Investment Perspectives of the Commercial Real Estate Market

Baker Tilly’s annual analysis highlights key developments and prospects for Kazakhstan's market.

In 2023, the volume of services rendered for the lease and operation of offices, retail, and warehouse premises in Kazakhstan amounted to 717 billion KZT, showing a slight decrease of 11% to the results of 2022, which is due to the stabilization of sales in shopping malls and shopping and entertainment centers, which was caused by an increase in attendance of shopping and entertainment centers by citizens of the Russian Federation. At the same time, comparing the pre-pandemic period - 2019 and the results of 2023, the volume of services provided by commercial real estate owners increased by 94% (from 370 billion KZT). The growth of the indicator is due to an increase in rental rates for commercial real estate, as well as an increase in the volume of space in the market.

Offices analysis

In 2024, the office market in Almaty and Astana faces a shortage of quality space. As of the 9 months of 2024, the total office space in Almaty is 2,371 thousand sq. m., where Class "A"/"A+" offices account for 220 thousand sq.m. (9.3% of the total space), Class "B"/"B+" offices - 1,110 thousand sq. m. (46.8%), and Class "C" offices - 1,041 thousand sq. m. (43.9%). As of 9 months of the year, the indicator of office space per 1,000 inhabitants in Almaty city amounted to 1,044 sq.m.

In Astana, the total office area is 1,665 thousand sq. m., where "A"/"A+" Class offices occupy 159 thousand sq. m. (9.5%), "B"/"B+" Class offices - 656 thousand sq. m. (39.4%), and "C" Class offices - 850 thousand sq. m. (51.1%). For the 9 months of 2024, the indicator of office space per 1,000 inhabitants in Astana city amounted to 1,117 sq.m.

For 9 months of 2024, the weighted average rental rate in Almaty is as follows: in Class "A"/"A+" offices the rate amounted to 20,100 KZT/sq. m., in Class "B"/"B+" the rate is 12,500 KZT/sq. m. Over the same period, the weighted average rate for Class "C" is 5,300 KZT/sq. m. The main factors of rental rate growth were the low vacancy of vacant premises, growth of operating expenses, as well as the cost of construction.

Demand for office space in Classes “A”, and "B" remains high, especially among international companies. As of the 9 months of 2024, Class “A”/”A+” offices in Almaty are 95.6% occupied and Class “B”/”B+” - 95.8%, while for 9 months of 2023, the occupancy rate for these classes was 94.4% and 93.7% respectively. In Astana, the situation is similar, with the occupancy rate for the "A"/"A+" Class at 95.4% and the "B"/"B+" Class at 96.0%, having increased over the year from 90.4% for the "A"/"A+" Class and 90.8% for the "B"/"B+" Class.

Warehouses analysis

The current economic situation in the country contributes to the active development of the warehouse real estate industry. The rapid growth of the industry is due to the increase in foreign trade volumes, expansion of transit traffic, and development of the e-commerce market.

The total area of quality warehouses (Classes “A” and “B”) for 9 months of 2024 is 1,493 thousand sq. m. Class “A” warehouses account for 75.5% of the total area - 1,128 thousand sq. m., while Class “B” warehouses account for 365 thousand sq. m. (24.5%). The vacancy of warehouses was 3.7% for Almaty and 8.1% for Astana.

The availability of quality warehouses (Classes "A" and "B") per 1,000 people as of 9 months of 2024 stands at 7.4 sq. m. According to this indicator, Kazakhstan is behind many developed countries.

The weighted average rental rate for Class “A” warehouse as of 9 months of 2024 excluding VAT, operating, and utility costs in Almaty is 5,400 KZT/sq. m. per month, in Astana, the rental rate is 4,800 KZT/sq. m. Class “B” rental rate is 4,000 KZT/sq. m. in Almaty and 3,000 KZT/sq. m. in Astana

These market trends reflect the increased interest in high-quality Class “A” and “B” facilities, which tend to focus on warehouse technologies: ceiling height, building capacity, automation systems, and climate control, which increase the overall cost of design and construction. There is also a tendency in the country to build large logistics hubs, and as a rule, the construction of these facilities increases the cost of the facility by additional investments in infrastructure and transportation.

Retail premises analysis

Over the last ten years, retail real estate in Kazakhstan has undergone significant changes, reflected both in the area of commissioned shopping and entertainment centers (SECs) and in the dynamics of their development. Despite the growth of online sales and e-commerce, the volume of traditional trade remains stable. Kazakhstani shoppers still prefer the "offline" format of shopping. In addition, visiting shopping malls is part of cultural leisure, which contributes to maintaining high attendance.

The vacancy of retail space in Almaty and Astana remains extremely low, and the average occupancy rate of SECs is over 95% (97.5% in Almaty and 95.1% in Astana). This indicates that even with the decline in the volume of services provided in shopping centers and malls, the demand for quality retail space is not decreasing. Businesses continue to choose modern shopping malls, which emphasize the steady demand for offline shopping formats. The weighted average rental rate in Almaty as of 9 months of 2024 was 21,624 KZT/sq. m. excluding operating expenses, compared to 19,505 KZT/sq. m. a year earlier. In Astana, weighted average rates for similar areas are 21,306 KZT/sq. m., up from 19,218 KZT/sq. m.

Thus, the natural factors that occurred in the country in 2024 did not affect the plans of investors in investing in commercial real estate. The shortage of quality premises and rental rate growth is observed in every segment of commercial real estate, which is a positive signal of market entry and the main factor of the attractiveness of investments in the industry.

Full industry analysis is provided at the link.

Kamila Khilanova, Manager |Business Valuation

Akbota Maratova, Senior Consultant |Business Valuation