Commercial Real Estate and the Prospects of the REIT Market
SUMMARY OF THE REPORT
• Kazakhstan is experiencing significant demographic and economic shifts, with key trends indicating sustained growth and development. As the largest economy in Central Asia, Kazakhstan is projected to expand its GDP to $355 billion by 2028 and potentially reach $900 billion by 2050.
• Kazakhstan's proactive investment policies and strong economic growth have positioned it as a top choice for foreign investors in the region. Over the past decade, investments in operations with real estate have grown significantly, reaching $7.1 billion in 2023. FDI to Kazakhstan in operations with real estate reached $379.5 million, breaking a record for the last ten years.
• The demand for commercial real estate in Kazakhstan is projected to rise alongside economic and population growth, particularly in sectors such as shopping and entertainment malls, offices, and warehouses. In recent years, rental rates have grown significantly across these three categories of commercial real estate. This growth makes Kazakhstan increasingly attractive to potential investors.
• The office real estate markets in Almaty and Astana have undergone significant changes driven by various factors affecting supply volumes and rental rates. In 2023, Kazakhstan commissioned 595,590 m2 of office space, valued at $296 million with Astana and Almaty leading the way, demonstrating ongoing growth in both area and cost trends.
• In 2023, Kazakhstan experienced a peak in the commissioning of shopping and entertainment malls over the past nine years, both in terms of area and cost. A total of 28 malls, covering 174,001 m2 were commissioned, representing almost 60% growth compared to 2022.
• The warehouse real estate market in Kazakhstan faces a shortage of Class A and Class B spaces amid increasing demand. Rental rates index rose by 3% in Q4 2023 compared to 2022, continuing an upward trend since 2020. Class A and B warehouses are particularly sought after, with projected rental rates for 2024 indicating significant year-over-year growth.
• The AIFC plays an important role in promoting investment in Kazakhstan's real estate sector and enhancing its investment frameworks, thereby stimulating growth, and attracting international investors to the dynamic REIT market. As of August 2024, 37 companies operating in the real estate sector and four REITs are registered at the AIFC.
• Kazakhstan's proactive investment policies and strong economic growth have positioned it as a top choice for foreign investors in the region. Over the past decade, investments in operations with real estate have grown significantly, reaching $7.1 billion in 2023. FDI to Kazakhstan in operations with real estate reached $379.5 million, breaking a record for the last ten years.
• The demand for commercial real estate in Kazakhstan is projected to rise alongside economic and population growth, particularly in sectors such as shopping and entertainment malls, offices, and warehouses. In recent years, rental rates have grown significantly across these three categories of commercial real estate. This growth makes Kazakhstan increasingly attractive to potential investors.
• The office real estate markets in Almaty and Astana have undergone significant changes driven by various factors affecting supply volumes and rental rates. In 2023, Kazakhstan commissioned 595,590 m2 of office space, valued at $296 million with Astana and Almaty leading the way, demonstrating ongoing growth in both area and cost trends.
• In 2023, Kazakhstan experienced a peak in the commissioning of shopping and entertainment malls over the past nine years, both in terms of area and cost. A total of 28 malls, covering 174,001 m2 were commissioned, representing almost 60% growth compared to 2022.
• The warehouse real estate market in Kazakhstan faces a shortage of Class A and Class B spaces amid increasing demand. Rental rates index rose by 3% in Q4 2023 compared to 2022, continuing an upward trend since 2020. Class A and B warehouses are particularly sought after, with projected rental rates for 2024 indicating significant year-over-year growth.
• The AIFC plays an important role in promoting investment in Kazakhstan's real estate sector and enhancing its investment frameworks, thereby stimulating growth, and attracting international investors to the dynamic REIT market. As of August 2024, 37 companies operating in the real estate sector and four REITs are registered at the AIFC.
Breakdown of real estate market ($ trillion)
KAZAKHSTAN’S COMMERCIAL REAL ESTATE MARKET OVERVIEW
The real estate market in Kazakhstan has been experiencing a significant growth in recent years. The real estate market in Kazakhstan was $0.89 trillion in 2023. The real estate market is forecast to reach a value of US$0.98 trillion in 2024, and with a CAGR of 6.7% until 2028, expected to reach $1.27 trillion. In 2024, commercial real estate will account for around $0.28 trillion, while the residential real estate – $0.7 trillion.
In 2023, Kazakhstan’s real estate market to GDP ratio was 3.44, compared to 4.15 for the US, 3.69 for Canada, and 7.43 for China.
Unique local conditions in Kazakhstan contribute to shaping the real estate market. With its vast land area and comparatively sparse population, the country presents opportunities for new construction and growth. In addition, government policies designed to attract foreign investment have helped stimulate the real estate market. Underlying macroeconomic factors, including economic growth, have also contributed to the growth of the real estate market in Kazakhstan.
With growing economy and population, the demand for commercial real estate – including shopping and entertainment malls, offices, and warehouses – in Kazakhstan is forecast to further increase. This, coupled with a continued growth in commercial real estate rental market in Kazakhstan, may attract the attention of potential investors.
The commercial real estate market in Kazakhstan is also being shaped by the growing number of companies relocating to the country, rising demand for coworking spaces (IT startups, remote working, freelancers, etc.), shifting supply chains and trade flows, and booming e-commerce.
The real estate market in Kazakhstan has been experiencing a significant growth in recent years. The real estate market in Kazakhstan was $0.89 trillion in 2023. The real estate market is forecast to reach a value of US$0.98 trillion in 2024, and with a CAGR of 6.7% until 2028, expected to reach $1.27 trillion. In 2024, commercial real estate will account for around $0.28 trillion, while the residential real estate – $0.7 trillion.
In 2023, Kazakhstan’s real estate market to GDP ratio was 3.44, compared to 4.15 for the US, 3.69 for Canada, and 7.43 for China.
Unique local conditions in Kazakhstan contribute to shaping the real estate market. With its vast land area and comparatively sparse population, the country presents opportunities for new construction and growth. In addition, government policies designed to attract foreign investment have helped stimulate the real estate market. Underlying macroeconomic factors, including economic growth, have also contributed to the growth of the real estate market in Kazakhstan.
With growing economy and population, the demand for commercial real estate – including shopping and entertainment malls, offices, and warehouses – in Kazakhstan is forecast to further increase. This, coupled with a continued growth in commercial real estate rental market in Kazakhstan, may attract the attention of potential investors.
The commercial real estate market in Kazakhstan is also being shaped by the growing number of companies relocating to the country, rising demand for coworking spaces (IT startups, remote working, freelancers, etc.), shifting supply chains and trade flows, and booming e-commerce.
Mr. Abdygapparov shared his views on REITs, current situation in the REIT market in Kazakhstan and its outlook:
- What are the investment benefits of REITs and why should individuals invest in REITs?
- The major benefits of REITs are as follows:
- What are the investment benefits of REITs and why should individuals invest in REITs?
- The major benefits of REITs are as follows:
- spread of risk over the larger properties reducing exposure to particular fixed physical square metres and to a particular tenant;
- ability to pool capital and invest collectively in large ticket properties otherwise unavailable for individual investors;
- professional property management team takes care of interactions with tenants and all day-to-day routine operations and maintenance of the facilities;
- good diversification tool for any investment portfolio, as REITs are classified as alternative investments and possess characteristics of both equity – providing ownership and capital appreciation, as well as debt – providing stable periodic cash flow.
Asset Abdygapparov
CEO at Provident Fiduciary Ltd
