Commercial construction costs in Ekaterinburg have risen by 30-40%
Hitting the Wallet Hard: Soaring Warehouse Costs in Ekaterinburg
Over the last year, the prices for constructing warehouses and industrial facilities in the gritty heart of Ekaterinburg have skyrocketed by 30-40%. This revelation was shared by Alexander Shirochenko, the director of the Ekaterinburg Urban Development Company, in an exclusive interview with our platform.
The primary culprits? A labor squeeze, escalating labor costs, and an almost twofold surge in the price of select construction materials. Shirochenko pointed out that developers with ambitions to construct large-scale projects are now grappling with investment risks. Federal operators usually lock in rental rates when inking long-term lease agreements, but these pre-determined increases often fail to keep pace with the spiraling rise in prices and the current inflationary wave. Consequently, developers end up settling for less profit and require additional time to recoup their construction costs.
Historically, one of the most sought-after investment arenas for private investors happened to be street retail. The allure of commercial spaces on the ground floors has intensified in recent years due to a scarcity of supply within the business center segment. According to analysts from the Ural Real Estate Chamber, the current supply of street retail spans approximately 200,000 sq.m.
Around the table for a discussion on our site, industry insiders tackled the reasons behind the popularity of ground-floor commercial real estate, the demographic it caters to, and strategies to make the most of these investments.
While the search results didn't offer specifics on the drivers behind the demand for commercial spaces on the ground floors or how investors maximize their returns, we can infer some trends from general real estate and urban development trends in Russia and similar regions:
- Business Prosperity: Regions witnessing economic growth typically see an increase in demand for commercial spaces due to the expanding businesses and new market entrants.
- City Expansion and Infrastructure Improvement: Urban growth and infrastructure development create a rising need for retail and service spaces to cater to local residents and businesses.
- Strong Consumer Spending: Regions boasting robust consumer spending power tend to attract more retail and service businesses, propelling demand for accessible commercial spaces like ground-floor units.
To ensure maximum profitability, investors favor strategic location selection, concentrating on sites with high foot traffic, such as city centers or locations near public transportation hubs. Other strategies include adaptive reuse and renovation, mixed-use development, market research, tenant diversification, and digital integration and amenities.
- I'm not sure if investing in ground-floor commercial real estate in Ekaterinburg is a wise decision due to the soaring warehouse costs and inflationary pressures in the industry.
- It's usually the case that ground-floor commercial real estate is highly sought after in the finance world, but the current investment risks associated with expanding businesses and new market entrants need to be considered.
- In Ekaterinburg, the popularity of ground-floor commercial real estate could be attributed to urban growth and infrastructure development, creating a need for retail and service spaces.
- Investors typically focus on strategic location selection, such as sites with high foot traffic in city centers or near public transportation hubs, to maximize profitability in the real-estate business.
- To ensure the success of their investments, it's important for developers to adapt their strategies to include strategies like adaptive reuse and renovation, market research, tenant diversification, and digital integration and amenities.
