“In developed countries, the contribution to GDP from transactions with finished real estate reaches 15%” - Sergey Ryabokobylko

Managing Partner and CEO of Commonwealth Partnership, Sergey Ryabokobylko, discussed how the trend toward sustainability has impacted real estate, why Uzbekistan is attractive from an investment perspective, and the contribution of real estate transactions to the country's GDP.

Economic turbulence and global unpredictability have also affected Uzbekistan's housing market. Property prices in the capital are growing at rates comparable to those seen worldwide.

The entire construction industry has had to adapt to economic realities and buyer demands. Consequently, approaches to modern residential and commercial real estate have shifted—focusing on class segmentation, sustainability, format, and price.

Construction in the capital is in full swing. Today, everyone can find a suitable option, from small studios to penthouses with playgrounds and sports areas on the rooftops of high-rise buildings.

Uzbekistan’s capital market is currently one of the most promising in the world. The shift is happening not only in residential real estate but also in commercial spaces, which are moving away from traditional offices toward flexible formats.

Sergey Ryabokobylko also discussed the real estate market's situation, current trends, forecasts for the near future, and why both individuals and companies no longer seek just square meters but instead desire an atmosphere.

Keeping Up with Global Trends

Global markets are currently under stress due to inflation, industry conditions, and rising credit costs.

This has a dual impact on project attractiveness: on one hand, it creates challenges, but on the other, it opens new opportunities.

Today’s real estate market is one of relatively low returns and long-term planning.

Modern development projects are complex, taking 10 years or more to complete, requiring thorough preparation and stable fiscal, financial, and legal systems.

It’s nearly impossible to plan anything 10 years ahead if a country’s legislation changes annually.

Eco-trend. Entrepreneurs worldwide have increasingly embraced the relatively new concept of ESG (Environmental, Social, and Governance).

If real estate once symbolized capitalism, the current trend is heading in a completely different direction.

Applying ESG standards to real estate reveals a growing awareness that property can have a significant social impact—whether through restoring affordable and social housing or investing in new "green" buildings.

I believe that with each passing year, ESG increasingly influences the valuation and investment in real estate.

Building eco-sustainable properties using environmentally friendly materials and smart technologies not only benefits the environment but also enhances the return on investment in such real estate.

For instance, this approach helps reduce the carbon footprint of cities and mitigates the impact of emissions.

Thus, the trend toward sustainability directly affects which projects will remain in an investor's portfolio, continue to develop, and which should be divested today.

Moreover, construction that adheres to international environmental standards is no longer exclusive to European markets—it is also gaining traction in Uzbekistan.

For example, one of our key investors here selected us to help certify their logistics complex under international environmental standards.

This shows that Uzbekistan is not lagging behind global trends.

A Promising Market

The capital market of Uzbekistan today is one of the most promising in the world, and not just in terms of investment appeal.

Here, mechanisms and institutional frameworks can be created in a short time, which took other countries 10 years or more. The country has demonstrated accelerated development, largely thanks to the openness and willingness to cooperate, both from entrepreneurs and the country's leadership.

In our view, the primary trend in the country today is transforming real estate from mere square meters into investment assets.

After all, a building begins its life after construction is completed—at a stage when investors and developers often pay the least attention to it, as they typically shift their focus to future projects.

In developed countries, the contribution of operations with completed real estate to GDP reaches up to 15%.

Here, this figure is still negligible. However, it's essential to understand that this refers not to the contribution of construction to GDP but to the impact of transactions involving already completed real estate.

I believe that changing the perception of real estate as an investment and considering it as a long-term asset can ensure accelerated economic growth for the country.

It’s understandable why many here haven’t yet adopted this perspective. We’ve observed similar trends in other former Soviet republics, where any investment or asset was expected to pay off within one or two years, with little consideration for long-term investments.

In my opinion, this stems from the inability to plan long-term and a lack of legislative stability and consistency.

This environment drove people to seek quick and easy gains, which are insignificant compared to the long-term benefits of real estate investments.

In this sector, there is, unfortunately, no place for short-term capital since projects take three to seven years to progress from concept to completion. Only after they are operational do they start generating value and creating additional benefits.

Thus, the path Uzbekistan is taking, similar to other countries, is a natural process for developing markets. But as I mentioned earlier, Uzbekistan has the potential to traverse this path more quickly.

Moreover, if we look at certain market players and their projects, which have emerged over a relatively short period, we can see a competitive and healthy environment that allows for real estate investments and even short-term planning.

Real Estate Boom

Recently, there has been something of a construction boom, likely tied to compensating for what was not built in previous years.

Admittedly, such urban transformations often provoke negative reactions from the public—dust, noise, and disruptions to daily life and comfort.

In such cases, only a modern approach to planning and urban development can balance the interests of all parties. Construction is inevitable; what matters is how it is carried out.

Many complain about the density of development, saying they are losing private spaces.

However, there is the concept of "good density," where a city strikes a balance between the volume of residential and commercial spaces being built and public spaces such as alleys, parks, gardens, playgrounds, and sports facilities, with a primary focus on pedestrian accessibility.

In such scenarios, few developers consider the surrounding area or the long-term significance of their project within the city’s broader development.

Moreover, it is commonly assumed that an outdated building can simply be demolished and replaced with something new. But this is a brutal and careless approach to urban planning.

A Place for Collective Work

In Europe, more than half of GDP is generated in office spaces.

The analogy is similar to a car: the majority of its cost structure lies not in materials but in engineering solutions, innovations, technologies, marketing, and other intangible elements.

The same applies to offices. In modern production companies, most people do not work on the production floor but in offices, where additional and added value is created.

For cities, offices are a kind of "factory for human capital," where primary incomes for families and households are generated.

People and companies no longer need just square meters—they need an atmosphere. An office is not merely a place to write a few emails and drink coffee. It is a place for collective work, thinking, and the collision of ideas.

In fact, today, it is more accurate to call it a "place for collective work," as this is the unique function of office spaces.

However, what is most important to remember today is that any type of office must have a sustainable business model, quality maintenance, and a workspace that ensures safety.

European cities are currently witnessing a shift toward flexible office spaces. This trend is irreversible, as it did not "roll back" even during the pandemic.

Most flexible offices are created by repurposing traditional ones. This doesn’t require changing the lighting or doors but rethinking the organization of space to give employees more choices.

Our company itself transitioned from a conventional office in a business center to a flexible space with an open layout. In Tashkent, we now operate out of a coworking space.

In practical terms, office spaces are utilized, at best, only 50% of the time, with conference rooms being used only 20–30% of the time annually.

Investor Sentiment

Real estate remains a key asset in institutional investor portfolios. However, attitudes toward the attractiveness of these assets are beginning to shift.

Location is becoming less of a priority, with market conditions and the timing of transactions taking precedence.

There is a noticeable transformation in real estate investment formats—student housing, senior living, and similar projects are gaining traction.

What was never considered a "prestigious" project and previously overlooked by investors is now becoming an essential part of portfolios.

I believe that for Tashkent, such formats are highly promising, given the rising costs of rent and real estate, high urbanization rates, and the country’s predominantly young population.

Forecasts

Recently, there has been significant growth in rental housing prices and the cost per square meter. There is a marked increase in interest in integrated land development projects.

We predict that in 2023, the market will stabilize in these areas, though some segments could see price surges of 200–300%.

This growth is unlikely to pose a threat to the economy, as the market remains underdeveloped and relatively small. The number of projects capable of delivering high quality within their segment is still limited.

Challenges. Among the challenges is the high key interest rate, which has surged and has yet to decline. Currently, it outpaces inflation. A correction in this regard would make financing in Uzbek soums more attractive.

We hope that as the economy develops and GDP grows, households will gain additional resources to afford larger loans at lower interest rates.

Source: Spot.uz