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Prospects for commercial real estate development in Kazakhstan –
Prospects for commercial real estate development in Kazakhstan –
WHAT’S AHEAD…
WHAT’S AHEAD…
Executive summary
Executive summary
4
4
Analysis of Kazakhstan commercial real estate market
Analysis of Kazakhstan commercial real estate market
Kazakhstan is the biggest dynamically developing country in Caspian
Kazakhstan is the biggest dynamically developing country in Caspian
Kazakhstan commercial real estate market passed through emerging
Kazakhstan commercial real estate market passed through emerging
Analysis of Kazakhstan commercial real estate market
Analysis of Kazakhstan commercial real estate market
With dynamic growth of GDP per capita, office real estate area in
With dynamic growth of GDP per capita, office real estate area in
Analysis of Kazakhstan commercial real estate market
Analysis of Kazakhstan commercial real estate market
Based on Almaty city population forecast and existing office real
Based on Almaty city population forecast and existing office real
Economic forecast for office space demand shows that Almaty market is
Economic forecast for office space demand shows that Almaty market is
Analysis of Kazakhstan commercial real estate market
Analysis of Kazakhstan commercial real estate market
According to economic forecast, new demand for quality office real
According to economic forecast, new demand for quality office real
According to economic forecast, Astana office supply will considerably
According to economic forecast, Astana office supply will considerably
Analysis of Kazakhstan commercial real estate market
Analysis of Kazakhstan commercial real estate market
Analysis of major foreign city development shows that there is a
Analysis of major foreign city development shows that there is a
Analysis of Kazakhstan commercial real estate market
Analysis of Kazakhstan commercial real estate market
Experts forecast that Almaty retail market turnover will increase
Experts forecast that Almaty retail market turnover will increase
Economic forecast for 2 scenarios of Almaty shopping space demand –
Economic forecast for 2 scenarios of Almaty shopping space demand –
Almaty economic forecast shows that future demand for shopping space
Almaty economic forecast shows that future demand for shopping space
Analysis of Kazakhstan commercial real estate market
Analysis of Kazakhstan commercial real estate market
According to expert estimates annual growth of Astana retail market
According to expert estimates annual growth of Astana retail market
Demand for new shopping space in Astana may be higher than in Almaty
Demand for new shopping space in Astana may be higher than in Almaty
Economic forecast for shopping space demand and supply shows their
Economic forecast for shopping space demand and supply shows their
Is Kazakhstan commercial real estate market competitve in terms of
Is Kazakhstan commercial real estate market competitve in terms of
What about profitability
What about profitability
BRIGHT FUTURE FOR SELECTED MARKETS WITH CLEAR PROFESSIONAL PROJECTS
BRIGHT FUTURE FOR SELECTED MARKETS WITH CLEAR PROFESSIONAL PROJECTS

Презентация: «Prospects for commercial real estate development in Kazakhstan – office and shopping real estate». Автор: Eurasia RED, www.EurasiaRED.com. Файл: «Prospects for commercial real estate development in Kazakhstan – office and shopping real estate.ppt». Размер zip-архива: 1096 КБ.

Prospects for commercial real estate development in Kazakhstan – office and shopping real estate

содержание презентации «Prospects for commercial real estate development in Kazakhstan – office and shopping real estate.ppt»
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1 Prospects for commercial real estate development in Kazakhstan –

Prospects for commercial real estate development in Kazakhstan –

office and shopping real estate

Dmitry A. Revin, Director for finance and business development Eurasia RED, www.eurasiared.com

Adam Smith conference – Construction and Real Estate in Kazakhstan April 1-3, 2008 Almaty, Kazakhstan

2 WHAT’S AHEAD…

WHAT’S AHEAD…

DEMAND SUPPLY RATES PROFITABILITY

2

3 Executive summary

Executive summary

Kazakhstan is a rapidly developing market with strong GDP growth, significant foreign investments and stable political environment that presents exciting profitable opportunities for commercial real estate development. Astana - market will be mostly saturated for offices and shopping center space by 2009. Unsatisfied demand for modern shopping center space may arise in as early as 2010. Almaty - there is unsatisfied demand for offices and modern shopping center space. Regions – offices and shopping real estate development projects present marginal opportunity in selected regions.

3

4 4

4

5 Analysis of Kazakhstan commercial real estate market

Analysis of Kazakhstan commercial real estate market

Sources for analysis of Kazakhstan commercial real estate market: JLL Knight Frank CBRE Cushman DTZ Deloitte EIU OECD Kazakhstan commercial real estate center Agency of RK for statistics Ministry of economy and budget planning of RK

5

6 Kazakhstan is the biggest dynamically developing country in Caspian

Kazakhstan is the biggest dynamically developing country in Caspian

region with attractive investment climate

1. Territory – 2,725 thousand sq.m. 2. Population – 15,514 thousand people 3. Yearly GDP growth – 9-11% a year (2000-2007, same growth forecast for the next 4 years) 4. Average retail turnover growth – 20% a year (2001-2007, same growth forecast for the next 4 years) 5. Average salary increased 3,6 times during 2000-2007

6

Source: Agency of RK for statistics

7 Kazakhstan commercial real estate market passed through emerging

Kazakhstan commercial real estate market passed through emerging

market stage and is currently still in the stage of dynamic growth

Stage I. Emerging stage

Stage II. Growth stage

Stage III. Maturity stage

Examples

Mainly construction of А+ and А class business centers MFC * with offices of premium class

Office real estate is comprised of facilities in old administrative buildings of Soviet period (i.e. Scientific Research Centers) Modern business centers are not constructed, just reconstruction of Soviet period buildings

Construction of new business centers of А, В+ and B class share of old buildings in office real estate is significant

Business centers

Construction of shopping centers, in particular due to network retailer presence Share of Soviet period commercial buildings is still high

Segmentation of shopping space by types (trade center, shopping mall, neighborhood store, etc.) Construction of malls with GLA> 20,000 sq.m. outside of the city Insignificant share of markets/bazars in trade turnover

Shopping real estate is comprised of old stores and soviet supermarkets, markets/bazars, stand alone shops, booths.

Shopping centers

7

Kazakhstan regions

Moscow

Regions of RF

Almaty, Astana

«АFC» almaty, 2008

«Astana Tower» Astana, 2005

BC at Gagarina str, Almaty 2006

«Kendala» Almaty, 2005

Time

* MFC – multifunctional complex (offices, shopping center, hotels, etc)

8 Analysis of Kazakhstan commercial real estate market

Analysis of Kazakhstan commercial real estate market

Overview of Kazakhstan commercial real estate market Business center real estate market Shopping center real estate market

8

9 With dynamic growth of GDP per capita, office real estate area in

With dynamic growth of GDP per capita, office real estate area in

Almaty and Astana should significantly expand as well

Office real estate availability per 1,000 inhabitants in world cities and its correlation with GDP per capita

Office real estate availability per 1,000 city inhabitants, sq.m.

GDP per capita at purchasing parity index, USD

9

Paris

Toronto

Sidney

Almaty (2012)

Madrid

Prague

Astana (2012)

Warsaw

Bratislava

Budapest

Moscow

Sofia

Almaty(2006)

Astana (2006)

Istanbul

Source: OECD, JLL (Cities’ reports), Swiss Realty Group, Istanbul Metropolitan Municipality, CBRE, Knight Frank

10 Analysis of Kazakhstan commercial real estate market

Analysis of Kazakhstan commercial real estate market

Overview of Kazakhstan commercial real estate market Business center real estate market Almaty Astana Shopping center real estate market

10

11 Based on Almaty city population forecast and existing office real

Based on Almaty city population forecast and existing office real

estate, it is expected that 1,5 mln. sq.m. of office space should be constructed to satisfy new demand by 2012

X

Comments

New demand growth forecast for office real estate in Almaty

Almaty city population forecast

Office space per 1,000 Almaty inhabitants based on GDP forecast

Based on forecasted population of Almaty city, it’s expected that there will be on average 2 sq.m. per citizen by 2012.

11

Thousand sq.m.

Thousand city inhabitants

Sq.m. / 1,000 city inhabitants

Source: Agency of RK for statistics, Kazakhstan commercial real estate center, Deloitte estimate

1375

1360

1345

1330

1316

1301

1287

2090

1393

928

618

412

275

183

12 Economic forecast for office space demand shows that Almaty market is

Economic forecast for office space demand shows that Almaty market is

still far from saturation point

Comments

Economic forecast of new demand and planned supply of office real estate in Almaty, thousand sq.m.

Declared volume of office space supply by market players lags behind economic forecast for new demand. In 2010 deficit could reach 300 - 500 thousand sq.m. Taking into account completion of first phase of AFC in 2007, insignificant market oversupply is expected that may stabilize prices in 2008. Nevertheless, soon additional demand will create deficit and rent prices will further increase, unless market players will manage to supply additional office space.

12

Economic forecast for new demand

Potential new supply taking into account AFC

Planned supply of office space taking into account declared plans on AFC

1 According to the plans declared by the market players and business center projects under development as of the end of 2007.

Source: Deloitte forecast

13 Analysis of Kazakhstan commercial real estate market

Analysis of Kazakhstan commercial real estate market

Overview of Kazakhstan commercial real estate market Business center real estate market Almaty Astana Shopping center real estate market

13

14 According to economic forecast, new demand for quality office real

According to economic forecast, new demand for quality office real

estate in Astana will increase eightfold from 2007 till 20012

X

Comments

According to the forecast, Astana office real estate could reach 1,2 million sq.m. by 2012. In the near future demand for Astana office space is unlikely to grow fast because Astana is still an administrative and political center rather than business center of Kazakhstan.

Astana city population forecast

New demand growth forecast for office real estate in Astana

Office space per 1,000 Astana inhabitants based on GDP forecast

14

Thousand city inhabitants

Thousand sq.m.

Sq.m. / 1000 inhabitants

Sources: Agency of RK for statistics, Kazakhstan commercial real estate center, Deloitte estimate

766

730

696

663

632

602

574

1600

1109

755

532

369

255

177

15 According to economic forecast, Astana office supply will considerably

According to economic forecast, Astana office supply will considerably

exceed demand in the next 2 years

In the next 3 years massive completion of development projects and supply of office real estate is expected in Astana market. Taking into account business center projects under development and declared plans, more than 600 thousand sq.m. of office space might be constructed till 2009.

Comments

Economic forecast of new demand and planned supply of office real estate in Astana, thousand sq.m.

15

Planned supply of new BC? space

Economic forecast for new demand

1 Based on market player plans and BC projects under development as of the end of 2007.

Source: Deloitte forecast

16 Analysis of Kazakhstan commercial real estate market

Analysis of Kazakhstan commercial real estate market

Overview of Kazakhstan commercial real estate market Business center real estate market Shopping center real estate market

16

17 Analysis of major foreign city development shows that there is a

Analysis of major foreign city development shows that there is a

strong correlation between city GDP and shopping space availability

Taking into account GDP forecast, shopping space availability may reach 650 sq.m. in Almaty and 530 sq.m. in Astana per 1,000 city inhabitants in 2011.

Shopping real estate availability per 1,000 inhabitants in world cities and its correlation with GDP per capita

Almaty 2011

Shopping real estate availability per 1,000 city inhabitants, sq.m.

Astana 2011

Almaty 2006

Astana 2006

GDP per capita, thousand USD

17

Paris

London

650 sq.m. per 1,000 city inhabitants

Warsaw

Madrid

Budapest

530 sq.m. per 1,000 city inhabitants

Berlin

Prague

Bratislava

Moscow

Kiev

Source: Kazakhstan commercial real estate center, Agency of RK for statistics, EIU, OECD, Deloitte estimate

18 Analysis of Kazakhstan commercial real estate market

Analysis of Kazakhstan commercial real estate market

Overview of Kazakhstan commercial real estate market Business center real estate market Shopping center real estate market Almaty Astana

18

19 Experts forecast that Almaty retail market turnover will increase

Experts forecast that Almaty retail market turnover will increase

threefold from 2006 to 2012

Retail trade through trade enterprises* grows annually and may reach 56% by 2012

Retail trade turnover through different sale channels

Retail trade turnover in Almaty, billion USD

Almaty is the largest trade center of Kazakhstan with about 40% of total retail trade turnover of RK in 2006.

20%

24%

19

Kazakhstan The same period 20%

* Trade enterprises – include all kinds of modern trade formats – neighborhood stores, supermarkets, hypermarkets, except for open markets (bazaars) and small retail outlets (stalls, stands) of individual enterprisers

Source: Agency of RK for statistics, EIU

20 Economic forecast for 2 scenarios of Almaty shopping space demand –

Economic forecast for 2 scenarios of Almaty shopping space demand –

using official and unofficial statistics on city inhabitants

1

X

2

Economic forecast of demand for shopping space in Almaty

Almaty city inhabitants growth forecast

Scenario 1

Shopping space per 1,000 Almaty inhabitants based on GDP forecast

Scenario 2

32%

37%

20

Scenario 1. Official statistics on Almaty city inhabitants

Scenario 2. Unofficial statistics on Almaty city inhabitants

Demand for new shopping space

Thousand sq.m.

Thousand city inhabitants

Thousand sq.m.

Demand for new shopping space

Sq.m. / 1000 Almaty city inhabitants

Source: Agency of RK for statistics, Deloitte estimate

1142

2010

1914

1823

859

1736

1653

1575

642

1500

479

358

268

200

1375

1360

1345

1316

1330

1287

1301

1770

890

1247

650

865

477

600

360

416

288

272

200

206

160

21 Almaty economic forecast shows that future demand for shopping space

Almaty economic forecast shows that future demand for shopping space

in 2008-2009 may exceed supply by 1.5 times

Comments

Economic forecast for new demand and planned supply of shopping real estate in Almaty, thousand sq.m.

In the next 4 years Almaty developers plan to construct about 300 thousand sq.m. of shopping space (based on the projects announced by developers). Taking into account current plans of developers up to 2010, potential deficit of shopping space in Almaty will potentially reach about 220 thousand sq.m. It should be noted that in 2007 IKEA announced its plans for development of 2 MEGA centers in Kazakhstan – one in Almaty and another one in Astana with area of 260-380 thousand sq.m.

21

Economic forecast for new demand for Scenario 2

Economic forecast for new demand for Scenario 1

Deficit ~1.5 times

Taking into account construction of 140 sq.m. MEGA center (IKEA)

Developer plans for construction of shopping centers

Source: Company data, Deloitte estimate

22 Analysis of Kazakhstan commercial real estate market

Analysis of Kazakhstan commercial real estate market

Overview of Kazakhstan commercial real estate market Business center real estate market Shopping center real estate market Almaty Astana

22

23 According to expert estimates annual growth of Astana retail market

According to expert estimates annual growth of Astana retail market

turnover will comprise 25% in the next 6 years

Retail turnovers will be more and more through trade enterprises and share of open markets (bazaars) may decrease up to 10-15% in 2012.

Retail turnover through various sale channels

Retail turnover in Astana, billion USD

Comments: Retail turnover growth in Astana is the highest in RK. Total retail turnover in Almaty and Astana comprise about 50% of total retail turnover of the Republic of Kazakhstan.

Kazakhstan for the same period - 20%

25%

31%

23

Source: Agency of RK for statistics, Ministry of Economy and Budget Planning of RK, EIU

24 Demand for new shopping space in Astana may be higher than in Almaty

Demand for new shopping space in Astana may be higher than in Almaty

due to higher population growth in Astana

1

X

2

Economic forecast of demand for shopping space in Astana

Astana city population forecast

Scenario 1

Shopping space per 1,000 Astana inhabitants based on GDP forecast

Scenario 2

39%

50%

24

Scenario 1. Official data on Astana city inhabitants

Scenario 2. Unofficial data on Astana city inhabitants

Thousand sq.m.

Thousand inhabitants

Demand for new shopping space

Thousand sq.m.

Demand for new shopping space

Sq.m. / 1,000 inhabitants

Sources: Agency of RK for statistics, Kazakhstan commercial real estate center, Deloitte estimate

575

1239

1127

414

1025

932

847

770

298

700

215

766

730

696

155

663

632

602

574

111

894

721

597

530

427

400

323

267

244

179

184

120

130

25 Economic forecast for shopping space demand and supply shows their

Economic forecast for shopping space demand and supply shows their

balance in 2008. However, shopping space deficit may be expected as early as 2009.

Coments

Economic forecast for new shopping space demand and supply planned by developers in Astana, thousand sq.m.

Total shopping space planned for completion by developers in Astana during 2007-2009 is around 150-170 thousand sq.m. Few large shopping complexes were launched in 2007-2008. Total shopping space completed in Astana may exceed economic forecast for demand in 2008. Given growing competition among shopping complexes, in 2008 rent may get stabilized and grow insignificantly (close to inflation level and difference of KZT to USD rate). Nevertheless, given potential demand for shopping space as Astana inhibitant income grows in 2009-2011 and absence of major plans by developers for construction of major shopping complexes (except for potentially Mega by IKEA), we expect that in 2010 there might be deficit of quality shopping space and rent may grow significantly.

Economic forecast for new demand under Scenario 2

Supply planned by developers

Economic forecast for new demand under Scenario 1

25

Supply and demand stabilization period

Shopping space deficit growth period

Source: Deloitte estimate

26 Is Kazakhstan commercial real estate market competitve in terms of

Is Kazakhstan commercial real estate market competitve in terms of

investment yield with other major CIS markets?

Investment yield

Investment yield

Change YoY, bpts

Change YoY, bpts

2006

2007

Russia

Russia

Russia

Russia

Office

9.5%

8.5%

-100

Retail

11.0%

9.25%

-175

Warehouse

11.0%

9.75%

-125

Ukraine

Ukraine

Ukraine

Ukraine

Office

11.0%

9.5%

-150

Retail

13.0%

11.0%

-200

Warehouse

14.0%

12.0%

-200

26

Source: Cushman & Wakefield Stiles & Riabokobylko, JLL, DTZ, Colliers, Renaissance Capital estimates

27 What about profitability

What about profitability

By 2012 profitability of office real estate in Almaty and Astana may decrease to current profitability in Moscow

Investment yield for office real estate investments

Comments

Almaty

Moscow

Аstana

Eastern Europe

Western Europe

Current office real estate profitability in Astana is close to profitability level in Moscow 5 years ago. Office real estate profitability in Moscow in its turn is 3 years behind profitability in Eastern Europe, which has profitability very similar to profitability of Western Europe “mature” market. Analysis of worldwide profitability dynamics shows that for growing stage markets profitability is decreasing at approximately 2% a year, due to increase in new office space construction and decrease in the level of risk for investors. Having reached the level of 7% a year, profitability decrease slows down to 0.5-1% a year and reaches 4,5-5% a year (current profitability in Western European countries). We forecast decrease of office real estate investment profitability in Kazakhstan by 2% a year till 2010, with slow down to 1.5% a year after that.

27

5 years

3 years

Minimal office real estate profitability ~ 4,5-5%

Source: JLL, CBRE, MC «Accord Asset Management», Deloitte estimate

28 BRIGHT FUTURE FOR SELECTED MARKETS WITH CLEAR PROFESSIONAL PROJECTS

BRIGHT FUTURE FOR SELECTED MARKETS WITH CLEAR PROFESSIONAL PROJECTS

DEMAND SUPPLY RATES PROFITABILITY

28

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