New merket research from DTZ Ukraine analitics. Trends the same - prices slowly grows up, vacancy - fall fown.

1. Property Times
Ukraine Q3 2011
Looking forward
The first three quarters of 2011 were marked by Ukraine’s preparation
21 October 2011 x
for the EURO 2012 Football Championship and generally positive
economic dynamics in the country. The major risks to Ukraine’s
further sustainable development include external shocks, political
Contents risks accentuated by legal proceedings against former Prime Minister
Executive summary 1
Yulia Tymoshenko, increases in public debt, unemployment and
Economic overview 2 inflation, as well as lack of efficient structural and legal reforms.
Offices 5
x The office property market in Kyiv remains structurally undersupplied,
Retail 11
Industrial 13 while any material delivery of pipeline stock will not commence in the
Investment 16 city prior to mid-late 2012. Further rental uplift was apparent during
Definitions 19 the first three quarters of 2011, as the supply of particularly prime
Contacts 20 CBD office space has become constrained, combined with
strengthening occupier demand.
Though new retail supply during 2011 has remained generally low
Authors x
both in Kyiv and the regional cities of Ukraine, the years 2012 and
2013 are likely to see significant augmentation in new delivery in the
Marta Kostiuk
Associate Director sector, reflecting the strengthening confidence of retailers, developers
Head of Research and Consulting and investors.
+38 (0)44 220 30 60
marta.kostiuk@dtz.kiev.ua
x In January-September 2011, the warehouse stock in the Greater Kyiv
area increased by only 29,515 sq m, representing an annual decrease
Andriy Tymoshenko in new supply by 55% and 72% compared to the same periods in
Senior Research Analyst 2010 and 2009. Despite gradually strengthening demand and
+38 (0)44 220 30 60 decreasing vacancy combined with lack of new supply, rents in the
andriy.tymoshenko@dtz.kiev.ua sector remain stable.
Dmytro Sokolskyy x DTZ witnessed stabilisation of property investor sentiment in Ukraine
Research Analyst during the third quarter of 2011, reflected by 0.5% decrease in still
+38 (0)44 220 30 60 high prime yields compared to other European countries (Fig. 1), and
dmytro.sokolskyy@dtz.kiev.ua driven by rental growth prospects and generally positive economic
dynamics in the country.
Figure 1
Contacts
Prime office yields in Kyiv versus other CEE capitals
Magali Marton %
Head of CEMEA Research 18
+33 1 49 64 49 54 16
14
magali.marton@dtz.com
12
10
Hans Vrensen 8
Global Head of Research 6
+44 (0)20 3296 2159 4
hans.vrensen@dtz.com 2
0
Budapest Warsaw Prague
Bucharest Moscow Kyiv
Source: DTZ Research Note: All figures are end-of-period
www.dtz.com 1

2. Economic overview
The first three quarters of 2011 were marked by Ukraine’s Figure 2
preparation for the EURO 2012 Football Championship
Macroeconomic indicators in Ukraine
and generally positive economic dynamics in the country.
%
40
Nevertheless, the international ratings of Ukraine
worsened owing to the country’s failure to comply with the 30
requirements of the International Monetary Fund (IMF),
20
as well as political risks accentuated by legal proceedings
against former Prime Minister Yulia Tymoshenko. 10
The present risks for Ukraine’s further sustainable 0
economic development include external shocks, political -10
risks, augmentation of public debt, potential increases in
unemployment and inflation, as well as lack of efficient -20
structural reforms. -30
GDP growth Unemployment
Economic growth Inflation Industrial production
According to preliminary data published by the State
Statistics Committee of Ukraine, real GDP increased by Source: Oxford Economics
3.8% year-on-year in the second quarter of 2011
compared to the economic growth of 5.3% in the first
Inflation
quarter of the year and 4.2% in 2010.
In September 2011 consumer price inflation reached
As stipulated in the 2011 State Budget of Ukraine, an 4.2% compared to December 2010.
increase in real GDP is forecast for 2011 at 4.5%. As of
September 2011, Oxford Economics project economic The 2011 State Budget of Ukraine was based on the
growth in Ukraine at 4.8% year-on-year in 2011. projection that consumer price inflation will reach 8.9% at
the end of 2011. Major Ukrainian and international
According to the draft 2012 State Budget of Ukraine, an experts forecast year-end inflation for 2011 in the range
increase in real GDP is forecast at 5%, while Oxford of 8.4% to 13% compared to the actual 9.1% in 2010 and
Economics project the 5.9% economic growth for 2012. 12.3% in 2009.
Industrial production and agriculture According to Oxford Economics, inflation in Ukraine will
amount to 8.8% in 2012 and 6.7% in 2013, and is
Despite the encouraging start to the year with 10.5%
projected to be around 5.5% every year during the period
growth in industrial production in January-February, in
from 2014 to 2020.
March this slowed due to the decline in export-oriented
metallurgical and machine-building industries.
Unemployment and salaries
In August 2011, industrial production increased by 9.6% In accordance with the ILO methodology (that defines
year-on-year, while in January-August 2011 by 8.9%. unemployment based on the population 15-70 years of
During this period the highest growth rates were age), unemployment rate in Ukraine amounted to 8.2%
registered in machine-building, chemical, metallurgical in January-June 2011 compared to 8.1% in 2010,
and light industries. 8.8% in 2009 and 6.4% in 2008. Oxford Economics
projects unemployment in Ukraine to decrease to 7.8% by
As of September 2011, Oxford Economics projects the end of 2011.
industrial production in Ukraine to grow by 7.1% year-on-
year in 2011. According to the State Statistics Committee of Ukraine,
the average nominal monthly salary in Ukraine in
In January-August 2011, agricultural output increased by January-August 2011 was UAH 2,550 (equivalent to
10.5% year-on-year compared to the 4.1% annual US$320) increasing by 18.1% year-on-year. At the same
decrease during the same period in 2010. In January- time, real salaries grew by 7.7% year-on-year, though
August 2011, total volume of agricultural goods sold by decreasing in August 2011 by 1.6% month-on-month.
producers increased by 3% year-on-year.
www.dtz.com 2

3. Economic overview
Retail sales Figure 3
Retail sales in Ukraine grew by 15.2% year-on-year in Real monthly salary, retail sales and consumer
January-September 2011 compared to the 5.1% annual spending in Ukraine
increase in 2010 and the 16.2% annual decrease in 2009.
%
40
National currency
30
In accordance with the official US Dollar exchange rate
determined by the National Bank of Ukraine, the 20
Ukrainian Hryvnia depreciated insignificantly,
10
from 7.959 UAH/US$ in early January 2011 to
7.9727 UAH/US$ in late September 2011. 0
-10
The Ukrainian currency also weakened against the Euro
from 10.573 UAH/EUR in January 2011 -20
to 11.216 UAH/EUR in March 2011, but strengthened by
late September 2011 to 10.8548 UAH/EUR. -30
Real monthly salary growth Retail sales growth
Consumer spending growth*
According to the decree issued by the National Bank of
Ukraine, from 23 September 2011 the new rules of
Source: State Statistics Committee of Ukraine, Oxford Economics,
foreign currency exchange by individuals in Ukraine were *For January-August 2011, consumer spending growth provided as a year-end projection of
introduced to accommodate the requirement to present Oxford Economics
identity documents prior to each currency exchange
transaction, while the limitation to exchange maximum Figure 4
UAH 150,000 per day (instead of UAH 80,000) was set. Business sentiment in Ukraine
200
Business sentiment
According to the survey of business sentiment in Ukraine 150
conducted by the National Bank since 2006, business
sentiment index remained generally stable in 2010/H1 100
2011, though worsened compared to 2006/08 (Fig. 4).
50
General business sentiment in relation to forthcoming
12 months deteriorated in the second quarter of 2011 0
compared to the first quarter, mainly due to uncertainty on Q1Q2 Q3 Q4 Q1Q2 Q3 Q4 Q1Q2 Q3 Q4 Q1Q2 Q3 Q4 Q1Q2
-50
external markets and currency risks. Positive
2007 2008 2009 2010 2011
expectations of enterprises somewhat worsened in -100
relation to all compounds of business sentiment index,
Businesss sentiment on staff increase
particularly capital investment and staff increases.
General business sentiment index
Staff increase in the coming 12 months was however Source: National Bank of Ukraine
planned by all enterprises operating in Ukraine, except for
utility, transportation and communication companies. In early 2011, Ukraine was engaged in negotiations with
Russia on prices for energy resources, as well as its
International support and cooperation membership in the Tax Union with Russia, Belarus and
Since May 2008 Ukraine has been in negotiations with Kazakhstan.
the EU for a free trade agreement as part of a future
Association Agreement. The 18th round of negotiations However, due to Ukraine’s obligations to the EU, its
between the parties started in September 2011. membership in the WTO and the restrictions related to
entering the free trade zone with the EU, Ukraine
The free trade agreement between the EU and Ukraine is withdrew from Tax Union membership negotiations.
expected to be signed in 2011 and implemented in 2013.
However, the position of Ukraine in negotiations with the Ukraine failed to receive another tranche from the IMF
EU has been threatened by legal proceedings against scheduled for March 2011, due to non-compliance with
former Prime Minister Yulia Tymoshenko and adjudication the IMF requirements (reforms in the pension system,
announced in October 2011. increase in gas tariffs for the population). The next
tranche is likely to be granted to Ukraine in early 2012.
www.dtz.com 3

4. Economic overview
Foreign trade and foreign direct investment Figure 5
According to the State Statistics Committee of Ukraine, Net FDI and FDI growth in Ukraine
exports and imports of goods in Ukraine increased during
billion $ %, y-o-y
the period January-July 2011 by 40% and 46.7% year-on-
year respectively. The exports to imports ratio during the 12 390
period was around 0.85. 10 325
8 260
The National Bank of Ukraine reported that net inflow of
foreign direct investment (FDI) into Ukraine amounted to 6 195
around $4,520 million in January-August 2011, almost 4 130
49% higher the figure registered during the same period 2 65
in 2010.
0 0
The most attractive sectors for foreign investment into -2 -65
Ukraine are the financial sector, industrial production, real
estate market, retail sector, construction, transportation
and communication.
Net FDI Net FDI growth
EURO 2012 Source: National Bank of Ukraine
In late 2009, the UEFA Executive Committee confirmed
Donetsk, Lviv and Kharkiv as host cities for group Much attention has been also paid to the improvement
matches of UEFA EURO 2012, while Kyiv was appointed and repair of the motorways of international importance in
the venue of the final match of the tournament. Ukraine.
Despite existing obstacles such as the after-effects of the Another major benefit for Ukraine hosting EURO 2012 is
financial crisis, high borrowing costs and imperfect the development of tourism in the country. This issue is
legislation, Ukraine has been undertaking a wide important, taking into account the distinct tourist-driven
spectrum of preparation works for the event. economic base of many major cities of Ukraine combined
with the generally poorly developed tourist infrastructure
The hospitality sector, as well as the transportation and in the country as reflected in ratings. Thus, during the
road system, are the spheres most in need of significant 2011 World Economic Forum Ukraine was ranked 38th
improvement prior to UEFA EURO 2012. among 42 European countries in terms of tourist industry
competitiveness.
In July 2010 Ukraine adopted a law encouraging hotel
development. In accordance with the law, starting from Outlook
1 January 2011, 3*, 4* and 5* hotels that are opened prior In the first three quarters of 2011, the Ukraine economy
to 1 September 2012 are exempt from income tax for demonstrated generally positive dynamics. The areas of
ten years. concern include public debt augmentation, high
unemployment and inflation combined with high risks of
The National Stadium ‘Olimpiyskiy’ in Kyiv opened on external shocks and political instability in Ukraine.
8 October 2011, while grand opening of the Lviv Stadium
is planned on 29 October 2011. The two other stadiums According to leading Ukrainian and international experts,
to host group matches of UEFA EURO 2012, ‘Donbas Ukraine will witness economic growth at around 5% in
Arena’ in Donetsk and ‘Metallist’ in Kharkiv, have been 2011, depending on the level of domestic consumption
operational since August 2009 and September 2010 and investments, as well as external market conditions.
respectively.
According to the 2010-2011 Global Competitiveness
Terminal ‘D’ and an extension to terminal ‘B’ at Boryspil Report, competitive strengths of the country include a
International Airport servicing Kyiv are scheduled for well-educated population, flexible and efficient labour
completion in 2011, while the passenger terminal ‘F’ has markets and a large market size, which set a strong base
been in operation since September 2010. As of for the country’s future growth.
September 2011, a new passenger terminal at Lviv
International Airport was reported 72% ready, and it is Institutional reforms and the improvement of inefficient
planned to open by the end of 2011. New passenger markets for goods and services are recognised as being
terminals at the airports in Kharkiv and Donetsk are to be the priority tasks for Ukraine to secure long-term
delivered in phases during 2011/12. economic development in the country.
www.dtz.com 4

5. Office
Supply Figure 6
There was approximately 1,173,755 sq m (GLA) of
speculatively delivered office stock in Kyiv as of the end of Major indicators of office property market in Kyiv
the third quarter of 2011 (Fig. 6), excluding government sq m % / $ per sq m
buildings and offices constructed by owner-occupiers. 1 400 000 80
1 200 000 70
Alike the first half of the year, the third quarter of 2011 did 60
1 000 000
not bring any significant changes to the office property 50
market in Kyiv, which remains structurally undersupplied 800 000
40
compared to the markets in other CEE capitals in terms of 600 000
30
total office stock, as well as the variety of formats and 400 000 20
quality of properties available for occupation (Fig. 7). 200 000 10
0 0
The 10,300 sq m (GLA) business centre located at
70 Saksahanskoho Street / 16b Pankivska Street was the
only office property delivered in Kyiv during the period
July-September 2011.
Total stock New supply Take-up
Vacancy rate Prime rent
New office supply in Kyiv amounted to approximately
Source: DTZ Research
55,060 sq m in the first three quarters of 2011, Note: All figures are year-end
representing an increase in delivery of over 43% compared
to the same period in 2010.
Figure 7
DTZ expects that new office supply in Kyiv will amount to Total office stock in Kyiv versus other CEE capitals
around 16,500-52,390 sq m in the fourth quarter of 2011,
sq m
subject to delivery of the 36,000 sq m (GLA) Premium
12 000 000
Centre.
10 000 000
Since late 2008 development of many large-scale office 8 000 000
schemes planned in Kyiv before the onset of the financial
6 000 000
crisis was suspended due to lack of finance, poor project
conception, economic decline and the resultant 4 000 000
evaporation of demand. 2 000 000
2010 was marked by the recommencement of works on 0
several sizeable office schemes, which are scheduled for
completion in 2012 and 2013.
As of early 2011 around 372,000 sq m (GLA) of new office Budapest Warsaw Prague
space was scheduled for delivery in Kyiv during 2012. Bucharest Moscow Kyiv
From past experience of continuous delays however, DTZ Source: DTZ Research
projects that new office supply is unlikely to exceed Note: All figures are year-end
250,000 sq m (GLA) during the year to come.
Table 1
Key office property market indicators in Kyiv
2008 2009 2010 Q1 2011 Q2 2011 Q3 2011 Directional outlook
Stock (sq m) 916,510 1,040,370 1,118,695 1,139,955 1,163,455 1,173,755 S
New supply (sq m) 175,110 123,860 78,325 21,260 23,500 10,300 S
Take-up (sq m) 160,000 106,000 165,000 43,500 41,800 32,850 §¨
Vacancy rate (%) 4.2 17.6 12.7 13.6 11.9 11.2 §¨
Prime rents ($/sq m/ month) 70-85 25-35 30-38 38-40 38-42 38-44 S
Source: DTZ Research
Notes: All figures are period-end and due to non-transparency of the market are subject to continued revision. Take-up and vacancy figures do not include sub-lease opportunities.
www.dtz.com 5

6. Office
Table 2
Major office projects completed in Kyiv in Q1-Q3 2011
Period Project Location* Size Developer Major occupiers** Occupancy**
(sq m) (%)
Q2, 2011 BC at 7a Klovskyi Uzviz CBD 19,000 Zhytlobud WND*** 100
Q1, 2011 Rialto BC NC-WB 15,000 Istil Group Swedbank 40
Q3, 2011 BC at 70 Saksahanskoho Str./ CBD 10,300 Elektrotekh LLC Uniqa 42
16b Pankivska Str.
Q2, 2011 Moskovskyi BC NC-WB 4,500 TRC Petrivka ltd ABBYY 29
Q1, 2011 BC at 2 Novovokzalna Str. NC-WB 4,385 Roza - 0
Q1, 2011 Vasylevs BC CBD 1,875 Novohrad - 0
Source: DTZ Research WND – would not disclose
* CBD – Central Business District; NC-WB-non-central area on the western bank of Dnipro River, NC-EB-non-central area on the eastern bank of Dnipro River
**As of late September 2011
*** Individual office units in the scheme were sold to numerous occupiers.
Table 3
Major office projects scheduled for completion in Kyiv in Q4 2011-2012
Project Location* Size (sq m) Developer Developer’s nationality
101 Tower CBD 57,720 KAN Development UA
Mariya BC CBD 47,300 KAN Development UA
Gulliver BC (Parus-2 BC) CBD 43,850 Mandarin Plaza /Tri O UA
Toronto-Kyiv BC CBD 37,670 Toronto-Kyiv UA
Premium Centre BC NC-WB 36,000 Premium Centre UA / TUR
Forum Victoria Park BC NC-WB 22,500 Forum Group UA
Topaz BC NC-WB 22,000 Artem UA
Sigma BC NC-WB 20,800 Midland Development UA
Ukraine
Vynohradar BC NC-WB 14,800 local developer UA
BC at Vasylkivska Str. / Hlushkova Str. NC-WB 14,400 Rele Invest UA
City Gate BC (phase 1) NC-EB 13,000 City Capital Group UA
Mega City BC (phase 1) NC-EB 10,000 UKOGROUP UA
BC at 26/14 Spaska Str. Podil 9,350 Perspektyva Resydencia UA
BC at 21-23 Verbova Str. NC-WB 8,690 Solidarnist UA
BC at 7a Shamryla Str. NC-WB 6,700 Georgiy UA
Maxim BC CBD 6,350 Aladdin / Rele Invest UA
BC at 28 Smirnova-Lastochkina Podil 5,500 local developer UA
Patriarch Hall BC CBD 5,000 local developer UA
BC at 14 Koltsova Bould. NC-WB 4,470 NBK UA
BC at 12 Chornovola Ave. NC-WB 4,000 local developer UA
BC at 23 Bahhoutivska Str. NC-WB 3,600 Extend Holding / RealEst UA
BC on 40/85 Saksahanskoho Str. CBD 2,500 local developer UA
Source: DTZ Research
* CBD – Central Business District; C – central outside CBD; NC-WB – non-central area on the western bank of Dnipro River, NC-EB – non-central area on the eastern bank of Dnipro River
www.dtz.com 6

7. Office
Demand At the same time, the office availability ratio in the Kyiv
Though Ukraine is still in the recovery phase following the central business district and Podil further decreased in the
global financial crisis of 2008/09, the market third quarter of 2011, amounting to 7.2% and 5%
fundamentals in the office property sector in Kyiv have respectively (Fig. 8).
continued to improve during the first three quarters of 2011.
An escalation in occupier demand combined with nominal
Around 32,850 sq m of office space was transacted in the new supply led towards a position of shortfall in quality
Kyiv market in the third quarter of 2011, representing an office supply in Kyiv, with efficient centrally-located office
annual decrease of around 32%. However, during the units of area over 1,000 sq m being particularly scarce.
first three quarters of 2011 office take-up in the Ukrainian
capital amounted to around 118,150 sq m, increasing by In view of insignificant new office supply combined with
over 3% year-on-year. strengthening demand, the vacancy rate is likely to further
decrease by the end of 2011.
Though office demand in Kyiv in the first three quarters of
2011 became less sector-oriented compared to 2010, it Figure 8
was strongly driven by multinationals operating in ICT (36% Vacancy on the office market in Kyiv by locations
of total take-up registered during the period),
manufacturing (26%, dominated by FMCG and %
40
pharmaceutical production accounting for 4% and 6.5%
35
respectively), financial sector (10%) and agriculture (5%).
30
Office lease transactions of over 3,000 sq m accounted 25
for 15% of total number of deals registered in the office 20
property market in Kyiv in the first three quarters of 2011. 15
10
In view of a gradually improving economic situation, but 5
still favourable office market conditions in Kyiv (i.e. low 0
rents, some incentive packages offered by landlords),
many companies moved to a better location/space during
the first three quarters of 2011, or expanded / renegotiated CBD Podil
current occupational terms with the intention of locking into Pechersk (outside CBD) NC-WB
a longer lease in anticipation of a market uplift. NC-EB
Source: DTZ Research
Note: CBD – Central Business District; NC-WB – non-central area on the western bank of
A lack of quality space with the possibility of expansion in Dnipro River, NC-EB – non-central area on the eastern bank of Dnipro River
the medium term remains a major barrier for office
occupiers to move, particularly in central locations. Figure 9
Due to the availability of opportunities to occupy space in Prime office rents in Kyiv versus other CEE capitals
existing projects and the fading of occupier confidence in € /sq m /month
developers’ ability to meet delivery deadlines, pre-lets on
100
the Kyiv office property market were almost absent in the 90
first three quarters of 2011. 80
70
Looking ahead, DTZ believes that in the fourth quarter of 60
2011 the dynamics of occupier demand in Kyiv will 50
remain generally stable with take-up outstripping new 40
30
supply. At the same time, many leases signed or 20
renewed in 2009/10 on terms favourable to tenants, will 10
expire in two-three years, which may lead to a significant -
upsurge of take-up.
Vacancy
Prague Budapest Warsaw
Primary market-wide vacancy on the Kyiv office market
Bucharest Moscow Kyiv
reached 11.2% in late September 2011, decreasing from
Source: DTZ Research Note: All figures are year-end
11.9% in late June 2011 and 12.7% at the end of 2010. *Office rents are typically quoted in the US dollars in Ukraine and Russia, converted based on
exchange rate defined by the National Bank of each country at the end of the period analysed
www.dtz.com 7

8. Office
Rents Outlook
Between the third quarter of 2008 and late 2009, office DTZ is of the opinion that the office property market in Kyiv
rents in Kyiv fell by over 50% due to the devaluation of the remains structurally undersupplied, while any material
national currency and weak occupier demand caused by delivery of pipeline stock will not commence in the city prior
economic recession in Ukraine and worldwide. to mid-late 2012.
In the second half of 2009 the negative dynamics halted, New office supply in Kyiv may potentially amount to
and office rents stabilised at around $25-35 per sq m per 250,000 sq m (GLA) in 2012. This figure remains highly
month for prime space, down to $20-25 per sq m per sensitive to delivery of several sizeable properties,
month for central and non-central B-class space, and $12- commissioning of which may be delayed further.
17 per sq m per month for class C.
In the fourth quarter of 2011 the dynamics of occupier
Evidence of some rental uplift was apparent during the first demand in Kyiv will remain generally stable with take-up
three quarters of 2011, as the supply of particularly prime outstripping new supply. As stated in the National Bank
CBD space has become constrained, combined with survey of business sentiment in Ukraine in the second
gradually strengthening occupier demand. quarter of 2011, staff increase was planned in the following
12 months by all enterprises in the country, except for
Prime office rents in Kyiv amounted to $38-44 per sq m per utility, transportation and communication companies.
month as of late September 2011, while B-class and
C-class space commanded monthly rents of $23-35 per Dynamics of prime office rents in Kyiv in the medium term
sq m and $8-25 per sq m respectively. will be highly sensitive to pricing strategy in the sizeable
business centres ‘Gulliver’, ‘101 Tower’ and ‘Toronto-Kyiv’
DTZ projects that there will be a further strengthening of scheduled for completion in 2012. An overpricing of these
asking rents by the end of 2011, and further reductions in schemes may lead to continued upwards pressure on rents,
other concessions for prime office space. However, as while a more competitive pricing strategy is likely to result
most occupiers remain highly sensitive to the incurrence of in a softening of prime office rents.
capital expenditures, they will continue to require offices to
be delivered with advanced base build levels. In view of high level of competition anticipated in 2012/13,
developers can enhance letting prospects in their office
properties by either delivering space in more advanced
condition, or being open to alternative solutions addressing
the main barrier to relocation, i.e. capital expenditure.
Table 4
Selected major office transactions in Kyiv in Q1-Q3 2011
Period Tenant Office area Occupier Building Location**
occupied (sq m) sector*
Q1, 2011 ntr l European Media Enterprises 10,350 A&M Shchekavytskyi BC Podil
Ltd. / 1+1 TV Channel
Q2, 2011 TNK-BP 5,923 Manufacturing Eleven BC NC-WB
Q1, 2011 EPAM Systems 5,300 ICT Vremena Goda BC NC-WB
Q2, 2011 Swedbank 4,520 FIRE Rialto BC NC-WB
Q1, 2011 Kernel 3,577 Agriculture 92-94 Dmytrivska Str. NC-WB
Q1, 2011 VOLIA 3,460 ICT FIM Centre NC-EB
Q3, 2011 Microsoft 2,908 Manufacturing Eurasia BC CBD
Q3, 2011 Metinvest 2,590 Manufacturing Rubin BC CBD
Q1, 2011 Canadian Embassy 2,264 Embassy 13a Kostelna Str. CBD
Q2, 2011 Ericsson 2,184 Manufacturing Forum BC NC-WB
Q1, 2011 Unilever 2,130 FMCG Mikom Palace NC-WB
Q1, 2011 Syngenta 1,900 Agriculture 120/4 Kozatska Str. NC-WB
Q3, 2011 IBM 1,800 Manufacturing Horizon Park BC NC-WB
Source: DTZ Research
*FMCG – fast moving consumer goods; FIRE – Finance, Insurance, Real Estate; ICT – Information and Communication Technologies; A&M – Advertising and Media
** CBD – Central Business District, C – central outside the CBD, NC-WB – non-central area on the western bank of Dnipro River, NC-EB – non-central area on the eastern bank of Dnipro River
www.dtz.com 8

9. www.dtz.com 9

10. Retail
Supply Figure 10
Total modern retail stock in Kyiv was estimated at around Modern retail stock in Kyiv
1,001,400 sq m at the end of September 2011, or sq m sq m
359 sq m of modern retail stock per 1,000 inhabitants 250 000 1 500 000
(based on official demographics statistics). This figure
200 000 1 200 000
accounts for all major retail developments in the city of or
over 5,000 sq m gross lettable area (including multi-tenant 150 000 900 000
retail centres and ‘big box’ single-occupied developments),
and reflects a significant undersupply of retail space in the 100 000 600 000
Ukrainian capital, particularly when considering the official
versus unofficial population imbalance and grey incomes. 50 000 300 000
0 0
Around 75,080 sq m (GLA) of new retail supply was
delivered in Kyiv in the first three quarters of 2011,
comprised of the second phase of ‘Dream Town’ in Obolon
anchored by an aqua park, the hypermarket Novus on
Brovarskyi Avenue, as well as four neighbourhood retail Annual supply Cumulative supply
centres: ‘inSilver’ on Sribnokilska Street, ‘Kvadrat’ on
Onore de Balzaka Street, ‘Livoberezhnyi’ on Maryny Source: DTZ Research
* Projection Note: All figures are year-end
Raskovoyi Street and ‘Victorio’ on Lvivska Square.
The 25,000 sq m ‘Mega-City’ (phase 1) is the only sizeable In 2010, investors and developers both local and
retail development scheduled for completion in the fourth international undertook numerous market analyses
quarter of 2011 in Kyiv. Quality of the scheme however is concerning the demand, competitiveness and financial
generally sub-standard, with individual retail units offered efficiency of their projects. Such activity continued during
for sale. the first three quarters of 2011 and indicated positive retail
property market prospects in Ukraine.
The opening of the city central retail and leisure centre
‘Gulliver’ (earlier known also as ‘Esplanada’ and Though new retail supply during 2011 has been rather low
‘Continental’) is likely to be postponed until 2012. both in Kyiv and the regional cities of Ukraine, the years
2012 and 2013 are likely to see significant augmentation in
Major retail schemes delivered in regional cities of Ukraine new delivery in the sector.
during the first three quarters of 2011 included the second
phase of the retail and leisure centre ‘City Mall’ in In 2012 new retail supply in the Ukrainian capital may
Zaporizhzhya, the retail and leisure centre ‘Ukraine’ in amount to around 220,000 sq m (GLA), an increase on
Mariupol and the retail centre ‘Galaktyka’ in Kremenchug, current retail stock of almost 22%. Schemes planned for
as well the DIY-stores ‘Epicentre’ in Kirovohrad, Chernihiv, delivery in 2012 in Kyiv include the first phase of ‘Ocean
Mukachevo (Zakarpattya Oblast) and Kamyanets-Podilskyi Plaza’ developed by UDP and KAN Development, ‘Gulliver’
(Khmelnytska Oblast). In addition, the wholesale centres in by Mandarin Plaza and Tri O, the third phase of ‘Domosfera’
the format ‘METRO Baza’ were opened by Metro by DeVision, the neighbourhood retail centre ‘RayON’ by
Cash&Carry in Ternopil and Lutsk. Astra Property (Arricano Group), ‘Marmalade’ by VKF
‘Mava’, as well as the first phase of ‘Kiev E95 Outlet
In October 2011, the retail centre ‘Passage’ was opened in Centre’, the first fashion outlet development in Ukraine.
the core city centre of Dnipropetrovsk.
In regional cities 2012 may see delivery of ‘City Centre’ in
The fourth quarter of 2011 may see delivery of ‘Ave Plaza’ Odessa, as well as extensions of ‘Magellan’ and ‘French
and ‘Magellan’ (phase 1) in Kharkiv, the second phase of Boulevard’ in Kharkiv, ‘Intermall’ in Simferopol, ‘Auchan
‘Donetsk-City’ in Donetsk and the first phase of ‘Fabrika’ in City Park’ in Donetsk and ‘Fabrika’ in Kherson.
Kherson.
Table 5
Key retail property market indicators in Kyiv
2007 2008 2009 2010 Q1-Q3 2011 Directional outlook
Stock (sq m) 534,185 647,885 854,220 926,320 1,001,400 S
New supply (sq m) 89,200 113,700 206,335 72,100 75,080 S
Prime shopping centre rents 180-220 200-250 120-150 160-200 160-200
§¨
($/sq m/ month)
Prime high street rents ($/sq m/ month) 300-350 350-380 100-160 110-220 110-230 §¨
Source: DTZ Research
Note: All figures are period-end and quoted for retail units of area of 100-300 sq m
www.dtz.com 10

11. Retail
Demand The lack of critical mass of quality retail space throughout
DTZ witnessed further improvement in the general Ukraine prevents a number of major international retailers
demand dynamics of the retail market across Ukraine in from entering the market. DTZ believes that the opening
the first half of 2011. Despite slightly deteriorating of stores by such brands as H&M, C&A, Debenhams and
retailers’ perceptions of the Ukraine’s short-term retail Peek&Cloppenburg remains unlikely before late 2012 –
potential, triggered by general dynamics on global early 2013.
markets and political uncertainty in Ukraine, major
retailers continued seeking opportunities to expand in the ‘Big box’ retail operators continued to demonstrate high
country during the third quarter of the year. activity in the first three quarters of 2011, driven by their
development strategies combined with the widely
Being the capital city of Ukraine, Kyiv remains the most recognised, largely unexploited potential of the Ukrainian
attractive destination for all retailers operating and market and the availability of development land at
considering entry into the country. Due to increased comparatively affordable prices.
demand, the availability of premises in high street
locations and successful retail centres in Kyiv has been Thus, Metro Cash&Carry, Epicentre and Nova Liniya
very scarce. further expanded across Ukraine. A number of food
hypermarket operators including Fozzy Group, Auchan,
Occupancy levels in the most popular, well located quality Novus and Amstor, as well as electronics and home
multi-tenant retail centres in Kyiv and other major regional appliance chain Comfy actively considered occupation in
cities returned to pre-crisis levels in the first half of 2011 retail developments not only in major cities of the country
and remained low during the third quarter of the year. with populations over 750,000 inhabitants, but also in
smaller cities.
Several new market entries were registered in the first
half of 2011. GAP opened its flagship store on the central Quality retail operators in Ukraine remain very selective in
Khreshachatyk Street in Kyiv. New Yorker and Oysho terms of retail space quality and occupational terms.
stores were opened in both Sky Mall in Kyiv and Rivera
Shopping City in Odessa.
Table 6
Major multi-tenant retail schemes scheduled for delivery in Ukraine in Q4 2011-2013
Period Project City Size (sq m) Developer Developer’s
nationality
Q3, 2012 Ocean Plaza (phase 1) Kyiv 72,200 KAN Development / UDP UA
2011- 2012 Fabrika (in phases) Kherson 65,500 BUD HOUSE GROUP UA
2011- 2012 Magellan (in phases) Kharkiv 62,500 Kray Property UA
Q1, 2013 Retail and leisure centre Odessa 55,000 Amstor UA
2013 Europort Retail Park Odessa 45,000 Europort ISL
2012 Marmalade Kyiv 38,700 VKF ‘Mava’ UA
Q4, 2012 Domosfera (phase 3) Kyiv 38,000 DeVision UA
Q4, 2012 Intermall (phase 2) Simferopol 37,030 Astra Property / Arricano Group UA
2012 French Boulevard Kharkiv 35,000 Aksioma UA
Q1, 2013 Forum Lviv Lviv 33,000 Multi Development NTL
Q1, 2012 City Centre Odessa 33,000 Venford / GMG Development UA
2012 Gulliver (Continental) Kyiv 32,000 Mandarin Plaza /Tri O UA
2012 Auchan City Park (phase 2) Donetsk 26,000 Immochan Ukraine UA / FRA
Q4, 2011 Donetsk City (phase 2) Donetsk 24,920 Domus UA
Q4, 2012 RayON (M26) Kyiv 23,000 Astra Property / Arricano Group UA
Q4, 2012 Kiev E95 Outlet Centre Kyiv 15, 250 EVO Land Development UA
Q4, 2011 Passage Dnipropetrovsk 12,950 GUM / Akselrod Estate UA
Q4, 2011 Ave Plaza Kharkiv 7,100 UNIQA Real Estate AUT
Source: DTZ Research
www.dtz.com 11

12. Retail
Rents Figure 11
With increasing retailer activity in the country and their Dynamics of retail rents in Kyiv
improved perception of market potential, the first quarter
of 2010 witnessed an increase in prime base rents in $ /sq m /month
quality multi-tenant retail developments in Kyiv of around 400
10-25% compared to 2009. 350
300
By the end of 2010 retail rents in prime Kyiv retail 250
schemes grew by a further 10%. During the first three 200
quarters of 2011 average monthly rents in Kyiv retail 150
100
schemes remained generally stable at around $70-90 per
50
sq m for premises of 100-300 sq m, reaching highs of
0
$160-200 per sq m per month in the most sought-after
2006 2007 2008 2009 2010 Q1-Q3
properties. 2011
Similar dynamics were also observed in the few western- Prime high street rent Prime shopping centre rent
standard retail developments already well-established in
other major cities of Ukraine. Source: DTZ Research
Note: All figures are period-end and quoted for retail units of areas in the range of 100-300 sq m
Since the second quarter of 2010, strengthened demand Outlook
for high street premises in Kyiv led to an upward
The retail segment proved to be the most resilient to the
correction of base rental rates for this category of real
effects of economic crisis in 2008/9 compared to other
estate. The first half of 2011 witnessed further upward
property sectors in Ukraine. DTZ believes that the retail
pressure on prime high street rents in Kyiv.
property market will show further growth in the medium
term after global and domestic economic conditions
Despite the positive dynamics of an increasing number of
further improve.
new retailers entering the market and the improvement in
activity of companies already operating in Ukraine,
DTZ projects that in the fourth quarter of 2011 the general
combined with nominal new supply of quality retail stock,
dynamics of the retail property market in Ukraine will
DTZ does not anticipate any major upswing in base rental
generally follow the pattern established in 2010 and
rates in the fourth quarter of 2011. This is due to the lack
during the first three quarters of 2011.
of critical mass of new market entries, as well as
uncertain further economic dynamics both globally
Despite the remaining signs of the economic crisis and
and in Ukraine.
comparatively low incomes of the population, the potential
of the retail property market in Ukraine undoubtedly
Nevertheless, DTZ anticipates that in the short term, due
remains high because of its immaturity in terms of quality
to the gradually strengthening demand of retail operators
and formats of existing retail schemes, large country size,
and the present lack of quality retail space, base prime
high population density, perceived high brand awareness
rents in well-conceived multi-tenant retail schemes and
and propensity to spend.
high street locations in Kyiv and other major cities of
Ukraine will be subject to further upward pressure. At the
The opportunities within the retail property sector, over
same time, the longer term sustainability of current retail
other sectors, are of priority interest for most developers
rents will depend on the actual commissioning and quality
and investors active in Ukraine, particularly within cities of
of new sizeable pipeline retail schemes scheduled for
total population over 750,000 inhabitants.
completion in 2012/13, particularly in Kyiv.
Works on several sizeable retail projects in Kyiv and the
Quality remains a crucial factor for the success of all
regional cities of Ukraine were recently recommenced,
existing and new retail developments in Ukraine. Today
which, if delivered to current schedules, will lead to a
the majority of developers in Ukraine accept that a well-
considerable increase in retail stock in the country by the
considered approach to selecting an appropriate location,
end of 2013.
efficient concept and thoughtful phasing of retail schemes
with due regard to the number and mix of quality retailers
As a result, the Ukrainian market will offer more
and their planned expansion into the country, will secure
opportunities for retail chain expansion, but retail rents
long-term financial viability and investment exit.
will be subject to downward pressure, particularly in some
poorly conceived first generation retail schemes in light of
to the strengthening competition within the sector.
www.dtz.com 12

13. Industrial & logistics
Supply Figure 12
In late September 2011, total stock of modern Key industrial market indicators in the Greater Kyiv area
warehousing space in the Greater Kyiv area amounted to
approximately 1,205,365 sq m. This figure includes sq m USD/sq m/ month; %
around 103,000 sq m of modern specialised 1 400 000 35
chilled&frozen and chemical warehouse facilities. 1 200 000 30
1 000 000 25
New supply on the logistics property market in the 800 000 20
Greater Kyiv area amounted to around 29,515 sq m in
600 000 15
the first three quarters of 2011, being comprised of three
properties, all delivered in the first quarter of the year 400 000 10
(Table 8). 200 000 5
0 0
New supply delivered on the logistics property market in
the Greater Kyiv in the first three quarters of 2011
represented a 55% and 72% annual decrease compared to
the same periods in 2010 and 2009 respectively. Total supply Annual speculative supply
Prime warehousing rents Vacancy
The majority of existing modern warehouse facilities in Source: DTZ Research Note: All figures are period-end
the Greater Kyiv area are located along the Kyiv-
Zhytomyr Highway (M-06) and in the location defined as
Figure 13
Kyiv-Moscow Highway (M-01) and Brovary-Boryspil Ring
Road, accounting for over 28% and 26% of total stock Existing logistics stock split by major locations in
respectively. the Greater Kyiv area, as of late September 2011
In accordance with DTZ’s projections at the end of the M-06 (Kyiv-Zhytomyr)
third quarter of 2011, new logistics supply during the 3%
period from October to December 2011 may amount to 4% 8% M-01 (Kyiv-Moscow),
between 84,250 sq m and 128,000 sq m (Table 9). Brovary-Boryspil RR
6%
28% M-03 (Kyiv-Kharkiv)
The largest logistics scheme scheduled for delivery in the
fourth quarter of 2011 is the first phase of a 41,400 sq m M-07 (Kyiv-Warsaw)
‘Amtel Logistics Complex’ developed by ‘International 8%
Logistics Company’, affiliated with the Russian ‘Amtel Kyiv City
Properties’.
17% 26% M-05 (Kyiv-Odessa)
New logistics supply in the Greater Kyiv area may
potentially exceed 200,000 sq m (GLA) in 2012. M-04 (Kyiv-Dnipropetrovsk)
Many warehouse developers in the Greater Kyiv area Other
expect to begin construction of new projects or finish
objects under construction as soon as relatively large Source: DTZ Research
tenants for their space are secured, or within built-to-suit
contracts.
Table 7
Key industrial market indicators for the Greater Kyiv area
2006 2007 2008 2009 2010 Q1 2011 Q2 2011 Q3 2011 Directional
outlook
Total supply (sq m)* 184,530 384,310 821,780 1,016,600 1,175,850 1,205,365 1,205,365 1,205,365 S
New supply (sq m)* 71,130 199,780 437,470 194,820 159,250 29,515 0 0 S
Vacancy, % 1-2 1-2 14.5 20.6 17.9 14.7 13.3 11.6 S
Prime rents (USD per sq m) 11 10.5 7.5-10 5.5-7 5.5-6.5 5.5-6.5 5.5-6.5 5.5-6.5 §¨
Source: DTZ Research
* Including ancillary office and mezzanine space Note: All figures are period-end
www.dtz.com 13

14. Industrial & logistics
Demand
In the third quarter of 2011, take-up of modern warehouse Rents
space in the Greater Kyiv area amounted to 42,664 sq m, Headline rents for prime warehouse space in the Greater
which was by around 68% higher compared to the second Kyiv area varied from $5.5 to $6.5 per sq m per month
quarter of 2011, and exceeded take-up in the third quarter depending on the quality of space, location and general
of 2010 by around 44%. lease terms. Prime rents in the Greater Kyiv area are
generally comparable to those registered in the suburbs of
In January-September 2011, take-up in the logistics Bucharest (Romania), Prague (Czech Republic) and
property sector in the Greater Kyiv area increased by Krakow (Poland).
80% year-on-year, totalling to around 174,968 sq m.
Please note that DTZ revised take-up registered in the DTZ projects that, other things being equal, by the end of
first quarter of 2011 from 92,474 sq m reported earlier to 2011 and in early 2012 rents for prime warehouse space
106,974 sq m. will remain generally unchanged.
In the first three quarters of 2011, occupier demand for Figure 14
modern logistics space in the Greater Kyiv area was
Take-up of logistics space in the Greater Kyiv area
dominated by logistics and transportation companies
(around 34% of annual take-up), companies operating in sq m
350 000
the FMCG and food retail sectors (around 17%), as well as
pharmaceutical companies (around 14%). 300 000
During the first three quarters of 2011 transactions 250 000
registered on the logistics property market in the Greater 200 000
Kyiv area were dominated by the deals of the area in the
range of 1,001-3,000 sq m. 150 000
100 000
Following earlier DTZ’s projections, take-up in the logistics
property sector in the Greater Kyiv area during the period 50 000
January-September 2011 exceeded annual take-up in
2009 and 2010 by 11.9% and 20% respectively. 0
2007
2008
2009
2010
Q1 07
Q2 07
Q3 07
Q4 07
Q1 08
Q2 08
Q3 08
Q4 08
Q1 09
Q2 09
Q3 09
Q4 09
Q1 10
Q2 10
Q3 10
Q4 10
Q1 11
Q2 11
Q3 11
This increased take-up reflects the intentions of many
existing tenants to improve their space occupied and/or
Source: DTZ Research
secure opportunities to expand. However, it does not yet
reflect strong market recovery in the Greater Kyiv area.
Figure 15
Vacancy Take-up of speculative logistics space by type of
By late September 2011 primary vacancy in the logistics occupiers in the Greater Kyiv area
property sector amounted to 11.6%, decreasing by 1.7%
quarter-on-quarter mainly due to absence of new supply 100%
and comparatively significant take-up registered in the third
quarter of the year. 80%
60%
At the same time, at the end of the third quarter of 2011
primary vacancy in the Greater Kyiv area was by 10.9% 40%
lower compared to the figure registered in September 2010.
20%
DTZ projects that by the end of 2011 primary vacancy in
the logistics property sector in the Greater Kyiv area may 0%
increase due to significant new supply scheduled for 2005 2006 2007 2008 2009 2010 Q1-Q3
delivery in the last quarter of 2011. 2011
Logistics & transportation Retail - Fashion
Retail - Cosmetics, pharma White goods
ICT FMCG/Food retail
Automotive Other
Source: DTZ Research
www.dtz.com 14

15. Industrial & logistics
Outlook An increase in commercial activity and strengthening of
Given the current economic conditions and delivery occupier demand, projected in the medium term, may lead
pipeline, vacancy in the logistics property sector in the to a fall in vacancy and an upward correction in logistics
Greater Kyiv area will increase by the end of 2011 and rents in Greater Kyiv. DTZ is of the opinion, however, that
will remain in double digits in 2012, with prime rents stable. the price elasticity of warehouse supply is higher compared
to other sectors of commercial property market in Ukraine,
and new logistics delivery could recommence relatively
quickly.
Table 8
Major logistics schemes delivered in the Greater Kyiv area in Q1-Q3 2011
Scheme Location Total area Developer Nationality Major tenants* Occupancy*
(sq m) (%)
Warehouse complex M-01, E95 15,755 Local developer UA WND 100
Impeco M-07, E373 10,000 Local developer UA WND 100
Santa Frost (phase 2) M-05 3,760 Santa Bremor BLR /GER Eko-market, 100
Ukraine Roshen
Source: DTZ Research WND – would not disclose
*As at the end of September 2011
Table 9
Major logistics schemes planned for delivery in the Greater Kyiv area in Q4 2011
Scheme Location Total area (sq m) Developer Nationality
Amtel Logistics Complex (phase 1) M-06, E40 41,400 International Logistics Company RU
BF Sklad (phase 3) M-03, E40 30,500 BF Group UA
Arktika Logistics Centre Kyiv RR 18,800 Skandinavia UA
V-Log M-01, E95 15,900 AIC BEL
Office and Logistics Centre M-07, E373 12,400 Local developer UA
Source: DTZ Research
Table 10
Major logistics transactions in the Greater Kyiv area in Q1-Q3 2011
Period Scheme Occupier Occupier sector Total area Location Type of
(sq m) deal
Q1, 2011 Plazma Logistics WND Pharma 21,600 M-03, E40 purchase
Q1, 2011 East Gate Logistics WND FMCG/ Food retail 17,300 M-03, E40 new lease
Q1, 2011 Komodor DHL Freight L&T 16,335 M-06, E40 new lease
Q1, 2011 BF Sklad Zammler Sklad L&T 14,500 M-03, E40 new lease
Q3, 2011 MLP Chayka Omega Automotive 7,850 M-06, E40 new lease
Autopostavka
Q1, 2011 Komodor Tarkett Manufacturing 7,690 M-06, E40 new lease
Q1, 2011 BF Sklad F.Formula L&T 6,620 M-03, E40 new lease
Q1, 2011 Office-Logistics Centre WND Retail & distribution 4,100 M-07, E373 pre-lease
Q1, 2011 Terminal Brovary DMT-Group White goods 3,160 Brovary-Boryspil RR new lease
Q1, 2011 Office-Logistics Centre Logistic Ukraine L&T 3,160 M-07, E373 pre-lease
Q3, 2011 Warehouse Complex Brevarex Ukraine Pharma 3,055 Kyiv RR new lease
Source: DTZ Research WND – would not disclose
*FMCG – fast moving consumer goods, L&T – logistics and transportation
www.dtz.com 15

16. Investment
DTZ witnessed a stabilisation of property investor x The sale of a 5,500 sq m warehouse complex with 3 ha
sentiment in Ukraine during the first three quarters of 2011, land plot in Lutsk by the Ukrainian subsidiary of Nestlé
reflected by a slight decrease in yields still considered to to the Ukrainian group of companies Avanta; a deal
be at high levels compared to other European countries. closed in the first quarter of 2011.
The decrease has been driven by rental growth prospects
x The sale of the operational retail centre Kvadrat at
and generally positive economic dynamics in the country.
Lukyanivka by the AIM-listed Ukrainian company XXI
Century to Monkar Limited for $14 million with a buy-
Nevertheless, the commercial property investment market
back option. The deal was reported in the third quarter
in Ukraine remains a buyer’s market as opposed to the
of 2011.
seller’s market that prevailed before the 2008/9 economic
downturn. x The sale of the hypermarket in Kyiv, previously
operated as a DIY-store ‘Nova Liniya’, to the Ukrainian
Transactions food retailer Fozzy Group for owner-occupation. This
During the first three quarters of 2011, several investment deal, reported in the third quarter of 2011, was
deals were concluded on the commercial property market estimated at around $10 million.
in Ukraine, with a focus on Kyiv. Out of them, four x The sale of a 7.5 ha land plot near Chabany Village in
investment deals totalled over $20 million in terms of Greater Kyiv to the Russian company Amtel Properties
estimated value, all registered in the capital city. for potential commercial development. The deal was
reported in the second quarter of 2011.
The majority of completed investment deals in Ukraine in x The sale of the 12,000 sq m operating retail centre
the first three quarters of 2011 were open-market ‘Amstor’ in Mykolayiv to the Ukrainian food retailer
transactions, in contrast to 2010, which was dominated by Tavria-V.
off-market investment deals.
In the third quarter of 2011, SECURE Management, a real
Quality retail and office properties remained the most estate investment company focused on property
sought-after investment assets in Ukraine. Investors’ investments across South-East Europe, acquired through
appetites towards hotels somewhat eased compared to convertible bonds the shares in Aisi Realty Public Limited,
2009/10, as opportunities to enter and realise projects in which is the property investment company with
time for the hosting of the UEFA EURO 2012 become development projects and related investments in Ukraine.
unrealistic.
The severe shortage of quality properties with stable cash
The acquisition of a city centre mixed-use development flows remains the major constraint for the increase in the
project in central Kyiv by a private European developer number of secondary investment deals in the Ukrainian
was the largest deal in the Ukraine commercial property real estate sector.
market since 2008.
Figure 16
Other property investment transactions taking place in
Ukraine in January-September 2011 include: Volume of investment transactions in Ukraine*
million $
x The sale of the 12,120 sq m new-built ‘Shchekavytskyi’
900
business centre in Kyiv to the Ukrainian television
channel ‘1+1’ for owner-occupation in the first quarter of 800
2011, a deal estimated at around $25 million. 700
600
x The sale of an office building in the central area of Kyiv
to a Ukrainian commercial bank for owner-occupation. 500
This deal, reported in the first quarter of 2011, was 400
estimated at around $25 million. 300
x The sale of a 21,600 sq m operating logistics complex 200
in Velyka Oleksandrivka Village in Greater Kyiv to a 100
pharmaceutical company for owner-occupation in the 0
first quarter of 2011. 2003 2004 2005 2006 2007 2008 2009 2010 Q1-Q3
2011
x The sale of warehouse complex in Obukhiv to May
Office Retail Industrial Hotel
Company for owner-occupation. The deal estimated at
around $5 million was reported in the second quarter Source: DTZ Research Note: All figures are period-end
of 2011. *The figure includes secondary investment transactions (the sale of land plots was excluded).
www.dtz.com 16

17. Investment
In January-September 2011, commercial banks in Ukraine Figure 17
continued to provide property development financing to
Prime yields in Kyiv
selected borrowers with strong attention paid to reputation
%
and track record of the developer, its credit history, as well 25
as quality of a project to be financed and the collateral.
20
The most active property investors in Ukraine in the first
three quarters of 2011, as in 2010, were local companies 15
and private individuals with a strong cash position.
10
European investors demonstrated modest interest in
acquiring Ukrainian property assets. 5
Similar to 2009 and 2010, the most active vendors in the 0
property sector during the first nine months of 2011 in
Ukraine were local companies and private individuals.
Yields Office Retail Industrial
Due to the global credit squeeze, prime yields in the core Source: DTZ Research Note: All figures are period-end
markets of Central Europe as well as in Prague, *No true open-market secondary investment transactions, yield perceived by market players
Budapest and Warsaw typically increased by around 3% ** Projections
in late 2008-2009 from the lows of late 2007. Meanwhile
prime yields in Kyiv increased by around 7% despite a far Figure 18
more profound downwards rental correction in the Prime office rents and yields in Kyiv
Ukrainian capital.
$ / sq m / month %
In 2009, commonly perceived net initial yields in Kyiv were 50 20
varying between 15-20% which, due to suppressed market
40 16
rent levels, reflected relatively low capital values,
discouraging vendors from selling, and banks from
30 12
applying pressure on borrowers to liquidate assets.
20 8
During the last five quarters from Q2 2010 to Q2 2011,
prime net initial yields in Kyiv were perceived to remain 10 4
generally unchanged, i.e. at 13.5% for prime office space,
14.5% for high-quality retail properties and 15% for prime 0 0
schemes in the logistics property sector. In July- 2009 2010 2011* 2012* 2013* 2014* 2015*
September 2011, DTZ witnessed a further decrease in
Prime office rent Prime office yield
prime net initial yields in Kyiv by 0.5% across all
commercial property sectors, driven by improved investor Source: DTZ Research Note: All figures are year-end
sentiment on the country’s potential. *Projections
It should be appreciated that yields remain highly In DTZ’s opinion, still relatively low capital values in
sensitive to asset value due to constraints over the Ukraine that have decreased since late 2008, combined
availability of debt finance, however there remains strong with strong rental growth prospects, present attractive
interest in good ‘flagship’ buildings mainly in central Kyiv, opportunities for investors in view of the recognised high
irrespective of size. Such assets tend to command potential of the commercial property market that remains
interest on a value determined on sq m basis rather than structurally undersupplied across all sectors in the country.
on a yield basis.
DTZ expects that prime net initial yields in Kyiv will remain
Outlook stable, at 13% for office space, 13.5% for high-quality retail
DTZ believes that pre-crisis yields in Ukraine were properties and 14.5% for prime schemes in the logistics
irrationally low in view of the clearly unsustainably high property sector by the end of 2011.
rents. However, post-crisis increased yields coupled with a
downward correction of rents, particularly in the office In the longer term, as the Ukrainian property market
property sector, are now offering fair value to investors. matures, there is further scope for yield compression,
coming off comparatively high existing levels.
www.dtz.com 17

18. www.dtz.com 18