average price on the primary residential market of Astana in August 2010 was in the range USD 1,150, while the average price on the secondary residential market keeps to the level of USD 1,270 per sqm, which represents virtually no change compared to the previous quarter. After a period of relatively stable increase in the second half of 2009 the average weighted rental rates in Astana started to decrease and reached a level of USD 800 per month in December 2009, which lasted during H1 of However during the reported period the rental rates have substantially increased up to approximately USD 1,000 per sqm. As illustrated in the chart below, the average Primary market prices in Astana are generally lower than the average Secondary market prices, which in some ways may seem quite uncommon. To an extent this can be explained by the partial loss of confidence of property buyers in the primary market segment, especially in the so-called shared interest developments. 2,200 2,000 1,800 1,600 1,400 1,200 1,000 Q1-08 Average Residential Prices, Astana, USD per sqm Q2-08 Q3-08 Q4-08 Q1-09 Primary market Q2-09 Q3-09 Q4-09 Q2-10 Secondary market Q3-10 Page 2

3 Astana Market View Residential As a result people prefer buying apartments either in fully completed and commissioned new buildings, or in existing older buildings of reasonable quality. This keeps secondary market prices at a relatively higher level. As part of the plan to mitigate the situation on the residential market, the Astana city authorities have started implementing a system of leased housing, which is widely spread in Western countries. The Real Estate Fund is in process of elaborating the rules of the sale of residential properties. One of the mechanisms provides for a lease of the residential units with a subsequent buy-out. This scheme implies that a unit is leased within a fixed term with a transfer of the residential unit ownership rights to the tenant after the expiry of the lease term. Map of Astana Districts Any citizen of the Republic of Kazakhstan may become a tenant, provided he/she is compliant primarily with the established solvency requirements. Other important factors of the selection of the future tenants include: availability of housing and the social status. It is not allowed to resell the housing units obtained as part of the program unless the larger part of the cost is repaid. In order to prevent speculative transaction on the market, there will be a fixed term within which the tenant will not be allowed to buy-out the leased property.the monthly rental rate will tentatively amount to KZT 700-2,000 per sqm, depending on the class of housing. Two residential developments ( Al-Arka and Ak Zhaik ) have been commissioned during the first half of 2010 as part of the leased housing program, with more than 8 residential projects planned for completion by the end of As reported by official representatives of the Real Estate Fund, this program should be fully completed in Source: Google, Scot Holland CBRE Almaty - lies on the right bank of Esil river, comprises the eastern part of the Old City ; total area 21,054 ha; population 263,400; large and medium size industrial enterprises, residential properties, both prestigious and less so, condominiums; basic retail facilities; open markets and bazaars, also some office space in light blue on the map. Esil an administrative centre located on the left bank of Esil river, dividing Astana in East-West direction, total area 31,200 ha; population 180,000; the district includes residential microdistricts Karaotkel and Chubary, as well as Prigorodniy, Ilyinka, Komsomolskiy, Zarechniy and Telmana village; business area comprises central governmental institutions, agencies, ministries, and buildings of diplomatic missions. 0 Q3 201 Saryarka lies on the right bank of Esil river, comprises the central part of the Old City ; total area 19,202 ha; population 296,364; 80 large and medium size industrial and construction enterprises, residential properties, both prestigious and less so, condominiums; basic retail facilities and some office space in yellow on the map. Page3

4 SCOT HOLLAND CB RICHARD ELLIS Astana Market View Offices Q Quick Stats Rental rates Occupancy Hot Topics Change from Q2 Q The Astana market is younger and more artificially expanded than the more mature Almaty real estate market, which makes it even more volatile in crisis times; Supply is mainly represented by lower-class and smaller-size administrative buildings (class В and С); The analysis of rental rates in Class A business centres in Astana shows that they have slightly increased during the period July-August 2010, with an average level of approximately USD 32 per sqm per month. OVERVIEW The development of the office property segment in Astana is driven by the current status of the city, which, thanks to the relocation of the capital city functions, has rapidly become the commercial centre of the country with a constantly increasing number of private / public enterprises and agencies. Currently, the office property market is characterized by somewhat increased demand in the business centres of higher grade, which is cased by the increase of business activity. At the same time, the volumes of new business centres commissioned show negative dynamics, and a number of offer projects were suspended due to the lack of funds. At the same time, it should be noted that the Astana market is younger and more artificially expanded than the more mature and better developed Almaty real estate market, which makes it even more volatile in crisis times. In recent years Astana had plenty of new ambitious office and mixed-use projects in the pipeline, promoted by the efforts of the Government to give the city a completely new appearance and international status. Most of these large-scale high-end developments were designed by internationally renowned architects. However, the construction of a significant part of these projects has been put on hold, and some of the projects under construction were even frozen as a result of the lack of financing caused by the current worldwide credit issues. The year 2009 was marked by the noticeable effect of the global financial crisis, causing a clear downward price trend in all Astana market segments. The intricate situation on global financial markets and the related decrease of crediting activities have caused a slowdown of GDP growth since late 2007, which in turn had a strong negative impact on the local property market. Despite that, office properties are still quite a promising segment of the Astana real estate market with good development perspectives in the medium- to long-term. Virtually all Class A and B offices in Astana were constructed over the last decade. Nevertheless, by mid-2005 the total available office space in the city was less than 30,000 sqm. In the period , the office market gradually started to grow. Thanks to the substantial number of newly constructed business centres, the supply of office space increased by 129% in 2005 and by 320% in Unfortunately, new class A business centres were not commissioned during that period in Astana. Since the beginning of 2010, the office property market has become slightly more active. One can observe that some of the earlier suspended and frozen office projects start resuming construction operations. The number of office sale and purchase transactions has remained quite low during the first 3 Quarters of In the longer term, the demand for office space will be closely linked to the speed of recovery of business activity and general macroeconomic conditions in the city. In our opinion the decrease of the selling prices and rental rates of commercial properties has come to an end and the market has entered a stage of relative stabilization. Today the Astana office market is predominantly represented by newly built business centres. There is also available office space in renovated Soviet administrative buildings, as well as ground floors of residential buildings converted to office use. It should be noted that an increasing number of local mid-sized companies are searching for office premises of a higher class, although this trend was slowed down by the financial and economic crisis, which forced many companies to cut their development and expansion budgets.

5 Q Astana Market View Offices Currently the range of office monthly rental rates in Astana is quite wide and ranges from USD 7 to USD 45 per sqm per month. It should be noted that office property market of Astana has experienced an increase of monthly rental rates during the three quarters of 2010 compared to the same period of 2009, especially this trend was evident in the business centres of Class A and B. For example, Class A business centres rental rates are in the range USD per sqm per month, with an average level of USD 32 per sqm per month including VAT but excluding service and utility charges, which range from USD 4 to USD 10 per sqm per month. The highest rental rates are charged in such business centres as Mercury Astana, Astana Towers and reach USD per sqm per month, while the lowest rental rates around USD 12 per sqm per month are charged in such business centres as Asia and Alma-Ata. The difference between rental rates in Class А and В offices is around 30%. The rental rates in Class B offices vary from USD 10 to USD 15 per sqm per month, with an average value of USD 14 per sqm per month. An analysis of rental rates in lower-class business centres in Astana shows that they have remained practically unchanged compared to the previous quarter of Also, in the process of choosing office space, most potential tenants consider only premises, which are already fine-finished at the expense of the landlord (owner). It is worth noting that, according to experts opinion, the gradual increase of actual office rental rates in Astana will continue at least until the end of According to our forecasts, by that time the rental rates of Class A office premises will have reached a level of USD per sqm per month including VAT. An analysis of the prices of Class A office developments offered for sale in Astana during Q shows that they vary widely, with an estimated average of USD 1,000 - USD2,500 per sqm. This leads to the observation that average selling prices of office space have slightly increased. The largest demand for office space in Astana is created by local government-related and foreign companies. The typical tenants of Class A offices are the companies operating in those industries which allow rapid development and highest revenues. The office premises with an area of sqm in shell & core condition (to be further modified by tenants) remain popular. Vacant office space accounts for approximately 20% of the total office stock of Astana. Most of the vacant space is found in Class A business centres commissioned in This fact can be explained by excessive rental rates, lack of demand and not very favorable location of some of these projects. The vacancy rate in the business centres of Class B and В+ commissioned prior to 2007 is around 8-10%, which evidences quite a high demand for office premises with lower rental rates, despite the fact, that they fall behind the Class A premises in terms of quality. Subject to the current financial difficulties, some companies are seeking to move to lower-class offices, thus making the vacancy rates in contemporary business centres even higher. Today, the landlords are very often forced to decrease rental rates and some management companies include VAT and service charges in the rental rate in order to retain tenants GDP Growth Rate, % y-o-y ( ) f 2010f Jun 2005 May 2007 Astana Office Rental Trend (Class А and В) Jun 2007 Sept 2007 Jan 2008 Jun 2008 Dec 2008 Aug 2009 Offices in the pipeline / under construction Class B 29% Class B 63% Class A 71% Existing Offices Class A 37% Dec 2009 Aug 2010 Page 5

6 Astana Market View Offices Talking about business centres in the pipeline/under construction, it should be noted that the overwhelming majority of such projects classify themselves as class A, with an average area of 15,100 sqm, and an average building height of 17 floors. Class A and B Business Centres in Astana are mostly located in the new administrative centre (the Left River Bank), but at the same time the old centre is still popular with some companies. The main avenues and streets connecting the new and old Centres of the city were rebuilt or repaired, and now offer a more developed roadside infrastructure of better quality. The quality of construction depends on the facility, customer and developer; however, lately most buildings are characterized by a smaller gross area/usable area ratio, due to the extensive use of internal partitions and dividing walls. In conclusion, we would like to note that in our opinion the activity in the construction sector of Astana should start recovering and increasing later during 2010, and the market should expand with the completion and launch of some Class A and B office projects currently put on hold by the developers for various (mostly financial) reasons. Map of Market Zones in Astana Market Zones Riverside mainly elite residential projects with few business and entertainment centres in dark-blue on the map; Old centre residential developments, business centres, administrative buildings, retail facilities, central part of the city in light-blue on the map; Extended old centre mainly residential developments constructed in s, with few retail premises in purple on the map; Microdistricts predominantly residential projects constructed in s, with few retail facilities in red on the map; Ak-Bulak only new residential developments, complexes of small buildings, individual houses in olive on the map; Energetic residential area, individual houses, both old and newly constructed in light-green on the map; Chubary residential area, individual houses, both old and newly constructed in dark-green on the map; Karaotkel residential area, individual houses, predominantly new in yellow on the map; South-East residential area, individual houses, predominantly new in orange on the map; Industrial Zone industrial buildings and few very low quality old residential complexes in black on the map. Source: Google Earth, Scot Holland CBRE Q Page6

7 SCOT HOLLAND CB RICHARD ELLIS Astana Market View Retail Q Quick Stats Rental rates Absorption Hot Topics Stable rental rates short- to medium-term in successful shopping centres; Change from Q2 Q Existing shopping centres, as well as centres under construction and planned for commissioning in still find it difficult to attract tenants, while less successful centres face intensive rotation of tenants. OVERVIEW The Astana retail turnover in the period Jan-Aug 2010 comprised KZT 171,853.3 M, which represents a 26.3% increase y-o-y. KZT million 300, , , , ,000 50,000 0 Astana Retail Turnover Jan- Aug 2010 Source: Astana Statistics Department The Retail market segment in Astana has sustained a noticeable increase of activity in Q thanks to the opening of Khan Shatyr shopping and entertainment centre on the left Bank of Ishim with an approximate total area in excess of 120,000 sqm. Companies from Kazakhstan, Russia, Turkey, Great Briatain and Germay took part in the realization of this project. Architectural design was prepared by the world-known architector Norman Foster. Currently, the occupancy rate of this shopping centre is above 95%. Planned tenants include wellknown international brands (more than 180 companies), such as: Massimo Dutti, New Yorker, Mango, Zara, Bershka, Miss Sixty, Stefanel, Trussardi, Debenhams, Steve Maden, Charles & Keith, Adidas, Desigual, Oysho, Ann Christine, Jack&Jones, LC Waikiki, many of which opened their first stores in Kazakhstan. Major trends of the Astana retail market include: high competition, relatively low purchasing power of the population, and poor marketing concept of some existing shopping centres. Newly commissioned shopping centres and those under construction still find it difficult to attract professional tenants. Yet one of the acute problems of the Astana retail market is the over supply of shopping centres on the Left Bank of the city, where most contemporary developments and centres under construction are located. Given the fact that more and more new retail and entertainment facilities will appear in the near future, the Astana retail market may face oversupply in the next 3-5 years, and developers may have to either shift focus to other market segments, or re-construct the existing developments, paying closer attention to the new formats of shopping centres. Also, clear positioning of retail facilities along with the competent professional management become increasingly important in the current conditions. This being said, the centres lacking these factors have faced issues with the occupancy and lack of confidence on behalf of professional tenants Historically, low population density along with outdated and very poorly maintained infrastructure across all regions of the country, have made it logistically challenging in terms of transporting goods and providing services on a nationwide basis, and have significantly increased the overall business running costs. As a result, up until now many international retailers and world-known brands were having second thoughts about the feasibility of entering the market and investing large amounts of money in shopping centres and other retail facilities locally. In addition, the current worldwide economic situation has forced many international companies to significantly reduce their development plans for the next 3 years, and to focus on improving the performance of their existing stores and outlets. Also, the certain decrease of the income levels of end-customers, together with growing unemployment rates, have led to a decline in consumption volumes, which in turn has caused a material loss of retailers revenues. However, in our opinion the situation on the retail market started changing in a positive direction, as currently several big internationally known chains have started looking at possibilities for entering the Astana market, but this process is quite slow and is often hindered by many local factors. There is no doubt that the purchasing power of the population in the pre-crisis period was somewhat higher than today. However, the effect produced by new conceptual projects might override that fact, as they attract a constant flow of visitors to experience a new, modern and conceptual shopping and entertainment process. At the same time, many buyers do shopping at flea markets buying economy-priced Chinese goods of lower quality. It is worth mentioning, that this format of trade did not suffer substantial sales slowdown, and in some cases, the sales even went up. Shopping centres of the old format inevitably suffer from a rapid decrease of activity, closing of outlets as many tenants relocate to new modern facilities, and subsequent high vacancy rates.

8 Q Astana Market View Retail In early 2005, only 6% of the Astana retail market was represented by good-quality shopping centres, while the remaining developments could be classified as covered markets with no concept. The average rental rates were in the range of USD 300 USD 500 per sqm per annum; selling prices were in the range USD 800 USD 1,000 per sqm. In , the annual growth of rental rates was as much as 40-50%, driven by the lack of retail space and the development of new conceptual projects. The shopping centres planned for launching in find it difficult to attract new retail operators, and are therefore forced to make compromises regarding the lease terms and conditions for potential tenants, in order to achieve an acceptable occupancy level by the opening date. At the same time some professional tenants which are considered important for the shopping centres and represented by well-established brands, work under scheme where the rental rate is calculated as percentage of the monthly turnover. Most modern retail facilities in Astana are concentrated on the Left River Bank of the city, where the majority of administrative buildings, governmental institutions and authorities are located. The right river bank of the city is represented predominantly by reconstructed and overhauled older shopping centres and street retail outlets. Many existing shopping centres and other retail facilities are of relatively poor quality, and lack an efficient concept, professional property management and appropriate tenant mix. As of today, despite a number of new facilities commissioned, Mega Astana and Khan Shatyr can still be classified as the most successful shopping & entertainment facilities in Astana. The table below shows the existing Retail stock in Astana, as well as the expected/planned additions of contemporary shopping centres (5,000 sqm +) by the end of 2010: Retail market indicators Total stock in modern shopping centers (GLA, sqm) 349,900 Delivery in Q3 of 2010 (GLA, sqm) 46,000 New retail facilities planned for launch in 2010 (GLA, sqm) 9,400 Average Vacancy Rate from 5-10% It should be noted that most owners of newly commissioned and planned shopping centres employ the services of professional advisors, providing assistance during the preliminary stages of the development process and ensuring follow-up support of the commissioned projects. In our opinion, this tendency helps the overall quality improvement of the market, and leads to the appearance of better-quality conceptual shopping centres in Astana. Existing popular and successful conceptual centres still have high occupancy rates and even waiting lists of tenants, while poorly planned and maintained centres without a concept are losing tenants and suffer from growing vacancy rates. Today, one may evidence a shortage of professional and well-known retail brands on the local market, which as a rule ensure the stability and attractiveness of the retail facility. During the 3 rd Quarter of 2010, the range of annual rental rates in retail passages of conceptual shopping centres (without considering the rates for anchor tenants) remained practically unchanged. A total of 4 modern projects with a combined Gross Leasable Area (GLA) of 137,000 sqm are currently under construction and announced for commissioning in According to our estimates, and assuming that all the planned facilities are commissioned by the end of 2010 the total retail stock of modern shopping centres in Astana will reach approximately 360,000 sqm of GLA A comparison between the current GLA index per 1,000 persons in Astana and the same index in other large CEE and CIS cities is shown in the chart below: Prague Warsaw Budapest Sofia Astana Zagreb Moscow Kyiv Almaty Total Shopping Centre Provision Rates of Large CEE and CIS Cities (2009) sqm per 1,000 inhabitants Page 8

9 Q Astana Market View Retail Location of large modern existing shopping centres and shopping centres under construction/in the pipeline in Astana: Source: Google, Scot Holland CBRE Map Legend: Yellow pins existing contemporary shopping centres (5,000 + sqm); Red pins shopping centres under construction / in the pipeline. DISCLAIMER 2010 Scot Holland CB Richard Ellis The information herein has been obtained from sources believed reliable. While we do not doubt its accuracy, we have not verified it and make no guarantee, warranty or representation about it. It is your responsibility to independently confirm its accuracy and completeness. Any projections, opinions, assumptions or estimates used are for example only and do not represent the current or future performance of the market. This information is designed exclusively for use by Scot Holland CB Richard Ellis clients, and cannot be reproduced without prior written permission of Scot Holland CB Richard Ellis. Page 9 For more information regarding the Market View, please contact: Scot Holland CBRE Strategic Consulting Eugene Dolbilin Partner Scot Holland CB Richard Ellis 105, Dostyk Ave., 3rd floor Almaty, Kazakhstan T: +7 (727) F: +7 (727) eugene.dolbilin@cbre.kz Peter Goranov Senior Manager Strategic Consulting and Valuations Scot Holland CB Richard Ellis 105, Dostyk Ave., 3rd floor Almaty, Kazakhstan T: +7 (727) F: +7 (727) peter.goranov@cbre.kz