By James Brooke and Mark Satter

KYIV – “For Rent” signs dot Kyiv’s marquee shopping street, Kreschatyk. Side streets are pocked with charming, but crumbling, brick apartment buildings from the 1890s.

But don’t judge’s Ukraine’s real estate by the core of its capital.

“In Kyiv, 350 new residential complexes are being built now,” Alexey Belokon, Commercial director at Royal House, said in an interview here.

Belokon should know.

His company recently sold all 1,000 apartments at their newly completed “British Quarter,” located near Ipodrom station, near the southern suburban end of Kyiv’s north-south blue metro line.

Hewing to the British theme, his company now is building “New England” a residential complex with 4,000 apartments. Three towers, named Cambridge, Oxford and Liverpool, with the first 600 apartments, are to open in October.

“Ukrainians don’t trust the banks, they don’t buy stocks,” the developer said, referring to the legacy of scores of Ukrainian banks run by fraudsters. In the last three years, half of Ukraine’s banks have been declared insolvent and closed.

“For Ukrainians, real estate is the only way to save money,” he continued. “People tell me: “Even if I don’t live in the apartment, it is a good investment.”

Suburban Dream: High Quality, Low Cost, Metro Access

While foreigners ooh and ahh over century old neo-Byzantine brick buildings in the city’s historic core, Ukrainians say they want year round hot water, reliable elevators, clean entryways, protected parking and easy access to Kyiv’s metro. This subway carries 1.3 million passengers a day.

“The center is interesting for tourists, for expats, for people while they are young,” said Belokon, referring to this city of 4 million people, the third largest in the former Soviet Union, after Moscow and St. Petersburg.

“People with families want to live near Holosiivskyi Park, he said, referring to a nearby a National Nature Park that has 4,000 hectares of forest.

Confounding the stereotype that all foreigners want to live in Kyiv’s historic center, Belokon said his company’s “low priced, high quality” apartments are being bought by Turks, Israelis, Chinese, and citizens of the United Arab Emirates.

Alexey Belokon, Commercial director at Royal House, Kyiv. (supplied)

Money in Western Ukraine

Expanding west from Ukraine’s capital, he said that his company, Royal House is starting to prefabricated walls for apartments in Lutsk, Lviv, Ivano Frankivsk, and Chernivtsi.

“There is a lot of money from workers who work abroad,” Belokon said, referring to the millions of Ukrainians who now work in the European Union. “There is a lot of potential in the Ukrainian market, especially the west.”

Exodus from East Pushes up Suburban Rents

Terry Pickard, chairman of Pickard & Co. Ltd., sees similar dynamics at play in Kyiv’s residential real estate market.

“There has been a more than 50 percent drop in central Kyiv housing prices,” said Pickard, a longterm British resident here. “But rents are going up in the suburbs, as migration from the East pushes prices.”

Over the last three years, an estimated 1.6 million residents of Donetsk and Luhansk fled after separatists armed by Russia took over the most populated portions of the two oblasts. Several hundred thousand internally displaced people moved to Kyiv.

Despite this flow, Pickard estimates that central Kyiv “property prices could double in five years, but even then they will still only be 60% of 2008.”

Pickard: Farm Land

For Pickard, who has set up Pickard Agricultural Services, the real action in Ukraine real estate will be in farm land.

“The primary area of foreign investment interest in Ukraine is agriculture, companies want to lease the land,” Pickard, said referring to Ukraine’s fabled black earth. “Big American groups are investing a lot. One American group just invested $140 million.”

Ukraine does not allow the purchase and sale of farmland. The International Monetary Fund is pressuring Ukraine’s government to start a land market. A gradual liberalization may start next year, allowing relatively sales of small amounts of land from state reserves -- and only to Ukrainians.

Lviv’s Hot IT Economy Doubling Class A Office Space

Nick Cotton, another longterm British real estate professional here, sees Lviv as a more dynamic office market than Kyiv.

“Lviv has an extremely vibrant economy – the IT industry is growing and is protected against currency fluctuation and inflation,” said Cotton who recently became

Managing Director at Cushman & Wakefield Ukraine.

Due to demand from the dollar-denominated IT industry in Lviv, “Class A office space could be doubled, possibly tripled by 2020,” Cotton said, referring to Western Ukraine’s largest city.

“A lot of the IT industry is scattered through several inefficient refurbished buildings,” he continued. “You need an environment where you can recruit and retain talent, which is key for IT industry. You need the high standard of office space, modern clean environment with amenities which IT workers will come to expect.”

IT Also Drives Office Demand in Kyiv

Jones Lang LaSalle, rival to Cushman Wakefield sees a similar IT dominance in Kyiv, according to a report by Jones Lang.

Tech companies account for 60 percent of all office rental deals in Kyiv, according to the report. But, with office vacancies at 19 percent last year, only 3,000 square meters of new office space has come online this. All of this was in a new building of the Forum West Side Business Center, near Dorohozhychi Metro station on the Green line.

By the end of this year, 42,600 square meters of new high end office space is to open: Astarta business complex in Podil, near Nyzhnii Val and the embankment road in Podol, and UNIT City innovation park, also near Dorohozhychi Metro station.

In sum, real estate professionals say look beyond central Kyiv’s stagnation to these hot spots: high quality, low cost suburban Kyiv apartments; farm land in Ukraine’s black earth country; and modern office spaces for IT workers, in Lviv and Kyiv.

Apartment towers of British Quarter rise above Kyiv's leafy southern suburbs (supplied)

For comments and story tips, please contact UBJ Editor in Chief at james.brooke@theubj.com

Slider Photo:All 1,000 apartments of southern Kyiv's "British Quarter", are sold, according to the developer, Royal House (supplied)