BMI View: A return to GDP growth signals that the economy has crawled out of recession, and with
greater public acceptance in the newly established Groysman government, we believe there is potential for
increased investment into the economy over the next few years. However, continued armed conflict along
the eastern border, low GDP per capita and high unemployment serve as warnings to potential investors in
the commercial real estate sector.
The commercial real estate market will remain stagnant as a result of ongoing economic, political and
security issues. Ukraine is still suffering from tensions with pro-Russian separatists, which has left a
business void in eastern parts of the country and reduced investor confidence in the commercial real estate
market. Furthermore, the economy is reliant on bailout funds from the IMF in order to stimulate the
economy and get spending to rise. The next bailout is due in Q316, but there is expected to be a delay, with
the IMF board considering the disbursement of funds in August 2016.
Nevertheless, the newly established government of Prime Minister Volodymyr Groysmon has done well to
gain confidence from the public. Meanwhile, the hryvnia has performed well against the US dollar in the
first few months of 2016. The National Bank of Ukraine (NBU) noted that there is also renewed confidence
in the banking sector, with an improving lending rate, more deposits and greater margins of foreign
currency entering the country. Overall, this indicates that the commercial real estate sector looks set to
bounce back from a turbulent few years, but greater confidence is needed in the general market before
investment levels return to pre-crisis levels, and we believe rental rates will stagnate across the board for the
rest of 2016 and into 2017.
The capital, Kiev, is the economic centre of the country, and has the largest population. In Kharkov, the
second largest city, in the north east, the property market is dominated by industrial space. Dnipropetrovsk,
Ukraine's third largest city, to the south east of Kiev, is dominated by industrial and office properties and
has been the centre for much of Ukraine's military development.