Fresh from completing its merger with Sorouh Properties, Aldar Properties has made a major international move by kicking-off its Kazakhstan project.
Last month, the company announced it has awarded an AED 4 billion (USD 1.1 billion) contract to a joint venture by Arabtec Holding and Consolidating Contractors Group.
The development, called the Abu Dhabi Plaza, will be a 500,000 square meter mixed-use development featuring five towers with the tallest tower roughly the size of the Burj Al Arab hotel in Dubai. It would be the second tallest structure in Kazakhstan after the 420-meter Chimney Ekibastuz GRES-2 Power Station.
All told, the complex in Astana will have 566 luxury residential apartments, 107,000 square meters of commercial office space, a five-star hotel and serviced apartments and a 50,000 square-meter retail podium.
EXPO 2017 HOST
Aldar's move comes at a time when Astana is gearing up to host the EXPO-2017. Real estate consultants CB Richard Ellis expect the city's real estate to see a bump in prices over the next four years as the city basks in the spotlight.
The Kazakh government relocated the capital to Astana in 1988, giving the city a business and tourist boost. Kazakhstan is the ninth largest country in the world in terms of geographical area, but only has a population of 16.5 million.
Like the rest of the country, Astana is also sparsely populated with around 773,387 people, but offers a number of opportunities thanks to its position as the new seat of government.
However, low levels of income and inconvenient mortgage lending structures means not all segments of society have traditionally participated in the real estate sector.
To address the needs of the wider population, a new affordable housing construction program was initiated last year.
"This program is aimed at sustaining a volume of construction of new residential space at the level of six million square meters per year, and reaching 10 million square meters by 2020," said Scot Holland, analyst at CB Richard Ellis in a note to clients.
"According to information from the city authorities, ca. 50,000 apartments are planned to be constructed in Astana by 2020. A campaign for purchasing apartments under the lease-with-subsequent-buyout scheme by all categories of the population will be actively implemented during 2013."
The Kazakhstan Statistics Agency notes that average residential prices in Astana have risen from USD 1,232 per square meter at the end of 2011 to USD 1,480 by the first quarter of 2013.
"In our opinion this trend is likely to continue in the short to medium term," said Holland.
Apart from Aldar's massive project, some of the other residential projects in the city include:
Riverside: high-end residential project with some business and leisure facilities
Old Centre: Mixed-use development
Extended Old Centre: Primarily residential developments
Al-Bulak: residential project featuring complexes of small buildings
Chubary: residential area, local bungalows - both old and new.
Karaotkel: villas and bungalows.
CONSTRUCTION UPTURN
Investment into residential construction has reached a low of KZT 61.22 billion in 2012, a far cry from the peak of KZT 162.28 billion five years ago, according to the Kazakhstan Statistics Agency.
While the economy grew over 7% in 2010 and 2011 and a comfortable 5% last year, the real estate and construction sector has not enjoyed the same boom.
Activity was weighed down by banks which were overexposed to the sector during the pre-global financial crisis days.
"The legacy of past poor lending, particularly to real estate and construction, has burdened banks, especially some of the large ones, with high and increasing nonperforming loans (NPLs)," said the International Monetary Fund.
However, there are signs of improvement. The first quarter of 2013 saw investments of KZT 12.13 billion - a 45.5% increase compared to the same period last year, as robust construction activity in the affordable housing segment kicked off in earnest.
Astana's office market is also showing signs of improvement.
"Since the beginning of 2012, the office market is characterized by somewhat increased demand in the business centers of higher grade, which is caused by the increase of business activity," said CB Richard Ellis. "Most of class A and B business centers have occupancy rates close to 100%).
Retail activity has been on a healthy trend as international retailers continue to evince an interest in the Astana retail market. In fact analysts are predicting an oversupply of retail space, as old-Soviet style marketplaces give way to new and gleaming shopping malls with some of the world's best known brands.
CB Richard Ellis' Holland estimates there are more than 25,000 square meters of gross leasable area either planned or under way over the next two years.
"According to our estimates, and assuming that all of the planned facilities are commissioned during 2013-2015, the total retail stock of modern shopping centers in Astana will reach approximately 410,000 square meters of gross leasable area (GLA) by the end of 2015."
Much of the activity in residential, commercial and the retail space is driven in anticipation of the Expo 2017 event and also as Kazakh's financial institutions slowly work their way through the bad debts.
With the rest of the economy getting a boost with rising public investment, the real estate is also expected to get a much-needed boost.
Seems like Aldar got in the Astana market at just the right time.
alifarabia.com 2013
