The Cabinet of Ministers has allocated an additional UAH 2.5 billion for the construction of engineering and fortification facilities, Ukrainian Prime Minister Denis Shmygal said.
“The key task for us this year is to strengthen our defense capabilities. In this context, today there are two important decisions. We allocate additional almost 2.5 billion hryvnias from the reserve fund for the construction of engineering and fortification facilities,” Shmygal said at a government meeting on Friday.
According to him, UAH 1.4 billion of these funds will be used for fortification of defense lines, and another UAH 1.1 billion for the construction of non-intrusion strips. – for the construction of non-explosive barrier strips.
In addition, the government has allocated another UAH 120m from the reserve fund for the State Border Guard Service to strengthen the defense capability and engineering and technical arrangement of the border.
In 2023, Epicenter Agro Holding, a member of the Epicenter K group of companies, began construction of a plant for the production of urea-ammonia mixture (UAN) and liquid complex fertilizers (LCF) in Vinnytsia region, according to the official website of the agricultural holding.
According to the report, the fertilizers are to be used during the 2024 sowing campaign.
“We have very ambitious goals for 2024. Changing the sowing structure, further testing of the No-till system, our own fertilizer production, and a number of other projects are just a small part of the challenges we have set for ourselves. In addition, we are confidently moving towards the introduction of processing of our products. This means that we firmly believe in ourselves as a team of professionals, our company Epicenter Agro, and the peaceful future of Ukraine,” said Svitlana Nikitiuk, Head of the Central Office of the Agricultural Department of Epicenter Agro.
Epicenter K LLC was established in 2003 and opened its first hypermarket in Kyiv in December of the same year. It has a network of shopping centers of the same name in Ukraine. It has also been developing its agricultural business since 2016. It cultivates more than 160 thousand hectares in Vinnytsia, Khmelnytsky, Ternopil, Zhytomyr, Cherkasy and Kyiv regions. The group includes 20 livestock farms and 15 elevator complexes with a total storage capacity of 1.5 million tons.
According to the Unified State Register of Legal Entities and Individual Entrepreneurs, the shareholders of Epicenter K LLC are Oleksandr Gerega (51.3%), Galyna Gerega (47.97%) and Tetiana Surzhyk (0.73%).
The cost of construction in 2023 rose to 20%, which will affect price increases in 2024, Susanna Karakhanyan, Head of Sales at Greenville Kyiv, told Interfax-Ukraine.
“The cost of construction has increased by about 15-20% everywhere, and our projects are no exception. This will affect the cost per square meter: prices will rise over the next year, but not critically, because developers are trying to maintain demand,” she said.
Currently, in the Greenville residential complex in Pechersk, the cost per square meter in a finished building averages 2.4 thousand USD, and in a building under construction – 2 thousand USD. In Greenville Park, the average price per square meter under construction is 1.9 thousand USD.
According to Karakhanyan, in 2023, sales, demand, construction, logistics and operational and production processes adapted to the conditions of martial law. In the second half of the year, demand increased significantly: people began to return to Ukraine.
“In the Greenville residential complex in Pechersk, we commissioned two new sections this fall, and next year we plan to start another one. At Greenville Park, we have almost completed all monolithic works this year – the dynamics of construction is high, despite all the obstacles of wartime,” she said.
According to the expert, the market conditions are now dictated by the buyer, and developers are adjusting to investors. The term for concluding a deal has increased, now this process takes a month or more, buyers are looking for the most favorable conditions for themselves. Also, investors are not ready to invest in projects at the early stages of construction, assessing the risks. Priority is given to apartments in buildings in the final stages or completed. While buyers used to consider buying a home as a good investment to save money or make a profit, now they buy apartments primarily for themselves and their families.
In general, when choosing a home, buyers’ attention is focused on three aspects: safety, functionality, and rational planning.
“They opt for projects with underground parking (which serves as a shelter), far from military-industrial facilities. Of course, the investor also pays attention to the constructive advantages of the complex and the quality of building materials,” Karakhanyan said.
According to the Unified State Electronic System in the Construction Sector, the certificate of acceptance for two sections of the Greenville residential complex in Pechersk was issued on September 29, 2023. They have a total of 250 apartments. The building has 23 floors plus 4 underground floors, its total area is 34.85 thousand square meters, residential – 21.083 thousand square meters. It is noted that the estimated cost of the object put into operation is UAH 354 million 968.37 thousand.
According to the LUN new buildings portal, the project developer, Greenville, has been operating since 2007, during which time 26 residential buildings have been commissioned, six are under construction.
The full-scale invasion radically changed the geography and size of the construction market, caused personnel changes, influenced the legislation and also opened up new business segments for Ukrainian construction companies.
Rauta director Andriy Ozeychuk told about trends and changes in construction during 2022-2023.
To date, total amount of losses is more than $150 billion, including the largest losses suffered by the housing stock ($56 billion), infrastructure ($37 billion) and industry ($12 billion). During the two years of the full-scale invasion, about 15% of the production facilities of construction materials were destroyed. At the same time, the segments of rolled steel and dry gypsum mixtures experienced the greatest losses.
Demand
In 2022, the size of the Ukrainian construction market decreased by approximately 65%. In 2023, there is a tendency to consumption growth of construction products and services, and according to the yearly forecasts, the market is expected to increase by 20%. At the same time, the size of the residential real estate market in hryvnia equivalent will remain at the level as it was last year, non-residential construction will grow by 15%, and infrastructure will show an increase of 40%.
The demand structure for new residential real estate in Ukraine has changed dramatically. Front-line regions experienced the biggest drop in construction market to almost 90%, the central part – a decrease up to 70%, and in the west, construction increased by 15%, which is associated with the relocation of businesses and internally displaced persons, as well as the active development of real estate resorts in the Carpathians.
The primary real estate market was reoriented mainly to the west of Ukraine. Developers in other regions are mostly focused on finishing current projects, which were started before March 2022. Currently, most investors do not dare to start new construction projects and take a wait-and-see attitude.
In the Centeral, Northen and Eastern Ukraine, the demand for the reconstruction services of destroyed buildings and structures has significantly increased. A business that has suffered the destruction of real estate needs the reconstruction of buildings in order to resume functioning.
Currently the fastest-growing construction segments are the infrastructure reconstruction, primarily bridges and social buildings, at the expense of state budget and donor funds.
In response to wartime threats, new segments of the construction market appeared: structures for the protection of critical infrastructure facilities and modular reinforced concrete shelters designed to protect people during air raids, artillery fire, etc.
Prices
In 2022-2023, the cost of construction increased by 53%, which led to a similar price increase for the primary real estate market. The construction cost price will continue to grow, which is determined by objective processes, including increased demand and inflation.
Import reorientation
Suppliers of construction materials, which previously imported products from the russia and belarus (glass, bitumen, rolled steel, cement, sandwich panels, etc.), were forced to reorient themselves to supply goods from EU countries and Turkey.
Due to the closure of Ukrainian ports, the import of construction materials by sea (rolled steel, chemicals, decoration materials, etc.) became impossible. Today, the import of these materials to Ukraine takes place mainly through Romania, which has led to an increase in their cost.
At the end of 2023, complications arose with the import of raw materials and construction materials due to blocking by Polish and Slovak carriers of checkpoints on the border with Ukraine. It also caused an increase in prices and delivery times of imported construction materials.
Personnel
During the full-scale invasion, the reduction in the number of the working population of Ukraine amounted to about 35%. The mobilization and emigration of qualified specialists caused a shortage of personnel in the construction industry, which is felt even against the background of a significant market decrease. In the future, this may lead to an increase in wages, which will further increase the cost of construction, but still it will not solve the problem of the lack of qualified personnel.
In this regard, rapid construction technologies, which require a minimum number of workers, are becoming more and more popular. For example, the construction of buildings from sandwich panels requires much smaller number of specialists than in case of installing building from small pieces of materials.
During reconstruction, Ukraine will need a large number of construction specialists, therefore, in the future, we are likely to expect labor migration of qualified personnel from the EU and labor specialties from Asia.
Legislation
Among the main legislative innovations in recent years, there is a notable trend to improve people’s safety and improve the energy efficiency of buildings. Thus, the adoption of amendments to Law No. 2486-IX regulates the requirements for the arrangement of bomb shelters during the construction of new buildings. Also, DBN B.2.6-31:2021 changed the requirements for the minimum permissible values of the reduced heat transfer resistance of the envelope structures of buildings, which increased by an average of 28%.
Preparation for reconstruction
Currently, most Ukrainian investors are preparing for reconstruction and are actively calculating the cost of construction, but as a rule they are waiting for the end of hostilities to start new projects.
International financial institutions are also planning to get involved in reconstruction and are gradually entering the Ukrainian market. The key criteria for financing post-war construction in Ukraine will be transparency and speed of project implementation, so international organizations are already starting to establish partnerships with reliable Ukrainian construction companies. At the same time, priority is given to companies that work with European materials and technologies, which allows to create modern architecturally attractive and energy-efficient buildings.
The shortage of professional staff at construction sites in Ukraine is up to 50% in both technical and labor specialties, while salaries are showing positive dynamics, according to a survey of developers conducted by Interfax-Ukraine.
“The need for people on construction sites is only increasing as the construction market is gradually recovering, work is ongoing, and construction volumes are increasing. But the war continues, as does mobilization into the Armed Forces, so this certainly affects the labor market. In general, we can state that the level of workers employed in construction is about 40% of the pre-war level,” said Dmitry Novikov, Marketing Director of City One Development.
According to him, the most sought-after specialties include welders, operators of tower cranes and specialized construction equipment, and high-rise mountaineers. In addition, there is a shortage of ordinary construction workers and general laborers, Novikov noted.
According to Olga Pylypenko, Executive Director of Kovalska Group, more than 70% of the group’s vacancies are for workers, most of them concrete workers, reinforcing steelworkers and electricians.
“Today, the number of workers is already about 50%. Given the overall drop in demand, this labor force is in a fragile balance that can be upset if construction volumes increase,” she explained.
The lack of labor at Intergal-Bud’s construction sites was felt again in the fall after the start of the full-scale war, said its commercial director, Anna Laevska.
“At the beginning of the full-scale war, we felt a shortage of workers at construction sites, but the situation was resolved quickly enough. And until May 2023, there was practically no labor shortage. But in the last few months, we have been noticing a shortage of construction workers. We observe a shortage of all specialists,” the expert said.
According to her, the company’s construction volumes allow it to increase its staff by a third, but due to the shortage of personnel, it has to restructure its teams.
According to the Greenville Group, the staffing situation has somewhat leveled off compared to last year, but the group also experienced a labor shortage and began to re-staff construction teams.
“Currently, the shortage is 40% – all of them are highly qualified specialists. Among the scarce specialties on the market are electricians, crane operators, monolithic workers, handymen, and facade workers,” said Natalia Dubyk, project manager of the Greenville group of companies.
At the same time, Alliance Novobud managed to increase its staff at construction sites by expanding the types of work performed by its own labor force. In addition, the company noted an increase in female demand for construction jobs.
“Construction is mostly a male sphere, but amid the difficult situation with the search for workers and the overall economic situation in the country, there is some growth in interest in working on construction sites from women. Most often, these are painting professions related to interior decoration,” said Oleksandra Kachan, HR Director at Alliance Novobud.
The interviewed developers noted the positive dynamics of changes in the salaries of builders. Thus, Intergal-Bud and the Greenville Group of Companies estimated the salary growth in October 2023 at 15-20% compared to spring, and Kovalska Group – up to 25%. In general, developers expect further salary growth next year, provided the economic situation is stable.
At the same time, City One Development expects the shortage of personnel in the construction sector to increase after the war ends.
“Even after the specialists who are currently serving in the army return to work, it will still not be able to cover the shortage of personnel and compensate for the demand for professional construction specialists,” Novikov said.
A similar opinion was expressed by Oleksandr Nasikovsky, co-founder and managing partner of DIM Group. According to him, encouraging Ukrainians to get technical education should become a priority of government policy.
“The deepening deficit in certain highly skilled professions is due, in particular, to the low demand for technical education from young people. Today, there is an acute shortage of monolithic workers, crane operators, painters, and electricians. Encouraging Ukrainians to master construction specialties should be a priority for both the government and private businesses. The vocational education system must undergo radical changes. It will be useful to involve private players who are ready to create a kind of corporate training institutions and facilitate the acquisition of various professions by those who are willing,” the expert said.
Foreign investors are looking for transparency, openness and willingness to cooperate in companies. This helps build trust and break down myths about corruption and instability.
This was stated by Marina Cheban, Head of the Legal Department of DIM Group, in an article for thepage.ua.
“While diplomats and politicians are discussing government investments, businesses should actively explore opportunities for existence and development in the new environment. An important aspect of successfully attracting investment from foreign companies is establishing partnerships with foreign investors. Foreign investors are looking for transparency, openness and willingness to cooperate in companies. This helps to build trust and break myths about corruption and instability,” she emphasizes.
Maryna Cheban shared an example of a successful partnership with a foreign investor company and attracting investment in the LUCKY LAND residential complex, which is notable for its scale and comprehensive social facilities. Foreign investors are interested not only in profit, but also in social issues and meeting the needs of the population. In particular, this applies to residents who migrated due to the war. The social aspect, along with well-thought-out planning and various services, creates a comfortable living environment, which makes the complex liquid and extends the product’s life cycle.
“At the moment, we cannot disclose the name of our partner and the size of the investment, but we can say with certainty that foreign investors are looking for long-term investments that bring passive income in the future, which means millions of dollars for construction and an example for other investors that the Ukrainian real estate market is potentially interesting to invest in. For the Ukrainian market, the cases of cross-border partnerships are an opportunity to share experiences, bring best practices, as well as a strategic opportunity to develop and create a positive image for the cumulative effect of building the Ukrainian real estate and development market,” Cheban said.
However, according to Cheban, attracting foreign investors to Ukrainian residential projects is not an easy task, and risk management plays an important role. An important step is project due diligence, which allows investors to understand all aspects of Ukrainian legislation, urban planning regulations, and other norms. Risk management includes a detailed analysis of risks that may arise, including military, political, tax, and economic factors. It is important for Ukrainian companies to demonstrate openness, trust and a deep understanding of the risks involved in attracting foreign investment. This is an important step for Ukraine’s development and building a safe investment environment.
DIM Group was founded in 2014 and consists of six companies covering all stages of construction. To date, it has commissioned 12 buildings in six residential complexes with a total residential area of over 218 thousand square meters. Six residential complexes of “comfort+” and “business class” categories are under construction: “New Autograph, Metropolis, Park Lake City, Lucky Land, etc.
