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Devaluation of BYR creates problems for developers

 International sales operators are puzzled by the Belarusian Ministry's of trade actions

Colliers International’s commercial real estate market experts admit that these days the commercial real estate market, in which rates depend on euro, has stopped dead and it’s waiting for the further course of events. Developers hesitate to raise the space lease rates, and lessors suffer a loss for commercial real estate handling in these new conditions.

At the moment big developers of all commercial real estate segments haven’t raised a lease rate. A lease rate is still paid in rubles according to the National Bank’s exchange rates. And a 30 % currency purchase fee has hardly reduced lessors’ earnings expressed in currency.

“In the first instance suffer those developers who had used foreign currency loans for their construction activities. They have to purchase foreign currency to pay off the bank loans thus having losses. But it’s not time to speak about problems of paying loans, because as a rule, banks give loans to those projects that provide debt settlement with 1,5 index. Although in some periods there are exceptions. Thus at the initial stage of constructions credit paying possibilities may be lower. In this case developers meet insufficient funds to pay a credit”, – Colliers International’s experts say.

The company examines a range of scenarios development for the year 2015:

– We are to expect the increase of the National Bank’s exchange rates and the further prices increase without the current restrictions. The current level of euro rates will decrease a little (up to 10%) if at all, we also may anticipate the market development slowdown and vacant places increase. But major market damage in this case is hardly to be expected.

– We may expect the current situation maintenance, when goods and services salesmen are restricted to prices increase, and there’s a difference between the true currency value and the National Bank’s exchange rates. In this situation retailers will suffer losses and developers especially those who have foreign currency loans will try to increase prices in rubles, which is difficult to do. As a result there’s a possibility of troubled foreign currency loans increase, objects and projects foreclosure, the commercial real estate market stagnation.

– We may also anticipate other unpredictable situations that will make one or another party (either a lessee or a lesser) suffer losses. It’s hard to forecast anything. Owners and developers are to wait for the situation clarification.

“Thus with a 30% fee abolition these months the financial losses won’t lead to severe consequences for the market. But the decision made in December, 19 increased considerably the country risks for Belarusian projects and destroyed the country’s reputation in Western investors’ sight”, – the report says.

According to Colliers International, if we consider the recent Ministry’s of Trade actions, we can say that many international sales operators are puzzled. In particular, the decision making about worldwide known brands’ entry to the country is to be postponed for some time, and Belarusians have no choice but to continue buying branded articles abroad.

In general, Colliers International considers rates decrease possible. “In this case we should distinguish nominal and real rates which are connected with parallel exchange rates formation. Thus, nominal rates may maintain, but real ones will decrease depending on the actual value of currency”, – the company admits.

On the office real estate market there turns off the existing positive tendency towards the decrease of projects shares. Thus, developers will meet again the problem of tight credits and the failure of their self-sufficient projects promotion. For other parties, small business included, the real estate is one of the main types of savings, as other mechanisms, the stock market, for instance, is underdeveloped.

The market of retail real estate will have vacancies increase, and it’s not only because of the places supply increase. After the consumers’ excitement in December 20-30, in February we are to expect a “consumers’ inactivity”, which will demand a shops placement optimization and a fight for rates with owners, considering sales turnover decrease due to the instability of exchange rates.

“The absence of big international brands will be a problem for developers of large shopping centres. But, considering that many international sales operators had decided to enter Belarus, we may expect their entry, but not so early”, – the experts say.

In 2011 the store market was the first to react to the financial crisis by the global vacancies increase that reached 50-70%. In contrast nowadays this segment is to be more stable thanks to the existing quantum growth: in 2012-2014 professional logistic operators became the main lessees of the modern complexes, and they are not going to reduce sharply the places in use. Low quality objects may have problems. Moreover, there will be increased the time period for the positioning of new objects, implemented at the end of 2014 and in 2015.

 

Text and pictures by TUT.BY

About Yana Yelina (30 Articles)
Yana is a fresh graduate of Minsk State Linguistic University. So it is not surprising she adores languages (English, Spanish, Italian). She's also a sports fan, and she won't lose an opportunity to watch some tennis/football/snooker matches. Moreover, she is nuts about travelling, dancing and reading.

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