The rental market in Uzbekistan is growing and becoming more transparent, according to industry expert Denis Sokolov.

 

In his author's column, Denis Sokolov, General Director of Commonwealth Partnership Uzbekistan, Chairman of the AmCham Real Estate Committee, and host of the "Real Estate Economy" podcast, reveals the secrets of profitable property management.

 

According to the State Tax Committee of Uzbekistan, as of August 1, over 515,000 lease agreements have been registered with tax authorities, generating nearly 600 billion UZS in taxes. Compared to the same period in 2024, the number of registered lease agreements increased by 9.1%, and the amount of accrued tax by 46.6%.

Based on 159.1 thousand lease agreements concluded between legal entities, 154.5 billion UZS in taxes have been accrued. Compared to the same period in 2024, the number of registered lease agreements increased by 14.1%, and the amount of accrued taxes by 34.7%.

The very fact of such a publication signifies not only that the rental market is gradually emerging from the shadows but also that the state is beginning to view this sector as a source of tax revenue for the budget and a driver of economic growth.

In other words, these figures are not just accounting; they are a signal: the rules of the game are changing, and transparency is becoming not just a trend but a condition for survival for developers and investors.

In Uzbekistan, most developers believe their work ends once a building is commissioned, and they should move on to the next project. In reality, it's the opposite. An office building, shopping mall, or warehouse, if built to a high standard, begins to generate income not only for the owner but also for the state and society from the moment it is put into operation. The amount of this income and public benefit is determined by the quality of its management. In most countries, the construction sector contributes 5-7% to GDP, while property operations contribute depending on the country's development. For developed countries, this figure can reach 20%, and for developing countries, 3-5%.

A modern building is like an enterprise, and for it to generate income and public benefit, it needs to be managed. Property management is a process no less complex than construction; it's like juggling burning torches: it's important not only to move skillfully but also not to forget the audience. A building is not just concrete and glass; it's a living organism. It has a heart – engineering systems; skin – facades; nerves – security and IT services. And if this organism is not managed, it quickly ages. Shopping malls, office towers, warehouses – all require not only strict order but also a creative approach.

A management company, appointed by the developer or chosen by the owners, balances the interests of the owner, tenant, and clients.

 

What is Professional Management?

 

Professional management means safety and efficiency. Ensuring the safety of owners, tenants, and their clients is a priority for management companies, as any accident or problem causes financial and reputational damage to the owner. This is why, in global practice, all major projects are controlled by independent management companies that professionally manage risks. Moreover, international classification requires the presence of a professional management company as a necessary attribute of a Class A building. In other words, an office without an independent management company is not perceived as a Class A building on the market, no matter how beautiful it is. The operation of modern buildings is expensive, as engineering systems require qualified personnel, and maintaining cleanliness with a high visitor flow requires regular and quality cleaning.

However, it is important to understand that the seemingly high operating costs per square meter, workstation, or visitor turn out to be cheaper than operating an outdated building. Modern layouts allow for one employee per 4-5 square meters, whereas older buildings require twice as much. Furthermore, services are included in the operation: reception, landscaping, security, and cleaning. Users don't have to worry about toilet paper, a gardener, or a security guard – they receive 24/7 service.

In global practice, the operating cost of high-class offices is $8-10 per month. In Uzbekistan, tariffs for the best properties are currently half that. Management efficiency lies not just in saving on tariffs but in providing the maximum services that users need.

Professional management is not just about numbers and reports but a constant search for balance between the interests of tenants, owners, and guests. A management company is like an orchestra conductor: when everything works in harmony, you hear music. When it doesn't, you only hear a cacophony of complaints and emergency calls.

 

IN GLOBAL PRACTICE, ALL MAJOR PROJECTS ARE CONTROLLED BY INDEPENDENT MANAGEMENT COMPANIES. AN OFFICE WITHOUT A PROFESSIONAL MANAGEMENT COMPANY IS NOT PERCEIVED AS A CLASS A BUILDING ON THE MARKET, NO MATTER HOW BEAUTIFUL IT IS.

 

Multiple Owners

 

In Uzbekistan, unlike neighboring countries, most commercial properties (retail, office, industrial) are sold by individual owners in separate units. As a result, an office tower can have 20-30 owners. This creates a significant problem in building management, as the interests of such owners can differ diametrically. Essentially, the building turns into a communal apartment with dozens of owners, and its management becomes an endless dispute. In global practice, professional management companies avoid taking on properties that have been sold off in units.

Unfortunately, an investor buying such an office unit does not realize that they will likely face problems during the operation of their premises. Moreover, they often fail to understand that even if they are not using the premises, they will still have to pay for the operation of engineering systems and common areas. And if an investor plans to simply invest money in real estate for resale and not rent it out, they should not buy premises in modern buildings, as mandatory payments, such as taxes and operating expenses, will "eat up" the resale profit over several years. The cost of property ownership is increasing in all countries as the economy develops and urban infrastructure improves.

 

Specifics of Managing Multifunctional Facilities in Uzbekistan

 

Unlike ordinary houses, the scale of tasks and challenges here is entirely different:

- Multifunctionality and tenant diversity. The same building houses corporate offices requiring privacy, offices for retail clients (lawyers, realtors), shops, and apartments. The management company must find a compromise between the interests of all who use the building;

- Law and order. It is necessary to carefully monitor the regulatory framework to avoid violations, claims from the state, and associated risks. Unfortunately, in Uzbekistan, the regulatory framework is often replaced by concepts and habits. The management company's duty is to bring all processes into strict compliance with the law;

- Technology. Ventilation, air conditioning, security, automation – the list goes on. It is important to understand that engineering systems are designed for high loads – a high density of people per unit area;

- Arrears. Low payment discipline is the biggest problem for the industry. Management companies constantly face cash flow gaps due to significant accounts receivable. An investor who paid half a million for a premise will postpone a $400 payment for operation until the last moment;

- Reputation. The reputation and image of a building are important not only for the developer but also for the investor and tenant. Everyone wants to live or work in a building that is considered the best on the market.

 

“A BUILDING SOLD OFF IN UNITS BECOMES A COMMUNAL APARTMENT WITH DOZENS OF OWNERS – ITS MANAGEMENT BECOMES AN ENDLESS DISPUTE”

 

The Future of the Industry

 

Unfortunately, there are currently few commercial properties in the country ready for professional management. However, the most experienced investors are already asking developers how a completed building will be managed.

On the other hand, the state already requires property owners to be responsible for their assets, financial transparency, and timely tax payments. Court practice on debt collection from malicious non-payers is also important, which in turn will increase the attractiveness of this business, including for international companies.

The emergence of international institutional investors and stricter banking regulations will increase demand for professional management services. Therefore, it is crucial today to train personnel and raise the overall qualification level in this sector.

 

“IN GLOBAL PRACTICE, THE OPERATION OF 1000 SQUARE METERS REQUIRES AT LEAST ONE PERSON – THE COMMERCIAL PREMISES OF TASHKENT ALONE CREATE TENS OF THOUSANDS OF JOBS”

 

Source: Votum