EE Real Estate Forum & Project Awards event that gathers industry leaders and potential investors to discuss regions investment opportunities, real estate challenges and innovations.
Anna Nestulia, NAI Ukraine
Please give your opinion on the region’s investment attractiveness and name market segments particularly attractive to foreign investors these days.
Ukraine is making great progress in improving the standards of living and increasing wages and retail sales. In the first half of 2018, wages have increased by 6% compared to the same period in the previous year. Retail sales increased by 9% in 2017 and by 5.5% in 2018 (January – September 2018). Currently, Ukraine is listed among the European countries with the strongest retail sales growth, which gives us good prospects for the future. In money terms, the volume of retail sales in Ukraine exceeds the retail sales volume in countries like Denmark, Finland, and Hungary. It is close to Norway’s and Greece’s indicators.
In addition to retail sales growth, Ukrainians’ consumer confidence has improved in 2018. GFK reported August consumer confidence at 60.3. We can see that Ukraine is currently working to restore customer confidence, and its index is growing steadily and consistently. This encourages international companies to bring their brands here. Ukraine has been repeatedly named among top countries international brands are actively expanding to (in 2016, Kyiv left behind cities like Bucharest, Prague, and Taipei). These positive trends are likely to continue. In the first half of 2018, about 10 more brands hit the market. In August, H&M finally made it to Ukraine. In 2019, we are expecting IKEA to bring the global brand to our country. By the end of September 2018, Kyiv was ranked 12 among the world’s top markets for retail businesses expansion.
The improvements in the country’s investment climate lead to the increase in foreign direct investments. In addition, according to Doing Business 2018 report, Ukraine was ranked 76 among 190 countries, which is a good result. It took us only a year to earn 1.9 points and climb 4 positions in the ranking. This is due to building permit costs reduction, as well as payroll tax reduction and simplification. We can see that Ukraine’s investment climate is gradually improving and therefore, we expect more foreign investors to come to Ukraine in the near future.
On the one hand, Ukraine is considered a high-risk country for investors. This severely limits the flow of investment. On the other hand, the return on investment in Ukraine may be several times higher than that in countries with developed economies. In the medium-term perspective, we can expect the flow of investment to traditional sectors, such as infrastructure, energy, and agriculture.
When it comes to real estate, the most attractive segments for foreign investors include office, hotel, and commercial real estate in Kyiv, as well as commercial real estate and logistics facilities in the regions. This is due to the high market capitalisation in commercial real estate: current rates stand at 10-15%, which is significantly higher than cap rates in the European countries.