ukraine real estate research & forecast report mid-year 2011

UKRAINE

RESEARCH & FORECMID-YEAR 2011

Accelerating success.

CAST REPORT

2011 | RESEARCH & FORECAST MID-YEAR RE

TABLE OF CONTENTS

Executive Sum

Economic Ove

In estment OInvestment Ov

Industrial Mark

Office Market

Retail Market

Hotel Market

Key Metric De

EVIEW | UKRAINE

mmary 3

erview 4

er ie 5verview 5

ket 6

7

9

11

efinitions 13

RESEARCH & FORECAST REPORT | 2011 UKRAINE| EX

ExecutiveRECENT TRENDS

• Economy: Econom

• Investment: InvestmThe highest investm

• Offices: Low supplrate: from 14% dow

• Retail: Retail turnovGrowing market actresult, a moderate g

• Industrial: Due torate has recorded a

• Hotel: The increasetop-end segment ho

MARKET INDICATORS

2011* 2012*

GDP GROWTH

CONSUMPTION

FORECASTS

• Economy: GDP gro

• Investment: Furthesector, is expected.

• Offices: As a resexpected to go furth

CONSUMPTION

INFLATION

OFFICE RENTS

RETAIL RENTS

INDUSTRIAL RENTS p g

• Retail: Demand foincrease. Moderate

• Industrial: A furthegradual growth of re

• Hotel: Increase incommissioning of t

t d b f EU

YIELDS

* COMPARED TO THE PREVIOUS YEAR

expected before EU

3 | COLLIERS INTERNATIONAL

XECUTIVE SUMMARY

Summary

mic growth continues, mainly driven by stable domestic demand.

ment volumes are on the rise in Europe, and, slightly up in Ukraine.g yment activity was recorded in the retail sector.

y coupled with growing demand resulted in a decreasing vacancywn to 12.5%. Rents are increasing slightly .

ver is booming, stimulated by increase in real income of population.tivity has pushed the vacancy rate from 3.5% down to 2.1%. As agrowth of rents was observed.

low supply of new premises and increasing demand, the vacancydecreasing trend: from 19% to 14%. Rents are stabilising.

e in demand for hotels pushed the average rooms occupancy, inotels (4-5 star), up to 60%.

owth is expected to speed up and inflation to slow down in 2012.

er growth in investment demand, with a major accent on the retail

ult of increasing demand for office space the vacancy rate isher down and push up rents.p p

or retail space in successful shopping centres is expected togrowth of rental rates is also highly likely to take place.

r decrease of vacancy rate and stabilisation of rents is expected. Aents for the most demanded premises is also possible.

demand is expected as economic activity recovers. Also, thethose hotel projects close to the final stages of construction is

URO 2012 t tURO-2012 starts.

RESEARCH & FORECAST REPORT | 2011 | UKRAINE |

Economic

POLITICS

Ukraine entered 20advancing economipolitical environmenaddress the most pincluded on its 201

t f T

GDP

sector reforms. Taxlaw (the law on landThe fact that pensbeginning of July,unpopular but muchunpopular reformsrapidly approach.

ECONOMICS

Source: Focus Economics

CO O CS

Economic reformsperspective. SomewEURO-2012 Champand modernisationaddition, EURO-20stimulate economic

GDPINDUSTRIAL PRODUCTION According to provis

May 2011 real GDGDP to grow by 4.7foreign experts. In 2

Industrial ProductionIn H1 2011, industrby the manufacturinoutput.

INDUSTRIAL PRODUCTION (annual var. in %)


ConstructionGrowth in the consMajor constructionpreparations, and la

Household IncomeIn H1 2011, real waincome real wages

Retail TurnoverReal wages growthgrowth: 15.2% yoy i

InflationIn June, consumerJanuary – June 20of the year, while that 10.5%.

CPI (annual var. in %)

External SectorIn January – May 20- $31.58 bn. Thus, t53.2% (yoy). In Q1 2

FORECASTS

• Focus Economics e2012



2012.

• GDP should be drwages growth and b

• Focus Economics s

| ECONOMIC OVERVIEW

c Overview

011 with a relatively favourable alignment of political forces foric reforms. The 2010 presidential elections brought about a stablent, with President, Parliament and Government acting in unison topainful economic issues. According to the Government statement,1 priority agenda are tax, pensions, land, healthcare, and energy

d i f h l d b i l t d d th fi tand pension reforms have already been implemented, and the firstd cadastre) necessary to launch the land reform has been adopted.sion reforms required by the IMF were finally adopted at the, reasserting the Government’s decisiveness in implementingh needed reforms. The time frame for the implementation of theseis also shortening as the October 2012 parliamentary elections

will certainly bring positive results – more likely in a long-termwhat earlier positive effects should be expected from the comingpionship. The Championship will hasten infrastructure improvement, and will prompt construction sector recovery in Ukraine. In12 will attract additional investment flows into the country andgrowth.

ional estimates of the National Bank of Ukraine (NBU), in January-P increased by 5% year-on-year (yoy). The Government expects

7% in 2011; this view is generally shared by the majority of local and2010 GDP growth reached 4.2%.

nrial production expanded 8.7% yoy. This growth was mainly drivenng sector, which accounts for nearly three quarters of total industrial

struction industry accelerated and reached 14.5% yoy in H1 2011.n works are implemented in the framework of EURO-2012argely financed by the Government.

ages increased by 9.6% yoy. In the general structure of householdincreased, but the share of income from property decreased.

h and improved bank lending activity stimulated further retail tradein H1 2011.

r prices rose 0.4% over the previous month (5.8% - cumulative11). The Government expects inflation to average 8.9% by the endhe majority of local and international experts see year-end inflation

011 commodity exports reached $26.95 bn, and commodity importstrade deficit amounted to $4.6 bn. Exports surged 43.9%, imports –2011 FDI constituted $925 mln, which is a 23% growth (yoy).

expects that GDP growth in 2011 will reach 4.6%, and grow to 5% in

riven mainly by stable domestic consumption, stimulated by realbank lending improvement.

ees inflation rise to 10.5% in 2011, slowing down to 9.1% in 2012.

Investmen


EUROPE

According to Realimprovement througTransactions involvof the total investmeEuropean Transaction Summary

(Q1 2011 vs Q1 2010)

UKRAINE

Ukraine’s propertypositive dynamics ithat major transactiofor a shopping cenThe total transaction

Among Kyiv marke

Vol (€ bn) YoY Chg

Office 11.5 29%

Retail 11.9 67%

Industrial 3.2 66%

Hotel 2.2 38%

Apartment 1 9 6% Among Kyiv markeGroup) deal consolHolding plans to rec

A sizable transactioclosed.

Signs of recovery woccupier office dea

i hi h i

Source: Real Capital Analytics

Apartment 1.9 -6%

Land 0.9 -14%

PRIME (NET INITIAL) YIELDS companies, which in

Even the industrialdeals being closed.

The retail market rcentrally located lainvestors/developerZlatoustovskyi Mal

PRIME (NET INITIAL) YIELDS UKRAINE

yGorkyi Park (Gor’ko

BANK LENDING

Improving liquidity ithe real estate marratios indicate somebanks show someSource: Colliers International banks show someconstruction. Besideof real estate, for ex

FORECASTS

• Increase in investme

• Scarcity of attractivcentral part of Kyiv

INVESTMENT VOLUMES ($M)UKRAINE

central part of Kyiv.

• Gradual revival of imillion and more.

• First large deals, ge

• Better lending terms


Source: Colliers International

nt Overview

| INVESTMENT OVERVIEW

Capital Analytics, European transaction volumes showed stronggh Q1 2011 with sales of €31.8 bn marking a 40% yoy increase.ing office and retail properties accounted for almost three quartersent volume in Q1 2011.

investment market showed moderate growth in H1 2011, showingn nearly all segments of commercial real estate. Despite the factons were concluded with end users, one significant land acquisition

ntre development closed as well. Several others are in the pipeline.n volume in H1 2011 comprised more than €100 mln.

et transactions it is worth mentioning the ESTA Holding (SCMet transactions, it is worth mentioning the ESTA Holding (SCMidating 100% of TSUM (Central Department Store) shares. ESTA

conceptualise and reconstruct TSUM.

on involving a large 4-ha land plot for retail development was also

were observed in the office market as well. A total of six ownerals were closed in H1 2011. Buyers were predominantly financial

di t d l fi i l t i lndicates gradual financial sector revival.

market, which has little investor appeal, has witnessed several

remains the most attractive to both investors and developers. Alland plots in Kyiv are seriously considered by local and foreignrs. In the near future we expect development projects SECll (former Nest City, Pobedy Avenue), SEC on Krasnotkatska and( y y )ogo Street) to start active construction.

in Ukraine’s banking system seems to have its positive impact onrket. Decreasing interest rates and increasing LTV (loan-to-value)e improvements in terms of financing for borrowers. A number ofe readiness to finance development projects, including newe readiness to finance development projects, including newes, new types of financing are emerging, such as financial leasingxample.

ent demand for high-quality retail projects.

ve land plots, suitable for shopping centre development, in the

nterest for retail projects in the regional cities with population of 1

enerating cash flow, particularly in retail and office segments.

s and an increase in development projects financed by banks.

Industrial


SUPPLY

New supply of wTechnoyarmarok-1stock of warehouse

. We expect five moreto be commissioned

Warehouse projects to be commissioned in 2011

to be commissionedcommissioning in 20on the route to Kove

DEMAND

The total volume omore than a twofold

Property Area, m2

Kyiv Logistic Park 15,000

Amtel (phase 1) 42,000

Heated warehouse 2,400

Technoyarmarok-2 (Bucha) 30,000


The average transa2010 indicator (5,40

The largest share ilogistics service promore than half of alsegment. It is worthpremises of higher q

Refrigerated warehouse 17,000

CHANGE IN STOCK 2005-2011rents stabilise and t

Among major warelogistics complex Poccupation. Plazma2008 and is located

New tendency: a fsuitable for construc


RENTS AND VACA

Low supply of new19% down to 14% ia level of $5-6 m2/pc

O C S SFORECASTS

• Increase in demandexpected retail turno

• Low supply of newits gradual increase

• Further decrease of

RENTS AND VACANCY

rents in the most de

• New development otenants (section are

• New development opremises in the mar



Market

INDUSTRIAL MARKET

warehouses in H1 2011 was limited to one logistic centreof 12,000 m2, located on the route to Kovel (M-07). Thus, the totalspace in Kyiv region reached 916,000 m2.

e warehouse projects with a total area of approximately 106,000 m2

d by the end of 2011 Most of the new logistic facilities planned ford by the end of 2011. Most of the new logistic facilities planned for011 will be located on the right bank close to Ring Road (55%) andel (28%).

of lease transactions in H1 2011 constituted 95,000 m2, which isd increase compared to the same period of 2010 (45,000 m2).

action size in H1 2011 equalled 5,500 m2, which is in line with the00 m2).

in the overall demand structure is comprised of retail chains andoviders. Class A warehouses are the most demanded premises:ll transactions are concluded in the high-quality class A warehouse

h noting that during H1 2011 a number of tenants were relocating toquality. We expect this trend to continue throughout 2011, as rentalheir current level allows tenants to move to higher quality premises.

house deals of H1 2011, we should mention the purchase of thePlazma Logistic by Ukrainian pharmaceutical company for its owna Logistic, with a total area of approximately 20,000 m2, was built in

on the route to Borispol’ (M-03).

few manufacturing companies are showing interest in land plotsction of industrial premises.p

ANCY

w premises and increasing demand pushed the vacancy rate fromn H1 2011. As a result, we observed further stabilisation of rents atcm.

d for warehouse premises in the largest regional cities, as a result ofover growth and retail/logistics operators expansion.

warehouse premises in 2011, in line with the supply of 2010, andin 2012.

f vacancy rate and stabilisation of rents. Also, a gradual increase ofy , gemanded premises is possible.

of specialised warehouse complexes, tailored for small and mediumea 2,000-5,000 m2).

of temperature controlled warehouses, driven by a deficit of suchrket.

Office Mar


SUPPLY

New supply of classa 20% increase comcentres were commSaksaganskogo/Pareached approx. 1,2

CHANGE IN STOCK 2000-2011

We expect a substacommissioning of ascenario, approximaHowever, timely conot all of the annsubstantial increase

Major offic


Major offic

Business Centre

Schekavitsky BC

Continental’ BC

Forum Victoria Park

TAKE UP DISTRIBUTION BY

Source: Colliers Internationa

Toronto

101 Towers BC

Maria BC

Horizon Podol BC

TAKE-UP, DISTRIBUTION BY TYPE OF TRANSATION, %

DEMAND

The total office spaincrease comparedwas mostly drivensectors.

The share of interntransactions) went dtake-up coming from– less than 1% oftransactions.

In 2011 we obseroccupation. The cofinancial and med


financial and medSchekavitsky BC by

The share of purchsale transactions) a– 66%.


rket

| OFFICE MARKET

s A and B office space amounted to 25,000 m2 in H1 2011, which ismpared to the new supply of H1 2010 (20,000 m2). Two business

missioned. These were Rialto BC (GLA ~ 15 500 m2) and BC onnkovskaya (GLA ~ 9 600 m2). Thus, the total office stock in Kyiv

230,000 m2.

antial increase in supply of new office space in 2012, given timelyall 2012 announced office projects. In case of such an optimisticately 193,000 m2 of new office space will be supplied to the market.mmissioning may be questionable, as is always the case. Even ifnounced business centres are commissioned on time, a still

e in supply is expected in the range of 87 000-148 000 m2.

e buildings announced to be commissioned in 2011-2012e buildings announced to be commissioned in 2011 2012

e Address GLA, m2 Developer Year

23-25, Frunze Street 8,600 Stolitsa 2011

1, Sportivnaya Square 48,000 Ukrainian developer 2012

BC 7, Ahtyrsky Lane 22,500Forum Management

Group2012

al

79, Gor’kogo Street 36,000 Toronto-Kiev 2012

57, Tolstogo Street 45,000 KAN Development 2012

2, Reznitskaya 25,000 KAN Development 2012

9, Naberezhno-Khreschatyska Street

16,000ISA Prime

development2012

ace take-up reached about 90,000 m2 in H1 2011, which is a 30%to the same period of 2010. This significant increase in demandby companies from the financial, pharmaceutical, IT and FMCG

ational companies in the structure of total take-up (lease and saledown from 76% (2010 indicator) to 66%. There was practically no

m companies for the first time entering the Ukrainian market in 2011f the total take-up. 99% of take-up was comprised of relocation

rved a strengthening tendency of buying office space for ownompanies acquiring offices for their own occupation are mostlyia sector companies One such example is the purchase ofia sector companies. One such example is the purchase of

y a media group.

hase transactions by the end users in the total take-up (lease andamounted for 34%, correspondingly, the share of lease transactions

Office Mar


RENTS AND VACA

Growing demand co14% down to 12.5%

RENTS

Source: Colliers Internatio

Base

Class 1 July 20

Class A 30-35

Class B 18-23

Class C 10-15


Source: Colliers Internatio

FORECASTS

• Further decrease of

• As a result, strengthrates in all class offirates in all class offi

• Increase in the num

• Two-threefold increcommissioning of al

VACANCY RATE



rket

OFFICE MARKET

ANCY

oupled with insignificant new supply pushed the vacancy rate from% during H1 2011. As a result, rents increased by 8%, on average.

onal

e rental rates for Kyiv office premises, $/m2/month

009 1 January 2010 1 July 2010 1 January 2011 1 July 2011

28-35 30-38 32-38 33-38

13-20 15-26 17-26 19-26

8-13 8-15 10-15 12-16

onal

f vacancy rate in 2011, mainly in class A and B+ office buildings.

hening of the landlords’ negotiating positions and increasing rentalice buildingsice buildings.

mber of purchase deals, for owner occupation.

ease in new supply in 2012 compared to 2011, given the timelyll announced projects for this period.

Retail Mar


SUPPLY

As of July 1, 2011600,000 m2. In H1commissioning of twm2), M. Raskovoi St

CHANGE IN STOCK 2001-2011

In July 2011, the secdoors to visitors. Tharea of 24,000 m2.electronics, as well

Meanwhile, activedevelopment projecSEC on Dniprovskat b l t d ito be completed inlocated at the inHypermarket Silpo,

In 2011-2013, thereactive constructionmall and SEC on Kplots, including sombecome subject to d


j

Active developmentfinancing. Commercthey are very cautiocases appear as afinancing are emerg

Summarizing the agrowing interest in t

KYIV SHOPPING CENTRE STOCK BY LOCATION

growing interest in tnew shopping centrmarket saturation,Anticipating future cplan to re-develop th

DEMAND

Currently demand fCurrently demand fsupply. This is evideMany successful shpotential tenants.

Significant retail tdevelopment. AccorH1 2011 increasedSource: Colliers International


rket

RETAIL MARKET

, the total shopping centre stock in Kyiv stands at approximately1 2011, supply of new retail space in Kyiv was limited to thewo shopping centres. These are SC Levoberezhnyi (GLA ~ 2 300treet, and SC Kvadrat (GLA ~ 3 700 m2), Balzaka Street.

cond phase of SEC Dream Town with GLA of 45,000 m2 opened itshe major anchor tenant of this project is an aqua park with a total. Furniture and interior design stores, household appliances andas products for children form the main tenants.

construction is being observed on the worksites of suchcts as Ocean Plaza, Rayon (M26), Silver Breeze, Marmelade, anda Naberezhna. In particular, the Rayon shopping centre is expected

Q2 3 2012 ff i GLA f 23 000 2 Th h i t iQ2-3 2012, offering GLA of 23,000 m2. The shopping centre isntersection of Bal’zaka, Lavrukhina, and Hradyns’ka streets.an electronics supermarket, and a food court are anchor tenants.

e is a high probability that new high-quality projects will enter thephase. SEC Gorkyi Park, SEC Panda Park, SEC Zlatoustovsky

Krasnotkatska Street are among them. There are also several landme centrally located, which are suitable for retail projects that maydevelopment in the next 12 months.p

t of retail projects is still constrained by the lack of affordable debtcial banks are ready to finance new retail developments, however,ous and selective. Equity partnership from foreign investors in manya good alternative option to bank financing. Also, new types ofging, such as financial lease of real estate.

bove, we should underline that developers and investors show athe retail market of Ukraine They are interested in both developingthe retail market of Ukraine. They are interested in both developingres and reconstructing old ones. This is largely explained by the low

improving economic outlook and growing retail turnover.competition owners of shopping centres with old/inefficient conceptsheir schemes.

for quality retail space in Kyiv shopping centres slightly exceedsfor quality retail space in Kyiv shopping centres slightly exceedsenced by a low vacancy rate of 2.1% in operating shopping centres.hopping centres have no vacant space, and there is a waiting list of

urnover growth is an additional incentive for further marketrding to the State Statistics Committee of Ukraine, retail turnover inby 15.2% compared to the same period of 2010.

MARKET ENTRY

• Clothing retailer Ne


• Clothing retailer NeMall.

• Spanish lingerie brabelongs to the INDIT

• Accessories storesrespectively.

PRIME RENTS

• The Fiba Retail coTurkey, Russia, and

• The largest footweastores in Kyiv with it

• Turkish menswearopened in SEC Kara

In addition we expeenter Ukraine’s mar

RENTS AND VACA

As of June 2011, prof 100-300 m2 reacprime rents for secti


New supply of retawonder that the vac

REGIONS

SC City Mall (secodeveloped by Arricasince 2009, is repgallery GBA of the

VACANCY

gallery, GBA of theBesides Auchan, thOther chain retailerChester, PLATO aagent for SC City M

At the beginningreconstructed six-st15,000 m2).

Multi DevelopmentForum Lviv (GBAsupermarket and minternational brands

SC City Centre (firsopened in 2012.


FORECASTS

• Increasing demandof Kyiv and major re

• Reviving interest inthan 500,000 people

• Moderate rent incre


• Development of larg

• Re-conceptualising/

• Growing interest inand retailers.

w Yorker (German brand) opened its first store in Kyiv in SEC Sky

RETAIL MARKET

w Yorker (German brand) opened its first store in Kyiv in SEC Sky

and Oysho opened its first store in SEC Sky Mall. The Oysho brandTEX Group.

SIX and I am opened in SEC Globus and in SEC Dream Town,

f f Gompany, which owns a management franchise of GAP stores ind Ukraine, opened the first GAP store in Ukraine.

ar and accessories retail chain in Russia CentrObuv opened its firstts brands CentrObuv and Centro.

brand St. Marine and Italian women’s clothing brand Naracamicieavan.

ected such retail chains as Finn Flare, Rive Gauche, and others torket in the near future.

ANCY

rime headline rents in Kyiv successful shopping centres for sectionsched $130 /m2/pcm (8% growth compared to H2 2010). Averageions of 100-300 m2 are around $90/m2/pcm.

ail space in Kyiv constituted just 6,000 m2 in H1 2011. It is littlecancy rate has dropped from 3.5% to 2.1%.

ond phase) opened in Zaporizhia, in April 2011. The project wasano Trading Ltd. The first phase of the project, which has operatedpresented by hypermarket Auchan. Together with the shoppinge SC City Mall amounted to 25 000 m2 with GLA 20 000 m2e SC City Mall amounted to 25,000 m2 with GLA - 20,000 m2.he other major anchor tenant is electronics supermarket Comfy.rs include Brocard, Colin’s, In City, Ostin, Carlo Pazolini, MOYO,

and OGGI. Colliers International served as an exclusive leasingall’s second phase.

of 2011, Mariupol witnessed the opening of SEC Ukraina, atorey soviet-era central department store (GBA ~ 20,000 m2, GLA ~

started a leasing campaign for its first project in Ukraine – SEC~ 68,000 m2, GLA ~ 36,000 m2). Among anchor tenants: food

movie theatre; the gallery will include 130 stores of well-knowns. The opening is planned for 2013.

st phase) in Odessa and SEC Fabrika in Kherson are planned to be

for retail space in successful SCs/SECs and main shopping streetsegional cities.

developing retail networks in regional cities with populations of lesse.

ase in successful SCs of Kyiv with low vacancy rate maintained.

ge-scale retail projects in Kyiv and regional cities.

/reconstructing of SCs with old/inefficient concepts.

retail market of Ukraine from international investors, developers,

Hotel Mar


SUPPLY

The Kyiv hotel marclassified hotels (1-stands at 2.7, which

Currently, Kyiv offereconstructed sovie

Kyiv 4-5 star hotels

Hotel # of rooms Category

InterContinental 272 5 reconstructed soviecompleted in the 20operators: two five-sRegency (234 roomBlu brand (255 room

In the 2011-2014 peunder internationalinclude: Fairmont (ft 513 )

InterContinental 272 5

Hyatt Regency 234 5

Premier Palace 289 5

Opera 138 5

Radisson Blu 255 4

Riviera 80 4

star, 513 rooms), an180 rooms), whichfunctioning underReconstruction and

Currently, there areinternational operathotels are expectedoperators Ramada

Podol Plaza 57 4

Dnipro 186 4

President-Hotel Kyivsky

338 4

Natsionalny 78 4

Kyiv 190 4 proom hotel under thmultifunctional Domcommissioned in Au

Among the main hosigned a contract wroom hotel will be lo15,000 m2.


Salyut 82 4

Perlyna Dnipra-XXI 34 4

Visak 42 4

We must bear in miIt is logical to assumwill rush to commievery reason to belthanks to EURO 20

DEMAND

I 2010 h b

KYIV TOP-END HOTEL ROOM SUPPLY

In 2010, the numbeAccording to Stateguests comprised 2people. It is worthdriven by foreign tra

According to the Boduring January-May1.71 million people.p pyoy. (For referenceequalled 6.7 million

The growth of passactivity recovery indemand for hotel rorooms increased byon average, up to 6been observed



been observed.

rket

| HOTEL MARKET

rket comprises 79 hotels (totaling 7,634 rooms), of which 47 are-5 star). The number of hotel rooms per 1,000 inhabitants in Kyivh is far below the level of Warsaw – 6.3 or Bucharest – 6.

ers only 12 top-end segment hotels (4-5 star). Five of them areet era hotels built in the 1960-80s the other seven are new hotelset era hotels built in the 1960 80s, the other seven are new hotels,000s. Kyiv has only three hotels which are managed by internationalstar hotels operating under InterContinental (272 rooms) and Hyatt

ms) brands, and one four-star hotel operating under the Radissonms).

erspective, it is expected that several more top-end segment hotelsoperator management will be delivered to the Kyiv market. These

five-star, 259 rooms), Hilton (five-star, 257 rooms), Swissotel (five-d H lid I (f t 210 ) Al H t l L i i (f tnd Holiday Inn (four-star, 210 rooms). Also, Hotel Leipzig (four-star,is currently close to the final stages of reconstruction, will beinternational operator management. The European Bank ofDevelopment is financing the reconstruction of the Leipzig.

e a total of 19 three-star hotels in Kyiv. None is managed bytors. However, in the short-term perspective two new three-star

d to be delivered to the Kyiv market – and managed by internationaland Ibis. In April 2012, DeVisioin Group is planning to open a 325-p , p p g p

he Ramada Encore brand (Windham Hotel Group), as a part of themosphera complex. The 212-room Ibis hotel is expected to beugust 2011.

otel market news of 2011: AZIMUT Hotels company (Russia) haswith Ariks (Ukraine) to manage the four-star hotel in Kiev. The 235-ocated on O. Gonchara street. The total building area will comprise

nd that it is already less than a year before the start of EURO 2012.me that the developers of those hotel projects close to completionssion them before the championship begins. Therefore, there isieve that the hotel shortage problem will be solved, at least partly,12.

f f i i Uk i i d b 2% d 2009er of foreign tourists to Ukraine increased by 2% compared to 2009.Statistics Committee of Ukraine, in 2010 the number of foreign

21.2 million people, while in 2009 this number equalled 20.8 millionmentioning, that typically demand for top-end segment hotels is

avellers.

orispol Airport data, passenger traffic reached 2.31 million peopley 2011, while for the same period of 2010 this number amounted to

Thus, during this period airport passenger flow increased by 26%, g p p p g y %e: the total passenger traffic of the airport for the entire 2010people).

senger traffic of the country’s main airport proves gradual businessUkraine, and Kyiv, in particular. As a result, we observe increasing

ooms. In H1 2011 demand (number of rooms sold) for top-end hotely 20% yoy. Consequently, occupancy in top-end hotels has risen,60%, also a gradual stabilisation of ADR (average daily rate) has

Hotel Mar


REGIONS

An agreement forInterpoint DevelopmResorts. The 333-ro

NUMBER OF FOREIGN VISITORS TO UKRAINE

eso ts e 333 oof Odessa.

Atlas Hotel, locateinternational hotelDonetsk (four-star,

FORECASTS


FORECASTS

• Increase in demand

• Increase in ADR, aKyiv market, oriente

• Increasing ADR tencurrently under cons

• Developers of thoscommission them be


rket

HOTEL MARKET

managing Swissotel Odessa (five-star) was concluded betweenment (Odessa) and international hotel operator Swissotel Hotels &oom hotel will be located on Frantsuz’ky Blvd., 4 km from the centreoo ote be ocated o a tsu y d , o t e ce t e

d on Shevchenko Blvd. in Donetsk is now being managed byoperator Wyndham Hotel Group under their brand – Ramada

165 rooms).

d as economic activity recovers.

as a result, of almost maximum occupancy reached in H1 2011 ined to business tourism.

ndency will be sustained at least until completion of several hotelsstruction.

se hotel projects close to final stages of construction, will try toefore EURO-2012 starts.

COLLIERS RESEA

512 offices in

RESEARCH & FORECAST REPORT | 2011 | UKRAINE

Colliers Research Scommercial real estasupport business decsupport across all proanalysis.

Across the CEE-SEE-update data on key reconstantly managed u

512 offices in 61 countries on 6 continentsUnited States: 125

Canada: 38

Latin America: 18constantly managed uregional markets inclucapital markets and tmarkets, the office dResearch Forum –established to ensuretransparency and reDefinitions of the key

Asia Pacific: 214

EMEA: 117

• $1.5 billion in annual revenue

• 978.6 million square feet under management

• Over 12,500 professionals

KEY METRIC DEFI

• Prime Headline Cafrom the annual prim

• Prime Net Initial Ybuilding, fully-let tolocation. Lease term

UKRAINE

Colliers International

Leonardo Business Center19-21 Bohdana Khmelnytskoho StreetKyiv 01030Ukraine

The information contained herein has been obtained fromsources deemed reliable. While every reasonable efforthas been made to ensure its accuracy, we cannotguarantee it. No responsibility is assumed for anyinaccuracies. Readers are encouraged to consult their

Initial Yield = first ye

• Prime Headline Rexpected for a unit oand specification ireflect the level atneed not be exactlymade up of unusuasurvey period the q

TEL +38 044 499 0000FAX +38 044 499 0009

professional advisors prior to acting on any of thematerial contained in this report.

survey period, the qmarket conditions, b

• Prime Net Effectivon a calculation ofhighest of either thesurvey date.

• Average Headlinetier of rent that codemand, based onmarket at the survey

• Total Competitivebuildings.

• Space Under Activfloor space of propep p por in existing propesurvey date.

• Space Under Conleasable floor spacrefurbishment/renovmonths or longer.

• Vacant Space: The


• Vacant Space: Thethe Competitive Smarketed at the surv

RCH

Services Group is recognised as a knowledge leader in thete industry, providing clients with valuable market intelligence to

cisions. Colliers International research analysts provide multi-leveloperty types, ranging from data collection to comprehensive market

-Russia region of EMEA, Colliers researchers regularly collect andeal estate metrics, set to consistent definitions. This information isusing databases enabling staff to readily produce analysis on keyusing databases, enabling staff to readily produce analysis on keyuding supply, demand, absorption, pricing and transaction data onthe office, industrial and retail sector. In most CEE-SEE-Russiandefinitions used are consistent with those set out by the CEEan umbrella group, of which Colliers is a founding member -e consistent research methodologies are used, bringing greater

eliability to the analysis of real estate markets in the region.metrics used in our regular reports are highlighted below.

NITIONS

apital Value (derived): This is a calculation of market value derivedme headline rent divided by the prime (net initial) yield.

Yield: The yield an investor is prepared to pay to buy a Grade Ao high quality tenants at an open market rental value in a primems should be commensurate with the market. As a calculation Netears’ net income/purchase price (prior to deducting fees and taxes)

Rent: Represents the top open-market tier of rent that could beof standard size commensurate with demand, of the highest qualityn the best location in the market at the survey date. This shouldwhich relevant transactions are being completed at the time but

y identical to any of them, particularly if deal flow is very limited oral one-off deals. If there are no relevant transactions during thequoted figure will be more hypothetical based on expert opinion ofquoted figure will be more hypothetical, based on expert opinion ofbut the same criteria on building size and specification will apply.

e Rent: Prime Net Effective Rent is the lowest rent payable, basedf the Prime Headline Rent, less the monetary equivalent of thee rent-free period or fit-out contribution available at the time of the

Rent: Average Headline Rent represents the average open-marketould be expected for a unit of standard size commensurate with

a blend of Grade A & B space across a range of locations in they date.

Stock: Includes the gross leasable floor space in all A and B class

ve Construction: Represents the total amount of gross leasableerties where construction has commenced on a new developmentperties where a major refurbishment/renovation is ongoing at the

nstruction – Inactive: Represents the total amount of grossce of properties where construction had started/where a majorvation was ongoing, but activity has since stopped for a period of 3

e total gross leasable floor space in existing properties that meete total gross leasable floor space in existing properties that meetStock definition, which is physically vacant and being activelyvey date. Space should be available for immediate occupation.

www.colliers.com Accelerating success.

ukraine real estate research & forecast report mid-year 2011

Real Estate