After a long period of instability generated by the COVID pandemic, the real estate sector shows signs of revival across Europe. To be more precise, the commercial real estate sector seems most appealing for investors at the moment, and when discussing potential locations, Eastern Europe appears to be the hot market of the moment. Despite it being a good short term investment, many forecast substantial return on investments in 2021 and beyond.
Don’t have to take our word for it. We had a sit down with David Kezerashvili, former Georgian Defense Minister and major investor in the Unlock Group, an entity which helps bring foreign investors to commercial real estate projects in Kyiv Ukraine. This firm works to reconstruct abandoned buildings and develop business and commercial centers from scratch. Unlock Group is the partner foreign investors need in Ukraine’s capital. David’s thoughts on the Kyiv real estate market are most helpful for those interested in the potential found there.
Why Do Commercial Real Estate Investors Choose Kyiv?
There are numerous reasons why Kyiv is an appealing place for a wide range of real estate investments, especially commercial and business buildings. The current government, headed by Volodymyr Zelensky, looks to be much more stable and predictable than at any point in recent memory. It’s no secret that investors prefer political stability and shy away from extremely risky situations that instability brings. In addition to stable politics, Kyiv is becoming one of Europe’s most attractive hotspots for IT and Fintech development. The number of foreign companies interested in opening offices in Kyiv is also on the rise. These foreign firms are seeking office space, which generates a consistent demand for modern business centers.
Stability and consistent demand are two important factors but not the whole story. Compared to other cities of the region, like Bucharest or Belgrade, Kyiv has lower prices per square meter in both residential and commercial real estate. The chart below gives a good visual representation of how much lower it can be in Kyiv.
Furthermore, Ukraine’s capital also boasts a larger population than many of its neighbors. Kyiv has over 3 million residents compared to only 1.8 million for Bucharest and around 1.3 for Belgrade. A larger local population to draw from means a wider possible talent pool for a business to consider.
Office Buildings, Warehouses, or Storefronts?
Like most questions of this nature, there is no universal answer for all investors. It depends on many factors. Starting from general market figures like rental rates or the supply/demand ratio and ending with the investor’s personal preference or experience.
This is where a local firm like Unlock Group can deliver guidance to foreign investors. The yield for offices and retail was 11.7% at the beginning of the year, while warehouses reached 13%. However, that doesn’t tell the whole story. Based on these numbers, one would be tempted to say that investing in warehouses is more profitable. However, during times of crisis when circulation is restricted, this segment is affected the most.
David notes that before COVID, there was a low vacancy rate in the city, and conditions were perfect for investors focusing on office spaces. Today the market is not so black and white. Many firms were forced to move their operations online and into work from home situations. There is always a possibility that some of these companies will never decide to go back to standard offices. While in Kyiv the early signs of return to the office are encouraging, the pandemic has not fully ended and it would be rash to draw any conclusions from such early indicators.
What’s certain is that all investors that approach the Unlock Group will gain access to a set of comprehensive data on commercial real estate in Kyiv, as well as guidance throughout the entire process. This locally collected knowledge and experience will be vital to any firm wishing to enter this high potential real estate market.
