Improving investment sentiment
In the second half of 2015 investors’ interest to opportunities on the property market in the country strengthened.
In 2015, total secondary investment volume on the Ukrainian property market amounted to around USD 65 million compared to USD 47 million in 2014 and USD 66 million in 2013.
Marta Kostiuk, Head of Research and Development Consultancy at DTZ Ukraine comments: “Quality income generating office, retail and logistics properties located in Kyiv remain the most attractive investment assets in the country. Some investors are also prepared to consider good quality existing retail properties in other major cities of Ukraine, except for eastern regions of the country.”
Transactions
There were 4 major secondary investment transactions reported in property sector in Ukraine in the first half of 2015:
• The company Petricol Investment acquired the shopping and entertainment centre ‘Kvadrat’ on Perova Boulevard on the eastern bank of the Dnipro River in Kyiv. Total area of the property extends to around 41,000 sq m, and its GLA is 19,100 sq m. Petricol Investment is also owner of the shopping and entertainment centre ‘Komod’ and the retail centre ‘Kvadrat’ near the metro station ‘Lukyanivska’, both in Kyiv. The deal structure is confidential.
• The 1,000 sq m business centre at 30 Fizkultury Street in Kyiv is known to have changed hands in the first half of 2015. The deal volume is estimated at around USD 1.7 million.
• A Ukrainian company acquired an 11,000 sq m pharmaceutical warehouse in the Greater Kyiv area for owner-occupation purposes. The deal volume is estimated at approximately USD 2.4 million.
• A 15,000 sq m ambient warehouse in the Kyiv Greater area was purchased by the private Ukrainian company. The deal structure is confidential.
No major secondary investment deals are known to be concluded in July-September 2015. Nevertheless, during the period there were some changes reported in the ownership structure of the operating retail and entertainment centre ‘Arena-City’.
In the fourth quarter of 2015, total volume of secondary investment deals amounted to around USD 23 million, including the following transactions:
• The retail centre ‘Opera Passage’ of total area around 4,500 sq m, which is located in the core city centre of Lviv and was developed by Finnish investors, is known to have changed hands in November 2015. DTZ represented the vendor. The deal volume is confidential.
• A Ukrainian pharmaceutical company acquired the pharmaceutical warehouse of area around 9,800 sq m in the Greater Kyiv area. The deal is estimated at approximately USD 2 million.
• An administrative building of 10,000 sq m, located in the non-central area on the western bank of the Dnipro River in Kyiv, is known to change hands in the fourth quarter of 2015. The deal is estimated at USD 6.5 million.
• The Ukrainian Public Joint Stock Company ‘Energobank’, through the Deposit Insurance Fund of Ukraine, sold the office building ‘Lyubava Grad’ of total area 15,000 sq m located at 9 Semena Sklyarenka Street in Kyiv. The deal value was reported at around USD 2.8 million.
Yields
Since mid-2014, prime yields for commercial property in Kyiv remained generally unchanged. At the end of 2015, prime net initial yields stood at around 13.5% for prime office and retail space and, at 15% for prime logistics properties.
Outlook
As of January 2016, DTZ projects that total volume of secondary investment transactions in Ukraine during 2016 may potentially amount in the range from USD 50 to USD 210 million.
“Other things being equal, during at least the first half of 2016 investors will further take a highly cautious approach to Ukraine. However, we expect that further implementation of institutional reforms and macroeconomic stability in Ukraine will reverse the momentum and enhance investors’ interest to opportunities on the property market in the country”. – says Volodymyr Mysak, Head of Capital Markets at DTZ Ukraine.