ECONOMIC OVERVIEW INVESTMENT OVERVIEW OFFICE MARKET RETAIL MARKET INDUSTRIAL MARKET HOTEL MARKET
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2 REAL ESTATE MARKET OVERVIEW 2013 UKRAINE CONTENTS TABLE OF CONTENTS ECONOMIC OVERVIEW INVESTMENT OVERVIEW OFFICE MARKET RETAIL MARKET INDUSTRIAL MARKET HOTEL MARKET Colliers International This report is intended as general market research and based upon material in our possession or supplied to us, which we believe to be reliable. Whilst every effort has been made to ensure its accuracy and completeness we cannot offer any warranty that factual errors may not have occurred. We would like to be told of any such errors so that these can be corrected. Colliers International takes no responsibility for any damage or loss suffered by reason of the inaccuracy or incorrectness of this report. The information presented in this report may not be used without the prior written permission of Colliers International Ukraine. All the forecasts and scenarios made by Colliers International in this report are based on macroeconomic indicators, provided in Economic Overview. In case of deviations of real macroeconomic indicators from those we used as basic, our prognosis might be ether optimistic or pessimistic accordingly. P. 2 COLLIERS INTERNATIONAL
3 REAL ESTATE MARKET OVERVIEW 2013 UKRAINE ECONOMIC OVERVIEW KEY ECONOMIC INDICATORS INDICATOR 2012 Real GDP 0.2 % Consumer price index 0.6 % Unemployment 8.1 % Source: State Statistics Service of Ukraine, Focus Economics 25% 20% GDP, INFLATION AND UNEMPLOYMENT RATE ECONOMIC OVERVIEW GENERAL CHARACTERISTICS According to the data of the State Statistics Service of Ukraine, the annual growth of the GDP in real terms dropped from 5.2 % in 2011 to 0.2 % in Among the main causes of economic deterioration are the following: Industrial production declined against a background of slack external demand for metallurgical products, which are the backbone of Ukrainian export. At year-end, industrial production dropped by 1.8 % compared to the indicators for 2011, with the major slump of 7.6 % being recorded in December. In 2012, agricultural production dropped by 4.5 %. 15% 10% The second half of 2012 was characterised by depressed sentiments due to national currency devaluation expectations. 5% 0% -5% -10% F 2014F The attitude of external investors was notably cooler to Ukraine in One of the main reasons for this was political tension in Ukraine s relations with the Western world. -15% -20% GDP, % Unemployment, % Inflation, % However, in 2012, retail turnover demonstrated a positive trend supported by the growth of real wages. At year-end, retail turnover growth was 15.9 % while the real wages growth was 14.4 %. Source: State Statistics Service of Ukraine, Focus Economics FORECASTS According to the consensus forecast of Focus Economics, Ukraine s GDP growth rate will increase to 2.0 % in Positive GDP dynamics are expected mainly due to improvement of the external market situation. Macroeconomic indicators E 2013F 2014F Population (million) 46,7 46,5 46,2 46,0 45,8 45,6 45,4 45,1 44,9 GDP (USD bln.) GDP per capita (USD) Economic Growth (GDP annual var. in %) 7,4 7,6 2,3-14,8 4,1 5,2 0,2 2,0 3,5 Private consumption (annual var. in %) 15,9 17,2 13,1-14,9 7,1 15,0 7,8 3,4 4,6 Government Consumption (annual var. in %) 4,0 1,8 1,1-2,5 4,0-2, Fixed Investment (annual var. in %) 20,9 24,4-1,2-50,5 3,9 10,1 3,5 1,4 5,0 Industrial Production (annual var. in %) 5,9 7,7-4,7-20,4 11,2 7,8-1,8 2,6 4,0 Unemployment (% of active population, eop) 6,8 6,4 6,4 8,8 8,1 7,9 8,1 8,0 7,7 Fiscal Balance (% of GDP) -0,7-1,1-1,5-4,1-6,0-1,8-3,8-3,0-2,4 Public Debt (% of GDP) 14,8 12,3 20,5 35,4 40,5 36,0 37,7 39,0 38,5 Inflation (CPI, annual var. in %, eop) 11,6 16,6 22,3 12,3 9,1 4,6 0,6 7,7 6,6 Exchange Rate (UAH per USD, eop) 5,05 5,05 8,05 8,05 7,97 8,01 8,05 9,01 9,22 Current Account Balance (% of GDP) -1,5-3,7-6,1-1,5-2,2-6,2-7,1-5,8-5,3 Current Account Balance (USD bln.) -1,6-5,3-12,8-1,7-3,0-10,3-12,0-9,5-9,3 Merchandise Trade Balance (USD bln.) -5,2-10,6-16,1-4,3-8,4-16,3-18,2-17,0-17,8 Merchandise Exports (USD bln.) 39,0 49,8 67,7 40,4 52,2 69,4 69,8 75,4 81,6 Merchandise Imports (USD bln.) 44,1 60,4 83,8 44,7 60,6 85,7 88,1 92,4 99,4 Merchandise Exports (annual var. in %) 11,2 28,0 35,9-40,4 29,2 33,0 0,6 7,9 8,3 Merchandise Imports (annual var. in %) 22,1 36,9 38,7-46,7 35,5 41,4 2,8 4,9 7,6 International Reserves (USD bln.) 22,4 32,5 31,5 26,5 34,6 31,8 24,6 24,0 24,6 External Debt (USD bln.) External Debt (% of GDP) 50,5 55,6 49,0 87,3 85,4 76,4 77,9 84,3 84,8 E estimate F forecast Source: Focus Economics, January 2013 State Statistics Service of Ukraine P. 3 COLLIERS INTERNATIONAL
4 REAL ESTATE MARKET OVERVIEW 2013 UKRAINE INVESTMENT KEY INDICATORS OF REAL ESTATE INVESTMENT MARKET Indicator December 2012 Volume of investment in Commercial real estate in Ukraine $600 mln. YIELDS (PRIME ASSETS IN KYIV) Shopping centres % Offices % Industrial % INVESTMENT VOLUMES, UKRAINIAN COMMERCIAL REAL ESTATE MARKET* million $ 800 * Investment transactions, excluding purchase of assets for the own use and development land PRIME (NET INITIAL) YIELDS, KYIV (PRIME ASSETS) 20,0% 18,0% 16,0% 14,0% 12,0% 10,0% 8,0% 6,0% F Office Shopping centres High street retail Industrial INVESTMENT OVERVIEW GENERAL CHARACTERISTICS The overall volume of investment in Ukrainian commercial real estate market reached ca. $600 million*, thus being the best result over the recent five years. Nevertheless, by no means does this imply that the investment attractiveness of Ukraine s market has improved dramatically. In particular, sale of SEC Ocean Plaza ($350 million) comprised about 60% of the entire investment volume. *Investment transactions, excluding purchase of assets for the own use and development land. TRANSACTIONS Two major sale transactions were closed in 2012: Russian TPS Nedvizhimost bought Ocean Plaza shopping and entertainment centre (GLA 72,200 m 2 ). This was the largest transaction in the entire history of Ukraine s retail real estate market. The transaction was initiated in the beginning of The estimated transaction value was approximately $350 million. Cimbrorum Holdings LLC bought a 100 % share in Taccadero Trading Limited (KDD Group) for $202.4 million. The company is developing two projects: the office and hotel complex Sky Towers (GBA ~ 224,000 m 2 ) and a residential complex Zazimye. Among other activity registered in 2012, it is worth noting the sale of 30 % of the shares of XXI Century company to DCH company at $10.3 million (owned by Alexander Yaroslavsky). The office segment registered some activity as well. In 2012, the 5,400 m 2 operating office building located in Kyiv s Central Business District was sold. YIELDS In 2012, yields level was within the expectations of late Prime yields for Kyiv stood in the range of % for the office and retail segments and % for the industrial market segment. FORECASTS Most likely, 2013 will witness a moderate investment activity on the Ukraine s commercial real estate market. Interest in the operating assets will be concentrated mainly in retail and office segments; while interest in development opportunities, as in the past, will target the retail projects. In the absence of economic and political upheavals in Ukraine in 2013, yields will remain at their present levels. KEY INVESTMENT TRANSACTIONS TRANSACTION VOLUME SELLER BUYER Ocean Plaza Shopping and Entertainment Centre ~ $350.0 mln. K.A.N. Development / UDP KDD Group (Sky Towers, Zazimye) $202.4 mln. 100 % в Taccadero Trading Limited «TPS Nedvizhymost» (Russian company) Cimbrorum Holdings LLC P. 4 COLLIERS INTERNATIONAL
5 REAL ESTATE MARKET OVERVIEW 2013 UKRAINE OFFICE REAL ESTATE MARKET KEY INDICATORS OF KYIV OFFICE MARKET INDICATOR DECEMBER 2012 Total stock 1,460,000 m 2 Annual take-up 135,000 m 2 Vacancy rate 16.8% Prime rents, Grade A offices $35-38 / m 2 / month TOTAL STOCK AND NEW SUPPLY, KYIV OFFICE MARKET thsd. m² 2,000 1,600 1, ,104 1,208 1,304 1,458 1,716 m² OFFICE MARKET GENERAL CHARACTERISTICS The overall supply of competitive office space in Kyiv in 2012 increased by 12% compared to 2011, and exceeded 1.4 million m 2. Take-up of office space dropped by 20% (to 135,000 m 2 ) compared to Due to the new supply delivered to the market in 2012, the vacancy continued its upward trend and increased from 13.5% to 16.8%*. In 2012, base rental rates remained nearly unchanged. By the year-end Grade А office space rates were in the range of $27-38/m 2 /month and Grade В office rents ranged from $17 to 23 /m 2 /month. Kyiv reported a record lease transaction in the entire history of Ukrainian office real estate market. The world leader in manufacturing of telecommunication and digital media equipment, Samsung, leased ca. 20,000 m 2 in BC 101 Tower (57 L. Tolstoho St.). * The vacancy estimate includes BC Toronto (36,000 m 2 ). If excluded, overall vacancy rate would have stood at 14.7 % F Total stock, thsd m² New supply, m² 0 SUPPLY In 2012, the overall supply of competitive office space in Kyiv increased by 12% compared to 2011, reaching ca. 1,460,000 m 2 **. TAKE-UP AND VACANCY, KYIV OFFICE MARKET thsd. m² % % % % 13.5% % 25% 20% 15% 10% TAKE-UP, DISTRIBUTION BY GRADE OF BUILDING, KYIV OFFICE MARKET 100% 80% F- 2014F Take-up, thsd. m² Vacancy, % 19% 17% 16% 14% 14% 19% 25% % 5% 0% А Development completions in Kyiv stood at 155,000 m 2, exceeding the 2011 volume by 62%. Among key commissioned office buildings: BC 101 Tower (GLA 45,000 m 2 ), BC Toronto (GLA 36,000 m 2 ), BC Mega-City (GLA 22,000 m 2 ) and BC Europe (GLA 20,000 m 2 ). More than a half of the new supply (57%) comprised Grade A business centres. As a result, the share of Grade A office space in the overall supply increased from 14% in 2011 to 19% in 2012, affecting the structure of Kyiv office real estate market. Over the past 10 years, such a significant share of Grade A office space in the new office supply was recorded only in This was due to commissioning of BC Parus (GLA 47,000 m 2 ) and BC Eurasia (GLA 27,900 m 2 ). In 2013 and 2014, a significant volume of new supply is expected to be delivered to the Kyiv office market. Provided all office buildings announced for this period are commissioned on time, ca. 260,000 m 2 of new office space will be delivered to the market. New major office developments expected to be delivered: BC Gulliver (GLA 64,000 m 2 ), BC Senator (GLA 48,000 m 2 ) and BC IQ Business Centre (GLA 38,000 m 2 ). Therefore, the market is expected to maintain its trend of expanding the share of Grade A office space in the overall supply, increasing from 19% in 2012 to 25% in 2013 and 2014, as well as decreasing the share of Grade B and C office space. 60% 40% 62% 62% 63% 65% 66% 61% 58% B 20% 19% 21% 21% 21% 20% 20% 17% C 0% F ** Includes all classified office buildings with GLA exceeding 5,000 m 2. State institutions are not included. P. 5 COLLIERS INTERNATIONAL
6 REAL ESTATE MARKET OVERVIEW 2013 UKRAINE OFFICE REAL ESTATE MARKET MAJOR COMPLETED AND PIPELINED BUSINESS CENTRES CENTRAL BUSINESS DISTRICT (CBD), KYIV # PROPERTY GRADE YEAR OF GROSS LEASABLE AREA COMPLETION (GLA), M 2 1 IOHC BC (9/2, Velyka Vasylkivska St.) B ,000 2 Europe BC (4, Muzeinyi Lane) B ,200 3 Kyiv-Donbas BC (42/4, Pushkinska St.) B ,000 4 OB at 29/31/34/36, Ivana Franka St. B ,200 5 Horizon Tower BC (42/44, Shovkovychna St.) A ,000 6 Khreshchatyk Plaza BC (19a, Khreshchatyk St.) B ,600 7 Millenium BC (12, Volodymyrska St.) A ,500 8 Olimpiiskyi BC (72, Velyka Vasylkivska St.) B ,700 9 NTBC (1 phase) (43, Zhylianska St.) B , Panorama BC (20, Velyka Zhytomyrska St.) B , Leonardo BC (phase 1) (17/52, Bohdana Khmelnytskoho St.) A , FIM Center (17, Liniina St.) B , Botanic Towers BC (119/121, Saksahanskoho St.) B , BC at 3, Sportyvna Sq. B , HPBC (4, Mykoly Hrinchenka St.) B , Renaissance BC (24, Vorovskoho St.) B , Europe plaza BC (1-2 phases) (Tarasa Shevchenka Blvd. / Saksahanskoho St.) B , OB at 5, Velyka Vasylkivska St. B , BC at 101, Volodymyrska St. B , Seven Hills BC (49а, Volodymyrska St.) B , OB at 6/28, Tarasa Shevchenka Blvd. B , BC at 38, Volodymyrska St. B ,400 P. 6 COLLIERS INTERNATIONAL
7 REAL ESTATE MARKET OVERVIEW 2013 UKRAINE OFFICE REAL ESTATE MARKET # PROPERTY GRADE YEAR OF GROSS LEASABLE AREA COMPLETION (GLA), M 2 23 OB at 6, Rylskyi Lane A , Parus BC (2, Mechnykova St.) A , Eurasia BC (75, Zhylianska St.) A , Fahrenheit BC (30v, Fizkultury St.) B , Leonardo BC (phase 2) (19/21, Bohdana Khmelnytskoho St.) A , OB at 28, Fizkultury St. B , Prime BC (48/50, Zhylianska St.) A , Maxim BC (33v, Antonovycha St.) B , Renome BC (5, Dymytrova St.) B , OB at 4, Rylskyi Lane A , BC at 35, Honchara St. B , Karat BC (110, Zhylianska St.) B , Protasov BP (2/1, Mykoly Hrinchenka St.) B , Capital Hall BC (31, Zhylianska St.) B , BC at 70/16b, Saksahanskoho St. / Pankivska St. B , Tower BC (57, Lva Tolstoho St.) A , Toronto BC (100, Velyka Vasylkivska St.) A , Gulliver BC (1, Sportyvna Sq.) A , Senator BC (2, Moskovska St. / 32-34/2, Riznytska St.) A , OB at 98, Velyka Vasylkivska St. A ,000 BC business centre OB office building TAKE-UP, DISTRIBUTION BY BUSINESS SECTOR, KYIV OFFICE MARKET DEMAND Take-up of competitive office space in 2012 dropped by 20% (135,000 m 2 ) compared to 2011 (170,000 m 2 ). IT & Telecoms Retail Banking, Insurance & Investment Energy, Industrial Professional Services 7% 6% 11% 20% 35% In 2012, open market sale transactions of the office space/buildings for the own use were nearly non-existent. The share of such transactions in the overall demand structure in 2012 was 4%, representing a sharp decline compared to 30% in A significant drop indicates that high demand typical for the previous periods has been met and temporarily there is no new demand for purchasing office space/buildings. Life Sciences 2% 0% 5% 10% 15% 20% 25% 30% 35% 40% DISTRIBUTION BY COUNTRY OF ORIGIN, KYIV OFFICE MARKET The strongest demand for a competitive office space in 2012 came from the companies in IT sector (35%), as well as Retail (20%) and Financial (11%) sectors. Among other 2012 trends: IT sector demand increase (from 21% in 2011 to 35% in 2012) and Retail sector demand expanding fourfold (from 5% to 20%). Office space demand in the Financial and Media sectors dropped from 20% in 2011 to 11% in 2012 and from 14% to 2%, respectively. Following last year s trend, demand for a high-quality office space came from international and Ukrainian companies in nearly equal shares. Thus, international companies accounted for 57% of the overall take-up in 2012 (53% in 2011). As a result, demand structure remained without significant changes except for a slight percentage increase in the overall take-up of international companies. Ukrainian 43% 57% Foreign As in , in 2012 take-up level of the companies entering Ukraine s market for the first time (new occupiers) comprised about 1% an insignificant percentage of the gross take-up. P. 7 COLLIERS INTERNATIONAL
8 REAL ESTATE MARKET OVERVIEW 2013 UKRAINE OFFICE REAL ESTATE MARKET MAJOR COMPLETED AND PIPELINED BUSINESS CENTRES OUTSIDE OF CENTRAL BUSINESS DISTRICT (CBD), KYIV # PROPERTY GRADE YEAR OF GROSS LEASABLE AREA COMPLETION (GLA), M 2 1 Artem BC (4, Hlybochytska St.) B ,900 2 Silver Center (4, Lepse Blvd.) B/С ,000 3 Podil Plaza BC (19, H. Skovorody St.) A ,800 4 Kontraktovyi BC (2a, Kostiantynivska St.) B ,000 5 Forum Business City BC (13, M. Pymonenka St.) B ,000 6 Stand BC (14, Vasylkivska St.) B ,000 7 OB at 18, Kutuzova St. B ,200 8 Cubic Center BC (phase 1) (3, Sholudenko St.) B ,000 9 Valmi BC (13/10, Novokostiantynivska St.) B , Inkom BC (31/33, Smolenska St.) B , OB at 13/5, Ihorevska St. A , Cubic Center BC (phase 2) (1, Sholudenko St.) B , Illinskyi BC (8, Illinska St.) B 2005, 2007, 2008 Phase 1:14,400 Phase 2: 8,300 Phase 3: 14, Forum Park Plaza BC (7-9, Moskovskyi Ave.) В/С , Irva BC (phase 1) (10/14, Radyshcheva St.) B/С , BC at 1, Dniprovskyi descent B , BC at 23, Haharina Ave. B , Fermmash BC (62, Dehtiarivska St.) B , Tri Zhelaniya BC (3 phases) (14а, Bazhana Ave.) B , OB at 26, Lesi Ukrainky Blvd. B , BC at 54/19, Avtozavodska St. B ,000 P. 8 COLLIERS INTERNATIONAL
9 REAL ESTATE MARKET OVERVIEW 2013 UKRAINE OFFICE REAL ESTATE MARKET # PROPERTY GRADE YEAR OF GROSS LEASABLE AREA COMMISSIONING (GLA), M 2 22 Itera BC (42/44, Pochainynska St.) B , BC at 5, Spaska St. B , BC at 4, Verkhnii Val St. B , Komod BC (1, Lunacharskoho St.) B , Grand Step (24d, Polieva St.) B , BC at 68, Verkhnii Val St. B , BC at 92-94, Dmytriivska St. B , Palladium Plaza BC (172, Antonovycha St.) B , Vector BC (10h, Starokyivska St.) B , Granit BC (8b, Raisy Okipnoi St.) B , Mikom Palace BC (27, Dehtiarivska St.) B , OB at 5, Zoolohichna St. B , BC at 6, M. Dontsia B , Karavan BC (12, Luhova St.) B , BC at 150, Zabolotnoho St. B , Izumrudnyi BC (2, Mekhanizatoriv St.) B , BC at 25b, Sahaidachnoho St. B , Stolytsia BC (50, Artema St.) B , HPBC II (phase 1) (12, Amosova St.) B , Irva BC (phase 2) (10/14, Radyshcheva St.) B/С , Prague BC (6, V. Sosiury St.) B , Vremena Goda BC (16, Kudriashova St.) B , Livoberezhnyi BC (2, M. Raskovoi St.) B , HPBC II (phase 2) (12, Amosova St.) B , Forum Kinetic BC (12, Lyvarska St. (Kurenivskyi Lane)) B , Eleven (phase 1) (11, Solomianska St.) B , Flora Park BC (8, Tankova St.) B , Bolshevik BC (6, V. Hetmana St.) B , Dnipro Plaza BC (4, Dniprovskyi terminal) B , Tsarskyi BC (13, Staronavodnytska St.) B , Premium Center (phase 1) (6, Lepse Blvd.) B , Rialto (18, Novokostiantynivska St.) B , Shchekavytskyi BC (23-25, Frunze St.) В , BC at 19, Druzhby Narodiv Blvd. B , Europe BC (101/103, Stolychne Highway) B , Crystal BC ( , Kharkivske Highway) B , OB at 7a, T. Shamryla St. B , IQ (13/15, Strutynskoho St.) A , Silver Breeze (1, Dniprovska Naberezhna) B , SP Hall (28а, Moskovskyi Ave.) B , Sigma BC (6, Lepse Blvd) B , MERX-2 (phase 2) (15, Leiptsyzka St.) B , OB at 9a, Dovnar-Zapolskoho St. B ,000 BC business centre ОB office building Analysis of take-up distribution by location has demonstrated a traditional dominance of the Right Bank district over the Left Bank district with regard to attractiveness of the office space: 98% vs. 2%. The share of take-up in the Central Business District reached 49%. In 2012, Grade B office buildings accounted for over a half of the demand reaching 55% (2% up over 2011). Whereas, Grade A premises share increased from 18% to 38%, and Grade C share dropped, contracting from 29% to 7%. At the top of the market completions list in 2012 stood Grade A office buildings, resulting in a significant increase in closed lease transaction in Grade A office premises. P. 9 COLLIERS INTERNATIONAL
10 REAL ESTATE MARKET OVERVIEW 2013 UKRAINE OFFICE REAL ESTATE MARKET The largest number of transactions in the office segment in 2012 was due to relocation. At year-end, the share of relocation transactions reached 74% of the overall volume of all leased or purchased office space. Over the past several years, the main reasoning of tenants willing to relocate has not changed and included: improve office premises quality, optimise office rent costs, consolidate disengaged offices in one building and/or expansion. At the same time, landlords are clearly ready and eager to provide their potential tenants with the above options in a Tenant Market. Analysis of demand structure in terms of a transaction size indicates that transactions exceeding 3,000 m 2 made up half of the overall take-up volume. TAKE-UP BY LOCATION TAKE-UP BY GRADE OF BUILDING 2% 7% 49% 49% 36% 57% Central Business District Non-central, Right Bank Non-central, Left Bank Grade A Grade B Grade C TAKE-UP BY TRANSACTION TYPE TAKE-UP BY TRANSACTION SIZE (m²) 14% 8% 4% 13% 17% 8% 50% 74% 12% Relocation Expansion Renewal Renewal/Expansion >3,000 2,001-3,000 1,001-2, ,000 <500 P. 10 COLLIERS INTERNATIONAL
11 REAL ESTATE MARKET OVERVIEW 2013 UKRAINE OFFICE REAL ESTATE MARKET $90 $80 $70 $60 $50 $40 $30 $20 $10 $0 RENTAL AND VACANCY RATES $ % $ % 16.8% 14.0% 13.5% $35 $30 $38 $33 $36 0.0% 0.0% Prime rents in Grade A offices Vacancy, % 25% 20% 15% 10% 5% 0% RENTAL RATES AND VACANCY Due to the new supply delivered to the market in 2012, the vacancy rate continued its upward trend, increasing from 13.5% to 16.8%. The vacancy rate estimate includes office premises in BC Toronto (36,000 m 2 ). If excluded, the aggregate vacancy rate for Kyiv would have stood at 14.7%. Given a provisional increase in vacant space, the lower limit of Grade A rents dropped from $33/m 2 /month in 2011 to $27/m 2 /month in Meanwhile, the lowest rates in the range were offered primarily to the first main anchor tenants in the new office buildings, whereas in existing Grade A business centres enjoying low vacancy levels, the rental rates remained relatively stable ranging from $35 to 38/m 2 /month. Grade B rental rates in 2012 dropped somewhat compared to Downward pressure is a result of Grade A high-quality completions, comprising a large share of total new supply delivered to the market. Grade A Grade B Overall VACANCY RATE* 0.0% 5.0% 10.0% 15.0% 20.0% 25.0% * The vacancy estimate includes office premises in BC Toronto (36,000 m 2 ), commissioned and received a title certificate. At year-end 2012, the BC was actually not ready to accept tenants based on the overall construction readiness. If excluded, Grade A office premises vacancy would have stood at 11.2%. 14.0% 16.8% 23.0% FORECASTS In 2013 and 2014, Kyiv market is expected to maintain its top position on the completions list, as significant new supply is expected in its office segment. Provided all office projects announced for this period are commissioned on schedule, ca. 260,000 m 2 of new office space will be delivered to the market. Therefore, the share of Grade A space in the overall supply is expected to increase from 19% to 25%. Given a 20% drop in demand in 2012 compared to 2011 and conservative macroeconomic forecasts, significant growth of the aggregate demand is not expected in the future time periods. Within the next one and a half or two years, the vacancy level may increase due to the expected significant volume of new supply and relatively conservative economic forecasts. In the future, these factors could potentially exert a downward pressure on the rental rates. However, rental rate dynamics in many respects will be defined by the actions of developers of the major office projects planned for commissioning in Grade Due to the competition between major high-quality projects, certain developers may demonstrate the evidence of dumping actions in their pricing policy, thereby collapsing the market. In this case, the rental rates may decrease in 2013 and If developers opt to take into account common global market practices, which indicate that new large-scale projects (above 40,000 m²) are usually occupied gradually and steady, reaching a 100% occupancy rate in 2-3 years after being commissioned, and given that developers do not resort to the dumping actions, the market will gradually consume all delivered supply and the rental rates may remain at their current levels. BASE RENTAL RATES FOR OFFICE SPACE IN KYIV, 2H H H 2010 $/M 2 /MONTH 1H H H H H 2013 Grade A Grade B Grade C P. 11 COLLIERS INTERNATIONAL
12 REAL ESTATE MARKET OVERVIEW 2013 UKRAINE OFFICE REAL ESTATE MARKET Given current and expected supply for , Kyiv office market may retain its status of a Tenant market. The landlords will most likely be inclined to revise the terms and conditions of the standard lease contracts and critically reconsider their approaches to retaining current tenants and winning over the new ones. TYPICAL TERMS AND CONDITIONS OF LEASE AGREEMENT, GRADE А, 2012 Term of Lease Agreement 3 to 5 years Priority Prolongation Option for Existing Tenant YES Currency of Rental Payments $ / m 2 / month Rent Payable in Advance Monthly or quarterly advance payment Security deposit / Bank guarantee Equivalent of rental payment for 2-3 months Indexation of Rental payments 3 to 5 % annually, starting from the second year of lease Operating Expanses $7-9 / m 2 / month, net of VAT Indexation of Operating Expanses 3 to 5 % annually, starting from the second year of lease Parking Indoor parking $100 to 200 per space /month, net of VAT Outdoor parking $250 to 450 per space /month, net of VAT Parking indexation 3 to 5 % annually, starting from the second rental year Parking index CBD: 1:120 to 1:250; non-cbd: 1:50 to 1:100 Handover Condition (Landlord s Work) Partially equipped room with open floor space (including a suspended ceiling with lighting fixtures and floor covering) Rent free period 1 to 3 months Method of Office Area Measurement BOMA or BTI (Bureau of Technical Inventory) Common Area Factor 10 to 19 % P. 12 COLLIERS INTERNATIONAL
13 REAL ESTATE MARKET OVERVIEW 2013 UKRAINE OFFICE REAL ESTATE MARKET KEY INDICATORS OF OFFICE REAL ESTATE MARKET, CENTRAL AND EASTERN EUROPE P. 13 COLLIERS INTERNATIONAL
14 REAL ESTATE MARKET OVERVIEW 2013 UKRAINE RETAIL MARKET KEY INDICATORS OF RETAIL MARKET IN KYIV INDICATOR DECEMBER 2012 Total Shopping Centre Stock 800,000 m² Vacancy rate 3.0% Prime rates in best SC/SEC (100 to 200 m² units) $110 / m² / month Prime rates, high street retail $250 / m² / month TOTAL STOCK AND NEW SUPPLY IN SC/SEC OF KYIV 1,400 1,200 1,000 thsd. m² RETAIL SPACE (SC/SEC) SATURATION IN SELECTED CEE CAPITALS m²/1000 inhabitants F Total Stock, thsd. m² New Supply, m² , F RETAIL MARKET GENERAL CHARACTERISTICS Ukraine s retail real estate market is developing at a steady rate. In 2012, ca. 100,000 m 2 of quality retail space was commissioned, thereby increasing the overall supply in Kyiv by 14% compared to By the year-end, total shopping centre stock in Kyiv reached 800,000 m 2. Meanwhile, vacancy increased insignificantly, whereas rents remained stable in the majority of projects. Kyiv s retail market, lacking high-quality space, is the most attractive commercial real estate market segment with respect to development. This is attested to by the unprecedented volume of a new supply announced for commissioning in 2013 to A majority of projects announced for commissioning in Kyiv and in the regions within the next five years are large-scale regional or super-regional shopping centres. These types of project formats are typical for the developed markets of Eastern Europe and Russia witnessed a growing activity of developers and retailers in the regional cities with a population of over 300,000. SUPPLY The overall supply of professional retail space in Kyiv by the end of 2012 increased by 14% over 2011, reaching 800,000 m 2. On a per capita basis, Kyiv has slightly more than 280 m 2 per 1,000 inhabitants of traditional shopping centre space. As before, these levels of shopping centre stock are lower than in the majority of European cities (e.g., for Warsaw s market stands at 594 m 2 per 1,000 inhabitants). The new supply comprised 100,200 m 2, or 67% up over the previous year. As expected, the delivery of several shopping centres was postponed for 2013, resulting in commissioning only 56% of overall supply announced in the beginning of 2012 (180,000 m 2 ). The following major shopping centres were delivered to the Kyiv market in 2012: Shopping and Entertainment Centre Ocean Plaza (GLA 72,200 m 2 ) a major project downtown Kyiv (presently, the largest SEC in Kyiv is Dream Town, GLA 90,000 m 2 ). SEC Ocean Plaza comprises hypermarket Real (GLA 12,000 m²), a gallery with over 300 shops of well-known international brands, some of which are new to Ukraine s retail market, as well as the first-in-ukraine children s entertainment centre Happylon and a 8-screen Cinema City. A unique feature of Ocean Plaza is a public aquarium. Shopping Centre RayON with a gross area of 62,000 m² (GLA 24,000 m 2 ) was opened in August 2012 in the Desnianskyi district of Kyiv. The anchor tenants in RayON are food hypermarket Sil po (GLA 7,000 m 2 ), electronics and household appliances supermarket Comfy (GLA 2,200 m 2 ), as well as the sport goods supermarket Sportmaster (GLA 1,200 m 2 ). The gallery features 100 shops selling popular international brands, along with cafes and restaurants. P. 14 COLLIERS INTERNATIONAL
15 REAL ESTATE MARKET OVERVIEW 2013 UKRAINE RETAIL MARKET MAJOR COMPLETED AND PIPELINED RETAIL PROJECTS, KYIV # PROJECT NAME ADDRESS GBA, M² GLA, M² YEAR OF COMPLETION MAJOR COMPLETED SHOPPING CENTRES 1 Poliarnyi (phase 1) 2, Mayorova St. 4, Karavan 12, Luhova St. 57,600 45, , 2006, Dream Town 1b, Obolonskyi Ave. 167,000 90, Metropolis 12, Malynovskoho St. 30,000 15, Alta Center 11а, Moskovskyi Ave. 22,000 17, Gorodok 23, Moskovskyi Ave. 12,000 10, Makros 16b, Moskovskyi Ave. 12,000 8, Plazma 12, Moskovskyi Ave. 30,000 8, Blockbuster 34v, Moskovskyi Ave. 33,000 26, Promenada Center 18, Ovrutska St. 20,000 15, Kvadrat on Lukianivka 1, Melnykova St. 9,000 6, ROOM 6, Velyka Kiltseva St. 40,000 21, Promenada Park 4, Velyka Kiltseva St. 60,000 43, Kvadrat on Borshchahivka 29, Hnata Yury St. 15,000 11, Bolshevik 6, Hetmana St. 90,000 40, Arkadia on Borshchahivska 154, Borshchahivska St. 27,000 15, Europort 15а, Lukashevycha St. 13,000 6, Ukraina 3, Peremohy Ave. 38,000 24, Globus (phase 1) Maidan Nezalezhnosti 16,500 9, Globus (phase 2-3) Maidan Nezalezhnosti 16,000 9, P. 15 COLLIERS INTERNATIONAL
16 REAL ESTATE MARKET OVERVIEW 2013 UKRAINE RETAIL MARKET # PROJECT NAME ADDRESS GBA, M² GLA, M² YEAR OF COMPLETION 21 Mandarin Plaza 4, Baseina St. 18,100 7, Arena City 1-3/2a, Velyka Vasylkivska St. 14,000 8, Metrograd Velyka Vasylkivska St. 18,000 10, Ocean Plaza 176, Antonovycha St. (Horkoho St.) 154,000 72, Araks 110, Velyka Kiltseva 30,000 27, Magelan 13b, Hlushkova Ave. 28,000 22, Domosphera 101, Stolychne Highway 30,500 22, RayON 4, Lavrukhina St. 66,000 24, Global UA 2а, Balzaka St. 9,000 7, Sky Mall 2, Henerala Vatutina Ave. 97,000 68, Kvadrat on Perova 36, Perova Blvd. 40,700 19, Komod 4, Lunacharskoho St. 14,000 10, Dytiachyi Svit 3, Malyshko St. 20,000 11, Darnytsia 1, Myru Ave. 12,000 6, Arkadia on Dniprovska Naberezhna 33, Dniprovska Naberezhna 33,000 18, InSilver 3, Sribnokilska St. 12,800 10, Aladdin 3а, Hryshka St. 16,000 10, Piramida 4а, Mishuhi St. 16,000 12, Total 793,100 MAJOR SHOPPING CENTERS DUE TO COMPLETE IN Poliarnyi (phase 2) 2, Mayorova St. 12,400 4, SEC on Dehtiarivska St. Dehtiarivska St. / Kopernyka St. 64,000 45, SEC on Zlatoustivska St. Peremohy Ave. / 11, Zlatoustivska St * 58, Marmelad 154, Borshchahivska St. 58,000 40, Central Department Store (TSUM) 2, B. Khmelnytskoho St. 38,780 22, Gulliver 1, Sportyvna Sq. 63,000 47, Respublika 1, Velyka Kiltseva 290, , Deltaplan Outlet Center Novoobukhivske Highway 22,300 15, Art Mall Stolychne Highway / Ak.Zabolotnoho St. 49,791 35, Atmosphera 103, Stolychne Highway 38,000 30, Prospect Chervonotkatska St./Chervonohvardiyska St. 42,000 40, Silver Breeze Dniprovska Naberezhna / Tychyny St. 22,000 16, SEC on Zdolbunivska St. (phase 1) Zdolbunivska St. 69,000 55, River Mall 10-14, Dniprovska Naberezhna 165,000 55, Vyrlytsia mixed-use complex Bazhana Ave. 150,000 67, Kyiv Mall P. Hryhorenko St. 104,000 72, Total 743,100 * total area of the project SEC shopping and entertainment center Development pipeline announced for comprises over 740,000 m 2 of new retail space. This will increase the existing supply of retail space in Kyiv nearly twofold. Many of the announced projects are in the active development stage, which substantiates the attractiveness of retail segment for development. However, bank financing remains quite limited, as in the past. As a result, the majority of projects are being developed either using the developer s own financing or by involving outside, mainly local, investors. P. 16 COLLIERS INTERNATIONAL
17 REAL ESTATE MARKET OVERVIEW 2013 UKRAINE RETAIL MARKET 40.0% 30.0% 20.0% 10.0% 0.0% -10.0% -20.0% -30.0% UKRAINE RETAIL TURNOVER 29.5% 26.4% 23.4% 17.3% 13.2% 15.9% 10.1% % Provided that all shopping centres announced for 2013 are commissioned on schedule, ca. 188,000 m 2 of new retail space in SC/SEC will be delivered to the market. Among major shopping centres are: SEC Gulliver (GLA 47,000 m 2 ), SEC Marmelad (GLA 40,000 m²), SEC ART MALL (GLA 35,500 m²), SEC Atmosfera (GLA 30,000 m²) and Silver Breeze (GLA 16,000 m²). There are four major projects among those announced for 2014: SEC Respublika (GLA 140,000 m 2 ), SEC Kyiv Mall (GLA 72,000 m 2 ), SEC River Mall (GLA 55,000 m 2 ) and SEC Prospekt (GLA 40,500 m 2 ). In June 2012, construction of SEC Respublika was launched on Velyka Kiltseva St. in Kyiv. The gross area of the project announced for delivery in 2014 will be 284,000 m². The shopping and entertainment centre will comprise a hypermarket, a gallery of 430 shops, as well the all-season entertainment park. Source: State Statistics Service of Ukraine INCOME OF POPULATION IN UKRAINE 30% 25% 20% 15% 10% 5% 0% -5% 24% 20% 18% 17% 15% 12% 9% 8% 8% % -10% -15% Source: State Statistics Service of Ukraine 13.5% III QV 2012 Additionally, two regional projects located in Kharkivskyi district of Kyiv - River Mall and Kyiv Mall are in the active development stage. They are expected to be delivered in At the same time, there is an ongoing trend of postponing the commissioning date far beyond the initially announced periods. Similar scenario is quite possible during DEMAND Consumer demand: According to the State Statistics Service of Ukraine, the real income of the population in Q3 of 2012 was 13.5% higher over a similar period in 2011, whereas the retail sales in January through December 2012 rose 15.9%. Irrespective of official data, the indices of consumer sentiments and economic expectations, according to GfK Ukraine, remained at quite low levels during the entire year of Besides, certain retailers operating in the medium and lower price segments recorded decreasing sales in H Tenant demand: CONSUMER CONFIDENCE INDEX IN UKRAINE * In 2012, the demand for retail space in Kyiv was moderate A significant volume of new supply announced for has resulted in differentiation of a tenant demand. The tenants have become more selective when choosing projects, paying special attention to the quality of the project s concept and its competitiveness. As a result, retailers are very interested in the high-quality and large-scale retail real estate projects '11 02'11 03'11 04'11 05'11 06'11 07'11 08'11 09'11 10'11 11'11 12'11 01'12 02'12 03'12 04'12 05'12 06'12 07'12 08'12 09'12 10'12 11'12 12'12 month/year Consumer Sentiment Index The economic expectations index *Value above 100 indicates that positive consumer sentiment dominates in Ukraine. Source: GfK Ukraine P. 17 COLLIERS INTERNATIONAL
18 REAL ESTATE MARKET OVERVIEW 2013 UKRAINE RETAIL MARKET $/m² % 6,0 5,0 4,0 3,0 2,0 PRIME RENTS, KYIV Prime high street rent Prime traditional SC rent VACANCY RATE IN SC/SEC, KYIV MARKET ENTRY In 2012, significantly more new brands entered the Ukrainian market than in At the same time, the majority of the new brand stores were opened due to expansion of existing local partners (franchisees). The following brands opened their first shops in Kyiv in 2012: Food/restaurants In 2012, the operators of supermarkets/hypermarkets trended towards expansion in the new formats delicatessen or speciality supermarkets and premium-format stores. The Russian chain of premium supermarkets Azbuka Vkusa announced its plans to enter Kyiv s market (average GLA of the shops is 600 to 1,100 m²). The first store of this retail operator may be opened as soon as in The chain of wine markets Poliana has announced its plans to open a new line, the farming products stores FOOD Poliana. The first store was due to open in January Meanwhile, other retailers are developing in the premium segment. Among them are Le Silpo, VK SELECT, Kosmos and Furshet Gurman. Other important activity on the market in 2012 is the opening of Amstor, the first flavour supermarket in Kyiv (~ 4,000 m 2 ), located in the shopping centre Poliarnyi. Among the most long-awaited openings in 2012 was the entrance of American chain of fast-food restaurants Kentucky Fried Chicken (KFC), the main competitor of McDonald`s in the global market. The first KFC restaurant (~ 300 m 2 ) opened in December 2012 in SEC Ocean Plaza. 1,0 0, Vacancy rate Clothing, footwear and accessories: In 2012, the following retail operators opened their first shops in Ukraine: Piazza Italia, W52 Jeans, Marina Rinaldi, Reiss, Evita Peroni, Cinque, Bebe, Max Mara Weekend, Black Star by Timati, Denis, Why Denis, Stefanel, Blanco, Strellson, Mohito, Suvari, and others. Many brands in the medium price segment managed to open their shops in Kyiv due to the delivery of SEC Ocean Plaza. Two new Turkish brands, LC Waikiki and Collezione, have confirmed their entry to the market. The first shops are expected to be opened in early Maratex Company introduced a new brand, the Italian fashion shops chain OVS that is a part of the Gruppo Coin instead of the Peacocks. P. 18 COLLIERS INTERNATIONAL
19 REAL ESTATE MARKET OVERVIEW 2013 UKRAINE RETAIL MARKET SATURATION BY RETAIL SPACE (SC/SEC) IN MAJOR UKRAINIAN CITIES m²/ 1000 inhabitants RENTS FOR М 2 UNITS IN TRADITIONAL SC/SEC $ / М 2 / MONTH Kyiv $50-75 Kharkiv $40-55 Odesa $45-60 Dnipropetrovsk $30-45 Donetsk $45-60 Zaporizhzhia $30-40 Lviv $ Luxury retailing sector remained active with a steady demand for retail space in Kyiv. Thus, following the opening of Dior monobrand boutique in late 2011 exclusive retail brand Prada opened its monobrand store in the Passage vicinity, Dolce & Gabbana boutique was opened in Mandarin Plaza shopping centre and Valentino - on L. Ukrainki Boulevard. MARKET EXIT An important market activity in 2012 was the sale of Real hypermarkets in Central and Eastern Europe (91 hypermarkets and 13 shopping galleries) by the German retailer Metro Group to the French group Auchan. Hence, two hypermarkets Real in Ukraine (in Kyiv and Odesa) will be reformatted to Auchan. In 2012, the Co & Beauty chain of accessories shops owned by the company Melon Fashion Group (Russia) closed its operations on the Ukrainian market, as well as the clothing and footwear retailers Peacocks and Nine West that followed suit. The Russian retail operator SELA also closed its shops in Ukraine. Stockmann, with two Seppala shops (in Kyiv and Kharkiv), decided to leave Ukraine s market, although in 2011 they negotiated the opening of their first Stockmann clothing department store (5,000 to7,000 m 2 ) in the Kyiv s main shopping street. RENTAL RATES AND VACANCY Growth in new completions in 2012 led to a temporary increase in vacant space, driving the vacancy from 1.7% in late 2011 to 3.0% in late In 2012 demand for retail space remained moderate stabilizing the rental rents. However, the rents were slightly adjusted downward in some projects. As of year-end 2012, prime rental value for m 2 units in the best shopping centres in Kyiv stood at $110 m 2 /month. Prime high street retail rates for m 2 units located in Kyiv were as high as $250/month. REGIONS In 2012, the developers demonstrated high interest in the projects located in regional cities, without limiting themselves to cities with population exceeding one million. The following projects were delivered to the regional markets: in Odesa, the 1 st phase of SEC City-Centre (GLA ~ 30,000 m 2 ); in Dnipropetrovsk, SC Kaskad Plaza (GLA 11,000 m 2 ); in Kherson, the 1 st and 2 nd phases of SEC Fabrika (GLA 45,000 m 2 ), and in Simferopol, the 1 st phase of SEC Meganom (GLA 20,000 m 2 ). Currently, other regional projects are in their various stages of development. There is a number of large-scale projects announced for 2013 in the regional cities. Among them: 2 nd phase of SEC French Boulevard (GLA 35,900 m 2 ) and the 2 nd phase of SEC Magelan (GLA 27,000 m 2 ) in Kharkiv; SEC Rose Park (GLA ~ 32,000 m 2 ) in Donetsk; the 2 nd phase of SEC Yuzhnaya Galereya (GLA 20,000 m 2 ) and the 2 nd phase of SEC Meganom (GLA 35,000 m 2 ) in Simferopol; SEC Port City (GLA ~ 71,000 m 2 ) in Mariupol, and SEC Lubava (GLA 26,000 m 2 ) in Cherkasy. Active lease is underway in SEC Forum Lviv (GLA 37,000 m 2 ) in L viv, planned for opening in P. 19 COLLIERS INTERNATIONAL
20 REAL ESTATE MARKET OVERVIEW 2013 UKRAINE RETAIL MARKET FORECASTS During , provided all announced projects are commissioned on schedule, the Kyiv market will see a considerable supply of about 740,000 m 2, almost doubling its existing stock of quality retail space. Unprecedented volume of a new supply may cause certain imbalance between the demand and supply with supply prevailing over the demand. As a result, an emerging trend is observed in the today s market whereby the tenants are becoming more scrupulous of their retail space choice, which clearly signals a potential for high competition between the projects. On the other hand, the availability of sufficient volumes of a high-quality retail space will most likely serve as a sound argument for the entrance of new international retailers into the Ukrainian market. Assuming that economic situation remains stable, the rental rates will most likely stay at their current level. On the other hand, should all announced projects be delivered to the market and economic prospects weaken, the headline rents may drop in response to the vacancy increase. Note that even if rental rates are adjusted downward, their level will be sufficient for the retail segment to remain as attractive as before for the development in terms of the overall segment profitability. P. 20 COLLIERS INTERNATIONAL
21 REAL ESTATE MARKET OVERVIEW 2013 UKRAINE RETAIL MARKET KEY INDICATORS OF THE RETAIL REAL ESTATE MARKET, CENTRAL AND EASTERN EUROPE P. 21 COLLIERS INTERNATIONAL
22 REAL ESTATE MARKET OVERVIEW 2013 UKRAINE INDUSTRIAL MARKET KEY INDICATORS OF INDUSTRIAL MARKET IN KYIV INDICATOR DECEMBER 2012 Total stock 1,356,000 m 2 Take-up ~ 200,000 m 2 Vacancy rate 8 to 10 % Prime rents in grade A warehouses $7 / m 2 / month TOTAL STOCK AND NEW SUPPLY, KYIV INDUSTRIAL MARKET GENERAL CHARACTERISTICS New completions in Kyiv and Kyiv region added ca. 86,000 m 2 to the industrial market in 2012, which was 39% down on the 2011 supply. Hence, by year-end 2012, the total industrial stock in Kyiv and Kyiv region stood at 1,356,000 m 2. Amid low volumes of a new supply in the Kyiv region and stable demand exceeding 200,000 m 2, vacancy rate has dropped from 17% in early 2012 to 8-10% by the yearend. The rental rates remained stable in thsd. m² 1 600, , , ,0 800,0 600,0 400,0 200,0 0, ,356 1,270 1, Total stock as of end of the year, thsd. New supply during the year, the m² m² SUPPLY New supply of industrial space in Kyiv and Kyiv region in 2012 totalled ca. 86,000 m 2, representing a 39% decline over 2011, when 140,000 m 2 was brought to the market. Approximately 74,000 m 2 or 86% of the overall new supply in 2012 were grade A warehouse facilities. The following major industrial and logistics projects were commissioned in 2012: the logistics complex Schaslyve (GLA 30,600 m 2 ), industrial park Krasylivka (GLA 15,900 m 2 ), and logistics complex Terminal Vorzel (GLA 12,000 m 2 ). In 2012, new supply available for the open market stood at ca. 77,000 m 2. The majority of which, namely 65,000 m 2 or 84%, were grade A warehouses. New supply of industrial space built for owner occupation totalled 9,400 m 2. Hence, by year-end 2012, aggregate supply of industrial space in the Kyiv region reached 1,356,000 m 2. The analysis of development direction and location of industrial completions in 2012 indicates: 35% is in the Kharkiv direction (М-03); 18% is in the Brovary direction (М- 01); 14% is in the Kovel direction (M-07); 11% is in the Zhytomyr direction (М-06) and 11% is in the area between Zhytomyr (М-06) and Odesa highways (М-05). In 2013 and 2014, an insignificant volume of new supply is expected as compared to previous periods. If all industrial and logistics projects announced for this period are commissioned on schedule, and development activity on some frozen projects is renewed, the market will see ca. 160,000 m 2 of new industrial space. MAJOR INDUSTRIAL PROJECTS COMMISSIONED IN KYIV REGION IN 2012 NAME DIRECTION (HIGHWAY) GRADE DEVELOPER GLA, М 2 1 Logistics complex Schaslyve M-03 (Kharkiv direction) А ADG 30,600 2 Industrial Park Krasylivka M-01 (Moscow direction) А V-Log 15,900 3 Logistics complex Transwest M-06 (Zhytomyr direction) А Transwest 9,500 4 Logistics complex in Petrivske M-05/M-06 (Odesa/ Zhytomyr direction) А Local Developer 9,400 5 Logistics complex Petrivtsy Vyshgorod direction А Local Developer 9,000 6 Logistics complex Terminal Vorzel M-07 (Warsaw direction) В Tekhnoyarmarok 12,000 Total 86,400 P. 22 COLLIERS INTERNATIONAL
23 REAL ESTATE MARKET OVERVIEW 2013 UKRAINE INDUSTRIAL MARKET MAJOR EXISTING AND PIPELINED INDUSTRIAL PROJECTS IN KYIV AND KYIV REGION PROPERTY NAME DIRECTION (HIGHWAY) AREA, M 2 YEAR OF COMPLETION MAJOR EXISTING PROJECTS, FOR OPEN MARKET, KYIV/KYIV REGION 1 Fim Center (Chaika) М-06 26, Obukhiv-II М-04 9, L-town M-04 8, Unilogic Park (1 phase) М-01 10, Andakta М-07 5, East Gate Logistic M-03 40, Logistic Park East 1 М-01 18, WWM Center М-05/М-06 10, Omega-1 М-01 16, KMP М-05 9, Etalon М-05/М-06 9, Mirazh (1-4 phase) М-07 28, , Prommash (1-2 phase) М-01 13, , Brokbusiness М-07 3, West Gate Logistic М-06 96, MLP-Chaika М , Customs Terminal М-05/М-06 7, Kopyliv Logistics Park М-06 27, Komodor М-06 59, BF Sklad (1-2 phase) М-03 72, , Metal-Holding Kyiv 5, P. 23 COLLIERS INTERNATIONAL
24 REAL ESTATE MARKET OVERVIEW 2013 UKRAINE INDUSTRIAL MARKET PROPERTY NAME DIRECTION (HIGHWAY) AREA, M2 YEAR OF COMPLETION 22 Plazma Logistic М-03 21, Amos М-01 11, Avgust Plus М-07 7, ICT М-05/М-06 20, Olvita/URC М-03 8, MMK М-01 24, Top-Trans М-01 17, Warehouse complex Kyiv 5, Terminal Brovary М-01 49, Yuta-Service М-06 12, UKR DC М-05/М-06 19, Warehouse complex Kyiv 6, ABC Logistic Group М-04/М-05 11, Santa Frost М-05/М-06 6, , Unilogic Park (2 phase) М-01 22, Arktika М-05/М-06 17, Technoyarmarok-1 М-07 12, Impeco М-07 8, Warehouse complex М-03 2, Amtel М-05/М-06 42, Schaslive M-03 30, Industrial Park Krasylivka М-01 15, Petrivtsy Р-27 9, Transwest M-06 9, Terminal Vorzel М-07 12, MAJOR EXISTING PROJECTS, OWNER OCCUPIED 1 Raben (1-2 phase) М-01 30, , Kalynivka М-05 15, Warehouse complex М-04 11, UVK Kyiv 10, Skandinavia Kyiv Kviza М-03 10, Biocon (1-3 phase) М-01/М-03 30, , Falbi М-05/М-06 12, Ice Terminal М-01 18, Raben (cross-dock) М-01 5, Reynaers Ukraine М-01 10, Technopolis М-01 21, Warehouse complex М-05 5, BF Sklad (3 phase) М-03 30, Logistics complex in Petrivske M-05/M-06 9, MAJOR PROJECTS EXPECTED TO BE COMMISSIONED IN 2013, FOR OPEN MARKET 1 Customs Terminal (2 phase) M-05/M-06 10, Unilogic Park (3 phase) М-01 22, MAJOR PROJECTS EXPECTED TO BE COMMISSIONED IN 2013, OWNER OCCUPIED 1 Biocon (4,5 phase) M-01/M-03 20, Interfarm M-07 8, Technopolis (Dimitrovo) М , P. 24 COLLIERS INTERNATIONAL
25 REAL ESTATE MARKET OVERVIEW 2013 UKRAINE INDUSTRIAL MARKET TAKE-UP, DISTRIBUTION BY MAIN DIRECTIONS 10% 11% 35% DEMAND In 2012, the take-up volume in the warehouse market surpassed new supply by more than two-fold, exceeding 200,000 m 2 and maintaining the trend set in The 2012 figures compare to the aggregate value of industrial market transactions in 2011, which totalled 220,000 m 2. The high level of demand can be accounted for the urge of the market players to maximize their business efficiency, in particular, to improve the quality of occupied space and avail them of the opportunity to expand. 11% 14% 18% Compared to 2011, the demand structure has remained stable, whereby retail operators and logistics companies were the main consumers of the warehouses. The industrial space in a high demand was medium-size units of 2,000 to 5,000 m 2. М-03 (Kharkiv) М-01 (Moscow) М-07 (Warsaw) М-06 (Zhytomir) М-05/М-06 (Odesa/Zhytomir) Other VACANCY AND RENTAL RATES During 2012, the rental rates on the Western bank of Dnieper were within the range of $5.5 to 7.0/m 2 /month (excluding VAT and operating expenses, ranging from $1 to 1.5/m 2 /month). On the Dnieper s Eastern bank, rental rates varied between $4.5 and 6.0/m 2 /month (excluding VAT and operating expenses). VACANCY AND RENTAL RATES During 2012, the aggregate vacancy rate in industrial market dropped from 17% in the beginning of 2012 to 8-10% by the year-end. $/m² 12,0 30% 10,0 25% 8,0 6,0 4,0 2,0 0, Average rent, Grade A and B Vacancy rate 20% 15% 10% 5% 0% FORECASTS In 2013 and 2014, given that all announced projects are commissioned on schedule, ca. 160,000 m 2 of new industrial space will be delivered to the market. About 32,000 m 2 of which will be available on the open market. Note that when examining construction costs and current level of the rental rates, developers sense no evident economic advantage of developing industrial and logistics projects taking into account the costs of a debt financing and current level of yields. Nevertheless, provided that economic conditions remain stable and the main consumers of industrial space maintain their activity at the previous pace, the level of new supply will most likely be restored. Otherwise, it may be expected that vacant space will decrease resulting in a slight growth of the rental rates in 2013 and 2014, provided that existing demand volume is maintained. P. 25 COLLIERS INTERNATIONAL
26 REAL ESTATE MARKET OVERVIEW 2013 UKRAINE HOTEL MARKET KEY INDICATORS OF KYIV HOTEL MARKET 4 AND 5-STAR HOTELS INDICATOR DECEMBER 2012 Total stock 3,521 rooms Occupancy* 58% Average annual ADR* $260 * Excluding Kyiv hotels commissioned in 2012 NUMBER OF FOREIGN VISITORS IN UKRAINE HOTEL MARKET GENERAL CHARACTERISTICS 2012 witnessed commissioning of many hotels in Kyiv: total supply of guestrooms of 5 and 4-star hotels increased by 27% and 50% respectively. The hopeful expectations of hoteliers fell far short of being realised during Euro-2012, despite the fact that the flow of foreign guests increased while the championship was underway. Analysis indicates that in 2012 the occupancy rate and ADR (Average Daily Rate) for hotels in operation for over a year in the top-range segment (4 and 5-star) dropped by 4 to 5 %. For hotels commissioned in 2012, the occupancy rate and ADR were significantly lower than the same indicators for hotels operating for longer periods. million SUPPLY In 2012, the supply of total guestroom inventory of 1 to 5-star hotels increased by 25 %. At year-end, the average supply of rooms of all categories per 1,000 Kyiv residents was 3.1 rooms. By comparison, the same indicator for Warsaw is 6.2 rooms, and 5.0 rooms per 1,000 inhabitants for Bucharest. As of the end of 2012, Kyiv had 25 operating hotels in the top-range segment (4 and 5-star) and 34 hotels in 1-3-star category. Eight hotels are managed by international hotel operators. MAJOR HOTELS OPENED IN KYIV IN 2012 # NAME ADRESS CATEGORY # OF ROOMS OPERATOR 1 Fairmont Grand Hotel 1а, Naberezhno-Khreshchatytska St Fairmont Hotels & Resorts 2 Alfavito 35d, Predslavynska St Private management InterContinental Hotels 3 Holiday Inn Kiev 79, Antonovycha St Group 4 Radisson Blu Hotel, Podil 17-19, Bratska St Rezidor Hotel Group 5 City Hotel 56a, B. Khmelnytskoho St Bikom Hotel Department 6 Park Hotel Holosievo 87, Holosiivskyi Av Private management 7 11 Mirors 34a, B. Khmelnytskoho St DEOL Partners 8 Staro 34, Konstiantynivska St Private management 9 Ramada Encore Kiev 103, Stolychne Shose Wyndham Hotel Group 10 Royal Congress Hotel* 32, Molodohvardiyska St Royal Hospitality Group 11 Pushcha Congress Hotel 20, N. Yunkerovycha St. ( Pushha- Vodytsia) NRB Bank 12 Royal Olympic Hotel 12, Hospitalna St Royal Hospitality Group 81/2, Kyivska St. ( Sofiivska 13 Sofiivskyi Posad 3 59 Private management Borshchahivka) 14 Amarant 71d, Konstiantynivska St Premier International 15 Royal Grand Hotel 31/27, B. Khmelnytskoho St Royal Hospitality Group 16 Ambassador Plaza 5/1, M. Hrechko St Private management 17 Bontiak 5/24, Irynynska St Private management 18 Raziotel Kiev 177/1, Kharkivske Shose Reikartz Hotel Management 19 IQ Hotel 6, Hetmana St Private management Total number of rooms 2,236 * Royal Congress Hotel closed for renovation, January 2013 P. 26 COLLIERS INTERNATIONAL
27 REAL ESTATE MARKET OVERVIEW 2013 UKRAINE HOTEL MARKET MAJOR COMPLETED AND PIPELINED HOTELS IN UPPER PRICE SEGMENT, KYIV # NAME ADRESS # OF ROOMS CATEGORY Year of completion/ reconstruction EXISTING HOTELS 1 InterContinental 2a, Velyka Zhytomyrska St Hyatt Regency 5, Tarasovoi St Premier Palace 5-7/29, Shevchenka Bulv (2005 reconstruction) 4 Opera 53, B. Khmelnytskoho St Fairmont Grand Hotel 1а, Naberezhno-Khreshchatytska St Radisson Blu Hotel Kyiv 22, Yaroslaviv Val St Riviera 15, Sahaidachnoho St Dnipro 1/2, Khreshchatyk St President Hotel 12, Hospitalna St , ( reconstruction) 10 Natsionalnyi 5, Lypska St Kyiv 26/1, Hrushevskoho St Salyut 11b, I. Mazepy St Cosmopolite 6, Hetmana St Radisson Blu Hotel, Podil 17-19, Bratska St Holiday Inn Kiev 70, Antonovycha St City Hotel 56a, B. Khmelnytskoho St Alfavito 35d, Predslavynska St P. 27 COLLIERS INTERNATIONAL
ECONOMIC OVERVIEW INVESTMENT OVERVIEW OFFICE MARKET
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