The pandemic and the quarantine introduced because of it have hit all sectors of the economy, affecting all markets and businesses without exception
The real estate segment and everyone involved in it has also been affected. What has changed in the work of architects and designers?
A brief pause, then a surge
Almost all respondents noted that in the midst of quarantine, most customers put their projects on hold due to the uncertainty of the situation and panic that was spreading in society. But this was a temporary phenomenon. Having recovered from the shock, developers began to return to their projects, making adjustments to the orders in accordance with the new working and living conditions.
“The commercial real estate segment, having felt the effects of quarantine, is quickly adapting and realizing the need to adjust the business paradigm. Therefore, we are now being approached by representatives of those shopping, entertainment and office centers that subtly sense the inevitability of changes in their market and prefer to be at the forefront of processes,” explains Andriy Voitko, founder and CEO of AVG.
“Currently, we have inquiries from customers regarding projects that were previously developed for offices, and now plan to change the function — to premises for a different purpose that do not require constant contact of people in one place,” cites the example of Volodymyr Yosypchuk, chief architect of AVR Development.
As for residential real estate projects, work here has hardly stopped, but some changes have occurred.
“Developers have begun to focus even more attention on complexes that have all the conditions for life even during quarantine — supermarkets, pharmacies, a green area for walks. In addition, there is increased interest in residential real estate with private terraces. Such apartments were in demand even before quarantine, now this demand has increased,” says Oleksiy Kutsalo, founder of KYB Architects.
“The residential development segment will remain extremely active in the coming decade, since the need for private real estate in Ukraine will not be satisfied soon. According to sociological forecasts, the population of the capital and satellite cities will increase by 2–2.5 million residents in the next five years. This means that at the pre-quarantine construction pace, an acute shortage in the residential real estate market will persist in the next few years, and hence the need for residential complex design,” predicts Andriy Voitko.
The pandemic has increased demand for specific projects, so Anna Izquierdo, architect and CEO of AIMM, notes that demand for the design of medical facilities has increased.
“We received a flurry of offers for the preparation of commercial and planning projects for the development concepts of territories of various scales: mainly large and medium,” comments Vlodko Zotov, urban planner, Bureau of Initiative Architecture “GA”.
“The share of reconstruction and restoration orders in the city center has increased, since real estate in the center is always high-margin, even in a crisis,” adds Mykola Viharev, founder of VIHAREV architects & engineers.
Experts noted that overall, the ratio of commercial and residential projects in the order portfolio remained almost unchanged.
What are they saving on?
Since businesses have suffered financial losses due to quarantine restrictions, it would be logical to assume that customers would try to save money on new projects, but as it turned out, the desire to save money does not depend on either crises or pandemics.
As several design companies told us, the desire to make projects cheaper is a completely natural tendency of most Ukrainian customers, so in this sense almost nothing has changed.
“There is no radical new trend of cost reduction, there is the usual work on budget optimization, as a permanent “hygiene” of the project,” notes Alexander Popov, CEO, architect, co-founder of Archimatika.
“Increasing the cost of projects has never been a priority for investors, so, of course, substantiating the cost of technical solutions is important when developing projects. Cheap solutions are not always justified in the long term,” adds Andriy Antonenko, founder and managing director of the UVT group of companies.
As for foreign customers, the situation is a little different.
“It is impossible not to mention the differences and peculiarities of work between Ukrainian and international (foreign) customers. On the one hand, domestic companies are almost always ready for an unstable situation and another crisis, but at the same time are more inclined to save, while a foreign investor has a clearer vision of the future project and is still ready to act according to the previous plan,” comments Dmitry Omelchuk, Commercial Director of DELTA Ukraine.
Budget optimization mostly occurs at the expense of materials.
“We are searching for new ones that have been used less often. We are doing feasibility studies to better compare materials, engineering systems, and structures to understand what is cheaper and what is more expensive, which helps customers choose the optimal solution,” says Volodymyr Yosypchuk.
Quarantine did not lead to total savings, as competition increased, and anyone who decides to save as much as possible today will lose their client tomorrow.
“More acutely than the pandemic, customers are concerned about the formation of a competitive advantage, the creation of a new quality: there is no way to beat the price now, everyone’s costs plus or minus are comparable. All that remains is to do better than the competitor!”, adds Oleksandr Popov.
“Customers are eager to invest in a project that differs from competitors in high-quality materials, advantageous use of space, and solutions that are attractive to potential buyers and tenants,” comments Oleksiy Kutsalo.
Among the things that customers do not want to save on, Volodymyr Yosypchuk singles out landscaping and public areas for shared use in residential buildings. As the expert explains, developers understand that after the pandemic and the end of quarantine, such recreation areas will be valued in their projects.
Andriy Voitko notes that in commercial construction the approach is more comprehensive and extremely pragmatic.
“There are certain frameworks, such as the class of the building, which subsequently significantly affect rental rates. To do this, it is necessary to lay modern facade materials, energy-efficient engineering systems, and when developing interior design, higher-quality finishing materials. It is also necessary to take into account that from the beginning of design to the completion of construction, from 1 to 3 years will pass. This means that design and design solutions must be relevant after the development of documentation and commissioning of the construction object. And the task of the design company today is to optimize the customer’s costs and develop a project with an understanding of future market trends,” the expert explains.
Support for domestic manufacturers
Domestic building materials are gradually increasing their share in new projects, this was facilitated by several factors, including a more attractive price, delays in import supplies at the beginning of quarantine, and improving the quality and expanding the range of Ukrainian products:
“Do not underestimate domestic manufacturers. Now they offer really high-quality products that can compete on the international market,” comments Oleksiy Kutsalo.
The trend of switching to domestic materials was observed even before the quarantine, with most experts noting that they have long been trying to use Ukrainian-made materials in their projects.
“As conscious Ukrainians, we try to support a high-quality domestic product and immediately incorporate it into our projects,” — Anna Iskierdo.
“We have been using high-quality Ukrainian materials for a long time, despite any crisis,” — Mykola Vikharev.
“We always try to use domestically produced materials, we use imported ones only when there are no domestic ones of appropriate quality,” — Oleksandr Popov.
“In small-scale territorial planning projects, up to 100 hectares, we have been trying to use domestically produced products for many years: from crushed stone and paving to street furniture, lighting and landscaping,” — Vlodko Zotov.
According to Andriy Antonenko, the current situation on the market will contribute to the development of Ukrainian industry, the only thing is that this industry has a long way to go to obtain first-class products.
“I think that for Ukrainian producers, the current situation should definitely become an additional motivation to improve the quality of production and intensify marketing activity in their own market,” adds Andriy Voitko.
But under any conditions, imports will retain their share due to the fact that in some projects it is physically impossible to castling “import – domestic”.
“Is it realistic to make a project without losing the quality and appearance of the final product by replacing imported building materials with domestic ones? It’s hard to say. In some projects, this is impossible according to the company’s standards. Also, if an order and payment have already been made, the client will not rush to look for an analogue on the Ukrainian market. In general, the investor remains on the rational side, and tries to understand how critical the situation is now in order to optimally replace imported materials,” explains Dmytro Omelchuk.
Author’s supervision
During the quarantine, there were some problems with the author’s supervision, which is mandatory when implementing projects. After all, in some places it was not physically possible to visit the construction site.
“Some temporary difficulties arose at sites located outside Ukraine, as air traffic around the world was suspended. And the two-week observation at the border crossing made free access to construction sites even more difficult,” comments Andriy Voitko. “However, modern technologies helped to overcome the situation: in particular, in Croatia, webcams were installed by agreement with the customer, so our specialists continue to monitor the work.”
At Ukrainian facilities, the company continues to carry out its own supervision, only in compliance with quarantine requirements – using masks, disinfectants, etc.
Customers understand the importance of its own supervision.
“This is an opportunity for the developer to build the object that was designed, so every day customers are paying more and more attention to it, and not only within the framework stipulated by the legislation. Usually customers want us to live with the object during construction and help with all the little things,” says Anna Izquierdo.
“There are a lot of advantages of having author’s supervision for the customer: this is, first of all, analysis and approval of deviations from the project, and secondly, it is additional risk reduction for the customer. In Ukrainian realities, this service is not too expensive to save on it,” adds Andriy Antonenko.
Prospects
Experts agree that quarantine will be an important experience, and those who manage to learn from it will be able to win in the competition and increase the number of customers and projects.
As for market development, experts are still giving cautious forecasts, because it is not known when life will return to normal.
“It is very difficult to give a detailed forecast now, because quarantine measures are still continuing, albeit with relaxations. It is already clear that the situation will not return to normal in a week or even a month. Each of us, including real estate market players, will have to adapt and change,” comments Dmitry Omelchuk.
“We expect a stable situation by the beginning of 2021. Economic growth will begin in 21, and at some point this will push the industry to new investments in new projects, and then to new architectural orders,” predicts Alexander Popov.
Author: Iryna Nastych
