Ukrainian real estate: which segment is the best to recover from the pandemic
Ukrainian real estate, as well as markets in other countries, was seriously affected in 2020. The main tenants of commercial facilities are companies that represent the service sector, and after the lockdowns the latter has found itself in crisis. As a result, investment in the real estate market decreased significantly, but not all sectors were equally affected. For example, logistics facilities were in quite high demand, thanks to the increase in the volume of online trading.
However, by the end of last year, the situation began to change, activity among investors increased. Experts say that investments in the market will continue until early 2022. The thing is that real estate belongs to the types of assets that in the long run bring passive income and do not require a lot of management.
To assess the prospects for the Ukrainian market, it is important to consider the characteristics of each segment. Now in the country there are about 649 sq.m. per thousand people, for example in Warsaw, for the same number of residents allocated 3130 sq.m., and in Berlin – 5228 sq.m. These figures demonstrate the high potential for Ukrainian real estate. Before the pandemic there was limited supply on the market due to the high demand from foreign investors and IT-companies. This allowed surviving the period of lockdowns and the consequences of the coronavirus with minimal losses. The vacancy rate of Class A and B facilities increased from 7% to 10%, which is not a bad option, especially taking into account the commissioning of new premises.
At the beginning of the pandemic, experts predicted a crisis in retail real estate, but there was no serious collapse. Demand fell sharply, but after the quarantine restrictions it recovered just as quickly. This segment depends on both the purchasing power and the mood among consumers, so before investing in such objects you should carefully consider all the risks.
The pandemic caused the most damage to the hotel real estate, which previously showed excellent development. The Ukrainian market has recently seen the arrival of low-cost airlines, which increased the flow of tourists into the country and had a positive impact on the hotel sector. However, the pandemic has reversed all these changes and no significant changes are expected in the near future. According to experts, the restoration of global air travel should not be expected before 2024.
For logistics and industrial real estate the pandemic was a driver for development, which continues now. The demand for the objects is growing, but the limited supply makes the rents more expensive. Currently, the rate of return of logistic objects in Kiev is 12.8%, which is high, especially when compared to other segments of the real estate market.