The term of operation of commercial real estate yas acres
Speaking about the commercial real estate market experts operate with such parameters as the volume of investments and the profitability of commercial real estate. These data are essential because they allow you to determine how long a commercial property will generate net income.
After the period of return on investment in the project funds, with proper management and maintenance, commercial property becomes a stable source of income at any stage of the market cycle. Whether income building commercial property built in the late 1990s when the commercial real estate market was in its infancy, how long will demand for new office complexes and shopping centers absorbed today before commissioning?
Despite the young age of the commercial real estate market in Kiev, as well as in other cities of Ukraine, a commercial property located in buildings whose age exceeds 50 years or even 100 years. Returning to the roots of origin of the capital of the commercial real estate market, it should yas acres be noted that the first commercial real estate projects appeared in the reconstructed old houses in the Central part of the city, dormant, research institutes and industrial sites redeveloped into office buildings. Multiple reconstruction and restoration and peculiar objects of street retail. So, Khreshchatyk originally was and still is the main shopping street of the capital, where are concentrated the most prestigious shops, boutiques and commercial properties.
In this lies the peculiarity of commercial properties: unlike many goods and products, its life cycle, with proper management and maintenance, can reach tens and even hundreds of years. In this respect the important role played by the concepts of physical and economic lifespan of commercial real estate. The term economic life is determined by the period of time during which a commercial property can be used as a source of profit. This period ends when produced improvements cease to positively affect the value of the object.
The life cycle of commercial real estate includes the period of its economic and physical life. Economic life is the period of profitable use of commercial real estate, while the physical – the period of his actual existence in functionally good condition prior to destruction or demolition.
Physical lifetime of commercial real estate is derived from the quality of designs, technologies used in the construction of the building, the integrity of the contractors. At the current pace of development of construction technologies building morally obsolete much faster than physically.
Modern construction technologies allow to build permanent structures, characterized by high wear resistance, which also affects the increase of their life cycle. And therefore it can be argued that new commercial buildings are designed a priori for at least 100 years. Particularly for capital construction period of physical fitness can be 100-175 years old. But at the current pace of life, rapid scientific advances, obsolescence of commercial real estate occurs much faster physical.
Like any other product, commercial real estate is exposed to various factors that leads to deterioration, i.e., loss of utility and decrease its cost. Depreciation is recorded as one of the most important criteria when evaluating existing commercial property, and can be physical, functional and external (economic). Physical deterioration of buildings and structures, in principle, can be corrected, but the costs should not exceed expected benefits.
Functional (moral) obsolescence of commercial property lies in its compliance with modern standards from the point of view of functional utility. This may manifest itself in the outdated architecture of the building, the inconvenience of planning, mismatch volume, engineering support, etc.
As physical, functional deterioration can be eliminated, again, based on the ratio necessary to improve the means and size of the incremental cost. The value of disposable functional deterioration of commercial real estate is defined as the difference between the potential value of commercial real estate at the time of assessment with updated elements and the same value on the valuation date without updated items.
Economic depreciation of commercial property occurs due to adverse changes in the external environment. This may be as a General decline of the area in which is commercial property and the actions of the government or local administration in the field of taxation, insurance, certain changes in the employment market in the field of recreation, education, etc. the Elimination of such negative influence to restore the value of commercial real estate is considered irrational in view of the disproportionately high costs.
That means, engineering office, shopping center, hotel or any other building for commercial purposes, you must not only consider technical requirements, but to weigh and evaluate the competition and requirements to the objects of the commercial real estate market in the next few years.
The life cycle of retail and office properties is highly dependent on a number of factors. Such indicators as location, format, the right concept and architectural decisions affect the life of the commercial properties in other segments, such as hotels, warehouses, industrial sector.
So, speaking about the duration of economic life of commercial real estate, the experts called for the inventory of real estate 10-15, and sometimes 20 years (without major reconstruction for A class warehouse). Significant wear in the first place, floors of warehouses, which need to be reconstructed 3-5 years of operation.
If you compare the average lifespan for all types of commercial real estate, hospitality segment leader. He requires most of the cost of construction and operation, but, on the other hand, the term economic life of the hotels in times exceeds indicators of retail and office properties. The hotels compared to office and retail real estate a much longer economic life.
If it is properly planned and managed project, with a good location, the attractiveness and value of the hotel only increases with time. However, today's investors have virtually no opportunity to evaluate this advantage, as, unfortunately, have relatively short-term horizon of investment.
Almost all international hotel groups have in their portfolio are reconstructed hotel with a century of history in the Central areas of cities. Such hotels, in addition to its real value, have historical value as a unique architectural objects.
The Ukrainian commercial real estate market is gradually transformed into a new phase of its development, when investors and developers are aware of the need to create an attractive investment commercial real estate with a long life span. Trend for future years will be to develop projects of office buildings, taking into account international requirements capacity car Parking facilities and quality of mamsha al saadiyat internal infrastructure and retail spaces, conference rooms, recreational areas, fitness centers, restaurants. This applies to other segments of commercial real estate. Already the next few years will be marked by the emergence of large-scale mixed-use complexes and business parks
Commercial real estate: trends and forecasts
Among the main trends of development of the Ukrainian commercial real estate in the first half of 2008, the experts name the following:
Rental growth in retail and office segments of commercial real estate.
The preservation and even widening of the gap between supply and demand for commercial real estate.
The increase in the cost of project financing; banks are more conservative approach to lending for new commercial real estate projects.
In connection with the deterioration of financing conditions in the commercial real estate market took a downturn in the development of the projects currently in the design phase or initial stages of construction.
Because of the increasing cost of financing and more conservative approach of banks to lending to the commercial real estate Ukrainian developers are more careful to select and develop projects, a more realistic assessment of their financial capabilities, for joint projects they are trying to find Western partners, able to attract less expensive financing.
The desire of many local developers for an IPO or private placement due to lack of capital.
On the commercial real estate market there are several examples indicating a change in expectations of investment funds regarding capitalization rates from 8-9% to 9-10%.
The trend of the introduction of commercial real estate objects in operation late from the stated time.
A further increase in construction cost due to the increased cost of materials and labor.
In General, all the main predictions regarding the development of the commercial real estate market in 2008 made by experts at the end of 2007, confirmed in the first half of the year: a further increase in rents in the commercial and office segment of commercial real estate, the preservation and even widening of the gap between supply and demand for commercial real estate, input of objects in operation after this date.