Almaty Market View Q2 2011 Eng


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Almaty Market View Q2 2011 Eng

  1. 1. SCOT HOLLAND | CB RICHARD ELLIS Almaty Market View Residential Q2 2011 OVERVIEW Quick Stats The implications and impact of the global economic Change downturn have “cooled down” the Residential market Completed Residential from segment, as a result of which many players have left Q1 Q2 Buildings (000 sqm) the market. However, the stronger and more 11 10 10,000 financially capable developers have continued their Prices   construction activities, although at slower rates. 1,000 Absorption   The total residential space commissioned in Almaty 100 in the period January-June 2011 comprised 10 325,269 sqm, which represents a 21.5% decrease on a y-o-y basis. 1 Hot Topics 2006 2007 2008 2009 2010 Jan-Jun According to information published by the Almaty Kazakhstan 2011• Stable levels of selling prices Kazakhstan Statistics Agency, the number of and rental rates; residential property sale & purchase transactions Source: Kazakhstan Statistics Agency during January-June 2011 in Kazakhstan increased• The number of actual by 12% y-o-y. It is worth mentioning that the number residential sale-and-purchase of transactions in Almaty in Q2 2011 is the highest transactions during Q2 2011 across the country, showing approximately 30% increase compared to the previous quarter of 2011. increased compared to Q1 2011 however still remains The chronological analysis of the number of property sales & rental transactions evidences a seasonal quite limited; trend of the Almaty market activity. This being said, Housing Stock per Capita• Slight easing of the mortgage traditionally the most active periods for purchase of 18.5 lending terms, caused by residential properties are spring and autumn, 18.0 whereas summer and winter show low activity. higher competition between 17.5 The “asking prices” on the primary and secondary sqm per capita the second-tier banks and 17.0 residential markets in Q2 2011 fluctuated slightly at 16.5 increased demand on behalf the beginning of the reported period and then 16.0 of population. remained virtually unchanged during June. 15.5 15.0 Despite the increasing number of incoming requests 14.5 for sale & purchase of apartments/houses and land 2002 2003 2004 2005 2006 2007 2008 2009 2010 plots, the property sales market still remains slow. Kazakhstan Almaty The property owners still quote overestimated prices, Source: Kazakhstan Statistics Agency which affects the market in a negative manner and potential buyers still cannot afford purchasing residential units at relatively high prices, and are waiting for further price decreases. Commissioned residential volumes in Kazakhstan in the period January – June 2011 decreased by ca. 1.2% compared to the same period of 2010. According to official statistics, the largest shares of Almaty Housing Stock residential space in January-June 2011 were 25,000 commissioned in Astana (23.8% of total), Almaty (12.2% of total) and Almaty province (15.3% of 24,000 total). 23,000 1,000 sqm Given the fact that Kazakhstan has not yet achieved 22,000 a level of meeting residential space demand to the 21,000 full extent, it is planned that approximately 6 mln 20,000 sqm of residential space will be constructed in 19,000 Kazakhstan in 2011. 2006 2007 2008 2009 2010 Jan-Jun 11 For reference, 6.4 mln sqm of residential space was commissioned in 2010 with state support of the Source: Kazakhstan Statistics Agency shared interest construction sector. ©2011, Scot Holland | CB Richard Ellis
  2. 2. Despite the relative overall improvement of the market situation, the The program for Government support of the residential sector activity of real estate market players remains quite moderate. This includes 3 major support schemes: can be explained by the ongoing process of overcoming the - construction of affordable housing by local authorities using theAlmaty Market View Residential consequences of the market downturn and stagnation, as well as residential savings system, the low level of confidence in the property market and cautiousness - allocation of funds to second-tier banks for the subsequent with regard to property investments. financing of construction and mortgage lending, According to the estimates of financial analysts, the construction - construction of utility infrastructure. and real estate business are currently considered among the riskiest Currently 3 shared interest developments are being financed and fields of activities. completed in Almaty and Almaty Province through the mechanisms At the same time, we noted an increase of the supply of mortgage of the ‘Samruk Kazyna’ National Welfare Fund. products from local banks and specialized institutions, including It should be noted that in contrast with the pre-crisis period, when a ‘KMC’ and ‘Zhilstroysberbank’ during the first half of 2011. large portion of buyers was willing to participate in shared interest Increased competition between the mortgage market players construction projects, today this method of purchasing a housing resulted in somewhat eased financing terms and lowered interest unit is the least popular among potential buyers due to the facts of rates of mortgage loans. ‘Zhilstroysberbank of Kazakhstan non-bona fide activities of development companies using this moderated the terms for the participants of housing construction scheme. Currently the largest part of potential buyers are either saving system, which mainly means decrease of the interest rates. considering the use of mortgage loans or their own funds, or would In addition JSC ‘Mortgage Organization ‘Kazakhstan Mortgage proceed with the state housing program for obtaining an apartment. Company’ also changed its credit conditions for purchase of housing and interest-shared participation in the construction of The situation on the ‘premium’ lease market has appeared to have multi-family residential houses, by decreasing the interest rate under changed somewhat over the last few months as some major these loans by 1% - to 13.5% per annum. companies have started moving out of Almaty. This means that there is a little bit of uncertainty how many expatriates are living However, despite the above, the system of evaluation of borrower’s and accordingly renting an apartment in Almaty. solvency remains strict. The banks continue to check solvency and paying capacity of customers very thoroughly. Traditionally there has been a steady influx of expatriates during Although most locally operating banks plan to preserve the key August and September, anxious to find appropriate housing and get terms of mortgage loans, nearly 24% of banks expect further ease settled before school starts. At the same time this year (and of their credit policy on mortgage loans, due to the fact that they particularly in June) there has been a larger-than-usual number of observed higher demand for mortgage products during the first half expats leaving Kazakhstan to take up new assignments elsewhere. of 2011. We expect have a clearer picture in the next couple of months as to how many of these people will be replaced. The Government of Kazakhstan has committed to reform the system of technical regulations applied in the Kazakhstan construction Rental rate levels continue to hold although landlords seem to be industry and to shift to the European Standards (Eurocodes) by slightly more willing to negotiate. High end properties are in great 2015, which we consider a positive development for the entry of demand but unfortunately good ones are now proving extremely new international investors and foreign developers on the difficult to find, which indicates of a very limited supply of properties Kazakhstan market. It is planned that this transition will be gradual with an actually good quality. with respective customization of European standards in accordance Generally rental rates are holding steady but if the current demand with climatic conditions of Kazakhstan. It will allow foreign continues for high end properties, then the prices may rise investors to implement their project and apply their designs and proportionally. calculation on the territory of Kazakhstan. In conclusion, we would like to note that the average price levels on Starting from 2011 a new residential construction program is the Almaty primary and secondary residential markets have being implemented. Its main purpose is to stimulate supply, in remained practically unchanged in the course of H1 of 2011 . order to prevent a rapid increase of property prices, which may take place due to the current increase of demand and shrinking of supply on the residential market. Distribution of residential Apartment sizes related to the Average sale price, projects under construction by class number of rooms (sqm) primary market 4,000 7% 1400 3,500 1200 3,000 21% USD per sqm 41% 1000 2,500 800 2,000 600 1,500 1,000 400 500 31% 200 0 0 2005 2006 2007 2008 2009 2010 Jan-Jun Economy Business Elite Deluxe 11 1 room 2 rooms 3 rooms 4 rooms 5+ rooms Source: Scot Holland CBRE Source: Scot Holland CBRE Source: Kazakhstan Statistics AgencyQ2 2011 Page 2 ©2011, Scot Holland | CB Richard Ellis
  3. 3. Map of Almaty Residential market zones Market Zones • Al-Farabi Corridor – Currently, the most popular area for up-market projects, mostly due to the availability of large land plots forAlmaty Market View Residential development and re-development, good road connections (though over-reliance on this artery leads to heavy traffic jams and is likely to decrease its popularity) and proximity to the mountains and to the expanding CBD of Almaty; • Dostyk Corridor – Lower part – Samal micro- districts were quite popular in the 1980’s – 1990’s when they were newly developed; there are some land plots for development and re-development; most projects in this area are Elite class, though Business class projects can also be found; • Extended Centre – Mostly residential stock from the 1950’s – 1970’s; with some land plots for development and re-development, there are a few Elite and Business class developments; • Golden Square – In the second half of 20th century, centre of Almaty City; residential stock mostly built in 1950’s – 1960’s, most of which is with excellent for those years quality and still very demanded; virtually there is not land free for development, but there are a few spots that were or will be re-developed; most of the buildings completed in the past 10 years are Elite class; • Lower Town – Poor quality residential stock, mostly individual houses and some apartment buildings; it is largely unpopular due to poor air quality, inefficient road network causing traffic jams, and higher density of industrial enterprises in the area; Source: Google, Scot Holland CBRE • Micro-districts – Mostly residential stock built in 1960’s – 1980’s, and some parts with Map legend: single-family houses; the areas closer to the • Al-Farabi Corridor – red; centre and to the mountains attract Business • Dostyk Corridor – dark blue; class developments, while the remaining • Extended Centre – magenta; territory hosts mostly Economy class projects; • Golden Square – yellow; • Mountain Belt –Most of the residential stock • Lower Town – light green; is single-family houses; an attractive area due • Micro-districts – light blue; to its proximity to the mountains and lower • Mountain Belt – dark green. population density, hosts a variety of Deluxe, Elite and Business class projects.Q2 2011 Page3 ©2011, Scot Holland | CB Richard Ellis
  4. 4. SCOT HOLLAND | CB RICHARD ELLIS Almaty Market View Offices Q2 2011 OVERVIEW Quick Stats Almaty remains the commercial focal point of oil- About 70% of these offices are ‘Old Soviet’ Change rich Kazakhstan and aspires to become Central type of real estate properties which are either from Q1 Q2 Asia’s regional financial centre. not involved in the office rental market or are 11 10 The commercial real estate market of Almaty is renting only 10-15% of the premises. Hence, Rental rates   the best developed in the country, especially the this stock is not included in our market analyses. Occupancy  office segment with approximately 20% growth Due to the decreased demand for space in in total gross area forecasted for 2011, given office and administrative buildings, the vacancy the completion of planned and suspended rate largely increased in 2009 reaching a level projects. of approximately 40% both in Class A and Hot Topics The bank liquidity crisis which started in August Class B projects. 2007 affected the office market through slowing However, starting from Q4 of 2009 the• Despite the consequences of down the construction and investment rates in demand for higher-class office premises started the financial crisis and bank the real estate industry. recovering gradually, and by the date of this liquidity issues, the Office report the estimated average vacancy rate is Nevertheless, both the economic and market market remains relatively indicators offer a positive outlook for the future approximately 27% and is expected to stronger compared to the more of office real estate projects in Almaty. This decrease further in the short-to-medium term and volatile Residential sector; optimism has attracted multiple investors and reach 24-25% by the middle of 2011. developers, thus making the office market The growth of business activity of• Rental rates across all classes environment more competitive every day. manufacturing, retail and other entities in 2010 of office properties remained is a sign of improvement of the economic Taking into consideration projects completed relatively stable during Q2 of during 2010, it is our estimate that at the situation, resulting in a forecasted GDP growth 2011; present moment there are approximately of 6% in 2011. 630,000 sqm of office space in Almaty. No significant increase in the rate of• The demand for office space However, this number does not include construction of office developments was continued recovering gradually observed during the first half of 2011. numerous smaller office projects which are during the2nd Quarter of mostly graded as Class B- or lower. Below is a brief overview of lease brokerage 2011. An analysis of the prime office yield levels in the transactions completed recently with the EMEA regions (Europe, Middle East and Africa) involvement of Scot Holland | CBRE: showed that the Almaty market has one of the • LLP «BASF Central Asia» moved to a new highest indicators, which on the one hand office with a total area of ca. 500 sqm; evidences of high risk degree of investments, • «Sberbank» opened an additional office in and on the other hand – is very attractive for Almaty (ca. 500 sqm); new players and investors. • Boart Longyear Drilling Services KZ opened a new office in Almaty (over 500 sqm). Prime Office Yields GDP Growth Rate, % y-o-y (2003-2010f) 16 Almaty 12 14 10 Kyiv 12 8 6 10 % Moscow Instanbul 4 Sofia 8 2 Warsaw Budapest 6 0 London Prague 2004 2005 2006 2007 2008 2009 2010 2011f City 4 Source: Scot Holland CBRE Source: Kazakhstan Statistics Agency ©2011, Scot Holland | CB Richard Ellis
  5. 5. The 2nd Quarter of 2011 was characterized by a relative Office Monthly Rental RatesAlmaty Market View Offices stability of rental rates across all Classes of office properties. 80 The expectations for an improvement of the macroeconomic 70 situation and overall business environment encouraged local 60 USD per sqm market participants to show a higher interest in new office 50 premises. Professional office brokerage companies operating 40 30 on the Almaty market have noted an increase in the number 20 of new orders and completed transactions. 10 Currently, the base rental rates for Class A office buildings 0 2005 2006 2007 2008 2009 2010 Q2 start from USD 25, up to approximately USD 42 per sqm per 2011 month, with an estimated average of USD 32 per sqm per Class A Class B month. However, some specific Class A business centres still keep much higher rental rate levels, in some cases up to USD Source: Scot Holland CBRE 45 per sqm per month. Almaty Office Sales Prices The difference in office rental rates between Class A and (USD per sqm) Class B is approximately 30%. The base rental rates for 6,000 Class B offices start from USD 15, up to approximately USD 6,200 5,200 25 per sqm per month, with an estimated average of USD 20 5,200 4,500 per sqm per month. 4,200 Service charges are in the range USD 3-9 per sqm per 3,200 3,200 3,000 month, depending on the location and class of the business 2,000 2,000 2,000 2,000 2,200 1,500 1,500 centre, as well as the amenities and services offered. 1,200 1,500 The average selling prices of office space in business centres 2006 2007 2008 2009 2010 Q2 2011 differ from district to district, and the current Almaty average Class A Class B is approximately USD 2,000 per sqm. This being said, it should be noted that the selling prices of premium-class office Source: Scot Holland CBRE space have slightly increased during several previous Completed Business Centres Quarters (by approximately 2-3%). In addition, we have noted that companies tend to submit more inquiries for the purchase of their own office premises. Class A Having analysed the existing office stock in Almaty, it is 20% noted that approximately 30% of all office premises are Class A, while the remaining 70% are Class B or B- (see pie-chart on the right). A comparative analysis of prime office rents in EMEA region Class B (Europe, Middle East and Africa) showed that despite the fact 80% that Almaty rates are lower than in other large cities like Moscow and London, they are still above the prime rental rates in many large cities of Eastern Europe and Asia. Source: Scot Holland CBRE Most developers prefer to retain ownership of the business Prime Rents for Office Space centres after their completion, and lease the premises to 100 multiple tenants. On rare occasions, whole buildings are Moscow offered for sale to institutional investors, and some projects London are completed as built-to-suit. Currently the “Nurly Tau” 80 City USD per sqm per month complex is the only sizeable office project offered for sale “by the piece”. 60 Astana The practice of office pre-leasing has traditionally been quite Warsaw Istanbul 40 popular and successful on the Almaty market. During the pre- Almaty Prague crisis period, many newly-built business centres were more Kyiv Budapest 20 than half leased to tenants even before the actual completion SofiaQ2 2011 of their construction. 0 Source: Scot Holland CBRE Page 5 ©2011, Scot Holland | CB Richard Ellis
  6. 6. Locations of major Office developments in AlmatyAlmaty Market View Offices Source: Google, Scot Holland CBRE Map legend: Al-Farabi Corridor – red; Dostyk Corridor – dark blue; Extended Centre – magenta; Historic Centre – yellow. Market Zones • Al-Farabi Corridor – New Class A office buildings which include Nurly Tau, Esentai Park, and AFD, are located along Al Farabi Str. This zone will be the prime office property area for the following reasons: major tenants, existence of large land plots, high-rise buildings, world known design companies, professional property management companies, higher prices and rental rates, sufficient tenant/visitor parking, etc; • Dostyk Corridor – Older Class A office buildings along Dostyk Ave. and up to Gogol Str. to the North is a less desirable office space area, due to higher congestion, government restrictions on reconstruction, lack of clear land plots, limited tenant/visitor parking, lower prices and rental rates; • Extended Centre – An area with new Class B office premises, demanded by smaller companies who are willing to pay higher rental rates in order to stay closer to the centre of Almaty. Located predominately south of Abai Str. and east of Rozybakiev Str., this area is characterized by both residential and commercial use projects and availability of land plots due to demolishing of older residential and commercial buildings;Q2 2011 • Historic Centre – This office space area with older and lower-quality Class B buildings is located in the northern part of Almaty, up to Raimbek Ave. This zone is the least desirable due to high congestion, high residential use, lower quality buildings with practically no property management, limited or no tenant/visitor parking, and the lowest selling prices and rental rates. Page6 ©2011, Scot Holland | CB Richard Ellis
  7. 7. SCOT HOLLAND | CB RICHARD ELLIS Almaty Market View Retail Q2 2011 OVERVIEW Quick Stats The 2nd quarter of 2011 was characterized by Kazakhstan is the largest of the five countries Change active demand for retail premises, and a forming the Central Asian region, but at the from continuous positive trend towards the entry of same time its low population of approximately Q1 Q2 new brands and opening of new retail premises. 16.0 million people places it among the least 11 10 densely populated countries in the world. Rental rates   Starting from 1999, the increasing number of new retail developments with a total area This factor, along with the outdated and very Absorption  between 5,000 and 20,000 sqm attracted more poorly maintained infrastructure across all and more the attention of Almaty residents. country regions, makes it logistically challenging in terms of transporting goods and The reported period was marked by a significant providing services on a nationwide basis, and Hot Topics increase of the interest on behalf of international significantly increases overall business running retailers planning to enter the Kazakhstan• Increase of rental rates short- to market within the forthcoming 2 years. costs. medium-term in new As a result, up until now many international The tendency towards involving new brands and retailers and world-known brands were having conceptual and popular experienced international players would second thoughts about the feasibility of entering centres; definitely contribute to the faster ‘natural the market and investing significant amounts of• We estimate that the total retail development’ of the retail market segment, and money in retail facilities in cities across especially of larger trade formats required by Kazakhstan. stock (GLA) in Almaty has non-food international brands. reached ca. 484,000 sqm at Since late 2010 the retail market of Kazakhstan the end of Q2 2011; We expect that other international retail saw some professional international retailers operators will enter local market, however this becoming more active with implementing their• The expected addition of retail process would require sustained negotiations. development programs in the country. The space to the Almaty total stock Overall, the retail market in Kazakhstan consists plans for expansion cover mainly well located in 2011 should be ca. of individual and specialized stores, shopping shopping centres with a strong mix of both 41,700 sqm of GLA; centres, bazaars, and wholesale markets. anchor tenants and internationally known brands. When negotiating with landlords, Due to its historical and economic particularities,• Some shopping centres under many well-established retailers manage to get the fact that it is an immature market with very favourable lease conditions. construction and planned for low population density, and the dependence of commissioning earlier have the economy on global oil & gas prices, the The situation on the retail market is starting to postponed their launch; change in a positive direction, due to the fact retail system and retail quality levels in that several large internationally known chains Kazakhstan vary widely across the cities and• Stable demand for street retail and brands have started looking for possibilities regions of the country. facilities with intense to enter the market, either independently or The active development and construction of through local partners. pedestrian flows, good shopping centres and shopping & entertainment location and accessibility. During Q2 2011 new retail outlets were centres in Kazakhstan during the past 5-6 years opened by such brands as GAP, Sportmaster, was concentrated mostly in Almaty and Astana. Ессо, Peacocks and Oasis, which were not The relatively low level of development of the previously represented on the Kazakhstan Kazakhstan retail market and the noticeable market. It is also expected that the stores of such absence of large international retail chains are newly entering international brands, as La caused by several reasons, the most prominent Senza and TopShop will be opened by the among which are: very low population density, year-end. Furthermore, Saks Incorporated geographical position and complicated logistics officially announced of its plans to open a caused by poor and outdated infrastructure. As licensed store in Almaty in 2012. a result, we can observe a lack of good quality International retailers which have the retail space. Kazakhstan market ”on their radar screens” are primarily seeking opportunities in Almaty, due to its relatively larger retail volumes. It should be noted that Russian retailers express the highest interest in researching the local market. ©2011, Scot Holland | CB Richard Ellis
  8. 8. In recent years, more than 28 shopping & entertainment centres According to our estimates, as of the end of Q2 of 2011 (with a TGA of more than 5,000 sqm each), were constructed or the total retail stock in Almaty (taking into account only reconstructed. However, for various reasons, Almaty market still centres with GLA above 5,000 sqm) reachedAlmaty Market View Retail experiences a deficit of conceptual project with proper location. approximately 484,000 sqm, and the expected annual The table below shows existing Retail stock in Almaty, as well as addition of GLA in 2011- will comprise approximately expected/planned additions in 2011: 41,700 sqm. The current GLA index per 1,000 persons in Almaty in Retail Market Indicators comparison to other Large CEE and CIS cities is shown Total existing stock (GLA, sqm) 484,000 below (conceptual centres only). Delivery in Q2 of 2011 (GLA, sqm) - Aggregate expected annual addition in Due to the fact that the commissioning dates of a number of 41,700 shopping centres were re-scheduled to a later date, the 2011 (GLA, sqm) Vacancy from 5% demand for high quality retail space still remains relatively high in conceptual shopping centres with professional Source: Scot Holland CBRE management. Many existing shopping centres and retail facilities are of poor In addition, the expected entry of new international brands quality and lack an efficient concept, professional property and retailers should stimulate the more active market management and appropriate tenant mix. As of today, ‘Mega development and absorb newly-added retail space. Alma-Ata’, ‘Sputnik’, ‘Aport’, ‘Prime Plaza’ could be classified as conceptual and professionally managed shopping & entertainment The demand for retail premises in stand-alone buildings facilities in Almaty. within the retail zones of Almaty remained high during Q2 2011. Most retailers seek to occupy retail space in the so- More than 17 projects are currently under construction or at called «Golden Square», which however is short of proper planning stage (expected to be completed in 2011 or later), of retail premises with large windows, high ceilings, loading which: areas, easy access ways and sufficient parking. In most • 3 projects are planned for commissioning in 2011, cases, available premises in the retail zones of Almaty do • 5 projects are planned for completion in 2012. not meet the requirements of international and local Some shopping centres under construction and planned for retailers. The demand for such premises is still quite high, commissioning in 2011 have postponed their launch to a later date. which is a reason for relatively high rental rates. Distribution of modern retail space by administrative Last but not least, we would like to note some additional district of Almaty City factors, which will also have a significant, although Bostandyk 26% indirect, influence on the longer-term supply/demand Auezov 26% balance in the Retail property market segment: Zhetisu 20% • Overall economic development of the country; Alatau 12% • Subsequent growth of the average income level of the Medeu 10% population; Almaly 6% • The appearance of new international brands and large-scale retailers; Source Scot Holland CBRE • Expected population growth; A map with a more detailed explanation of the city administrative • Winter Asian Games (2011); districts is given on the next page. The map also shows the locations • Participation in the newly-formed Customs Union with of existing shopping & entertainment facilities in Almaty. Russia and Belarus would have a positive effect on the rate of development of the local retail market segment; • Pending infrastructure improvements in Kazakhstan’s major regional cities, etc. Distribution of Modern Retail Space, by Almaty Districts Total Conceptual Shopping Centre Provision Rates of Large CEE and CIS Cities 6% Prague 10% Warsaw 26% Budapest Sofia 12% Astana Zagreb Moscow Kyiv 20% Almaty 26% 0 100 200 300 400 500 600 700 800Q2 2011 sqm per 1,000 people Bostandyk Auezov Zhetysu Alatau Medeu Almaly Source: Scot Holland CBRE Source: Scot Holland CBRE Page 8 ©2011, Scot Holland | CB Richard Ellis
  9. 9. Almaty Market View Retail Locations of shopping & entertainment centres in Almaty Map Legend: • Yellow place marks – existing shopping centres; • Red place marks – shopping centres under construction and planned; • Blue polygon – Alatau • Red – Almaly; • Orange – Auezov; • Yellow – Bostandyk; • Green – Medeu; • Purple – Turksib. • Light Blue – Zhetisu. Source: Google, Scot Holland CBRE Administrative Districts • Alatau - a new administrative district of Almaty, which was formerly the western outskirts of the city; its population is still to be assessed to obtain reliable figures; it represents a mix of low quality individual households, industrial facilities etc – in blue on the map above; • Almaly – comprises the central part of Almaty; population 188,100; mostly residential properties, both prestigious and less so, condominiums and houses; both fine and basic retail facilities; also some office space and light industrial facilities – in red on the map above; • Auezov – comprises the western part of Almaty; population 370,200; mostly residential, not very prestigious properties, multi-family at south-eastern part of the district, individual houses in the other parts; basic retail; no contemporary office space – in orange on the map above; • Bostandyk – comprises the southern part of Almaty; population 307,400; mostly business class residential multi-family properties plus a few prestigious residential developments; expanding retail facilities; business centres at the eastern end of the district – in yellow on the map above; • Medeu – comprises the south-eastern part of Almaty; population 164,300; the most prestigious residential part with condominiums along Dostyk Ave. and individual houses in outlying parts; both fine and basic retail facilities; the business core of Almaty – in green on the map above; • Turksib – comprises the outlying north-eastern part of Almaty; population 195,100; not prestigious individual houses; basic retail; no contemporary office space and some industrial facilities – in purple on the map above; • Zhetisu – comprises the northern part of Almaty; population 179,300; a mix of industrial facilities, trade centres and less prestigious residential properties – condominiums at the southern end and individual houses at the eastern and western parts – in light blue on the map above.Q2 2011 Page9 ©2011, Scot Holland | CB Richard Ellis
  10. 10. SCOT HOLLAND | CB RICHARD ELLIS Almaty Market View Warehouses Q2 2011 OVERVIEW Quick Stats In the period 1991-1994 there were The commercial warehousing property Change practically no warehouse developments in segment demonstrates relatively low activity. from Q1 Q2 Almaty. This market segment started According to the information available, only 11 10 developing only with the arrival of large one large modern warehousing terminal with Rental rates   international companies to the Kazakhstan a total area of 30,000 sqm is currently under Supply  market, nevertheless constructed facilities were construction. not A or even B class. The high level of transportation-related traffic According to our estimates, the current Almaty leading to the quick deterioration of the road warehouse space amounts to approximately surface, together with the threatening Hot Topics 800,000 sqm, including old Soviet-type increase of the level of pollution in the air,• No significant changes of warehouses, which represent approximately provided an impetus to the local city warehouse rental rates were 70% of the total existing stock. Soviet-type administration to develop a new policy of observed during the second warehouses are usually rented by smaller reducing the transportation burden and quarter of 2011; (predominantly local) companies, which are improving the environment. either not interested in the quality level of the Several plans have been devised to move all• Persistently Low demand levels facility and services it offers, or simply cannot warehousing and industrial premises out of in the logistics/warehousing afford more expensive premises of better the city, in conjunction with the construction segment; quality. of the new ‘Large Almaty Ring Road’• Slightly higher occupancy rates Currently, there is practically no supply of (BAKAD). of Almaty warehousing land plots with a ready infrastructure for the Today, many old-type logistics terminals are construction of an industrial park. This market facilities; in the process of renovation, the quality of the is still at a very rudimentary stage of infrastructure (motor-ways in particular) is• Marginal increase of the development. being improved and the traffic capacity - supply volume of warehousing New commercial developments reside along extended. Though this is not a quick process, space. the Almaty – Astana road. Lack of railways in the sector shows a relatively good future the west of Almaty (Bishkek road) has created outlook. a problem for construction of warehouses in The construction of new generation this area. Future investment in new projects warehouses should partially relieve the will stimulate the warehouse sector Almaty road system of its current traffic development and become a key factor for congestions, optimize storage conditions, and most practical placement of storage solve a number of logistic problems in the complexes. retail sector. Some companies prefer to build their own The annual rental rates for warehouse space warehouses, which are subsequently taken off in Almaty vary quite significantly, starting the market, and are therefore not taken into from USD 30 and up to USD 110 per sqm, consideration in this report. which means they are in the range USD 2.5- Market practices show that if companies have 9 per sqm per month. specific requirements for warehouse storage, At the same time no significant changes in they construct their own facilities around 20- warehouse rental rates were observed during 50 km from the city and one storage-yard in Q2 2011. Moreover we do not expect rental the city, which is used as a distribution centre. rates to increase in the short term. Other companies rent small storage places, mainly of Class B or lower, attracted by the lower price. ©2011, Scot Holland | CB Richard Ellis
  11. 11. The average rental rate levels of warehousing space in Large tenants of warehousing premises, represented bothAlmaty Market View Warehouses Almaty (by class) are given in the following table: by local and foreign companies, still prefer renting large spaces in Class A or B+ warehouses for 5 and more years Rental rate, USD per month Class and virtually provide no new orders for additional space (including VAT) due to their reduced development and expansion plans. Class A 7-9 Class B 5-7 At the same time, due to the difficult economic situation Lower class 2.5-5 during the past several years, the market did not see the entry of large new companies to the Kazakhstan market. Source: Scot Holland CBRE As a rule, orders for the search of warehousing premises The average selling price of warehouse space in Almaty is are submitted by local entrepreneurs, i.e. small- and approximately USD 600 per sqm. medium-sized businesses. Given the current average occupancy rates in existing However the number of such orders is limited, which is warehousing terminals (approximately 80%), as well as partially due to low demand, and also due to the fact that taking into consideration the recovery of the economy and local companies predominantly search for the warehouses business activity in Kazakhstan (in particular related to the using their own resources. development of the Customs Union) and implementation of industrial and innovation development programs, we can Existing warehousing stock, conclude that the existing warehousing stock of Almaty may by size prove to be insufficient in the medium- to long-term. The slowdown of the global markets and national economy of 18% 25% Kazakhstan, together with the decrease of business activity, have led to the increase of vacancy rates in existing warehouses, sometimes reaching 30%. However at the current moment average vacancy rates are in the range 23% 20-25%. 34% Net Usable Warehouse Stock (sqm) 800,000 Vacancy rate (%) 20 % 15.000-20.000 20.000-40.000 40.000-60.000 > 60.000 Source: Scot Holland CBRE Source: Scot Holland CBRE Despite the slight increase of occupancy rates in existing In conclusion, we would like to note that the average size of facilities, it is our estimate that the demand for new warehousing space sought by such local companies is in warehousing premises is currently not high. the range 100 – 500 sqm.Q2 2011 Page 11 ©2011, Scot Holland | CB Richard Ellis
  12. 12. Almaty Market View Warehouses Map of locations of old Soviet-type warehouses and industrial facilities For more information regarding the Market View, please contact: Scot Holland | CBRE Strategic Consulting Eugene Dolbilin Vice President Scot Holland | CB Richard Ellis 105, Dostyk Ave., 3rd floor Almaty, 050051 Source: Google, Scot Holland CBRE Kazakhstan T: +7 (727) 258 1760 Map Legend: F: +7 (727) 258 1768 The green areas on the map indicate old Soviet-type industrial zones, mostly outdated and not properly managed and maintained. Map of locations of modern warehouses and industrial facilities, existing and under construction Peter Goranov Senior Manager Strategic Consulting and Valuations Scot Holland | CB Richard Ellis 105, Dostyk Ave., 3rd floor Almaty, 050051 Kazakhstan T: +7 (727) 258 1760 F: +7 (727) 258 1768 Source: Google, Scot Holland CBRE Map legend: Yellow placemarks represent completed Class A and B warehouse facilities; Red placemarks represent new projects under construction. It is obvious that the warehouse facilities concentration depends on its class and age in two distinctive zones highlighted in Yellow (completed Class A and B), and Red (under-construction Class A). DISCLAIMER 2011 Scot Holland | CB Richard Ellis The information herein has been obtained from sources believed reliable. While we do not doubt its accuracy, we have notQ2 2011 verified it and make no guarantee, warranty or representation about it. It is your responsibility to independently confirm its accuracy and completeness. Any projections, opinions, assumptions or estimates used are for example only and do not represent the current or future performance of the market. This information is designed exclusively for use by Scot Holland | CB Richard Ellis clients, and cannot be reproduced without prior written permission of Scot Holland | CB Richard Ellis. Page 12 ©2011, Scot Holland | CB Richard Ellis