Interview of Dmytro Omelchuk, commercial director of DELTA Ukraine, in the business publication LDaily!

Dmytro Omelchuk, commercial director of DELTA Ukraine, is sure that with the right organization of activities, it is possible not only to preserve business in a crisis situation, but also to expand it. What an experienced manager proves on the example of his company, informing LDaily readers about the necessary organizational reforms, the principles of the company’s culture and its corporate values, as well as about the features of the real estate market that require innovative solutions today and in the future.

LDaily: DELTA has been operating in Ukraine for over 12 years. How have the trends in the Ukrainian real estate sector changed over the years?

D. Omelchuk: During all this time in Ukraine, we managed to see many events and survive a number of crises that changed both the country and us. Financial and economic crises, war, pandemic… This is what affected the development and trends in the domestic real estate sector and directly on the company itself.

In fact, trends in Ukraine are changing similarly to European trends. I would say almost in unison. Sometimes faster, sometimes slower. Mainly, the approaches to development and the requirements for the architecture and concept of the facility were changing. If about 10 years ago the main criteria for a development project were price and location, now the buyer has become more demanding, and the market is more saturated. Now you need to “lure” the client to your facility. This can be done with a thoughtful and modern concept of the object.

LDaily: Which segments of real estate in Ukraine are of the greatest interest among investors?

D. Omelchuk: Here the question should be divided into two parts regarding priority in time. As for the short-term perspective, we all understand: the situation with COVID-19 has radically changed the real estate market, and not only in Ukraine. Currently, logistics real estate is developing as intensively as possible. And there are several reasons for this. First, as the last crisis showed, the logistics segment was the most protected. That is, the need to store products has not decreased. Secondly, more and more demand falls on the field of e-commerce. Here we predict further growth due to the fact that more and more retail will switch to the e-commerce format and actively develop it. Thirdly, it is an insufficient supply of quality warehouse space. In recent years, not so many logistics projects have been brought to the market. Therefore, there is a certain shortage of quality areas. And the last thing is the development of intra-city logistics. Right now, there is considerable demand for warehouse projects in the city, which allows retail to significantly save on the cost of logistics and the time of delivery of goods to the buyer. And also gives him an additional competitive advantage over others.

Regarding the forecasts: the optimization and interconnection between logistics centers and their transport connections will become more intensive and developed, and the supply of construction objects of warehouse real estate will enter a phase of rapid growth.

Regarding offices and co-working spaces, we see that such projects have temporarily taken a backseat and are preparing to transform. We all understand that work from home cannot last long, so the need for office space will eventually increase. However, in my opinion, the advantage will be not just square meters somewhere in the central part of the city, but office complexes that will meet the criteria of safety, internal comfort and quality.

We also see that healthcare facilities are coming to the fore. Next year, we expect moderate growth and investments, because the crisis revealed potential opportunities and showed the problems of existing clinics.

LDaily: What are the main factors affecting the construction market of Ukraine? What slows down its development?

D. Omelchuk: The most important factor is attracting investments. We noted that in the middle of 2020, the price of attracting bank investment became somewhat lower, which had a rather positive effect on the number of new projects planned for 2021. For many market players, institutional financing from international financial institutions is available, the cost of which is much lower, but the requirements for the project and the borrower have become stricter.

The main factors inhibiting the development of the market are its significant regulation, lack of transparency and the difficulty of obtaining permits. That is, the construction part itself is clear and simple for the developer. The economic part of the project as well. However, when it comes to changing the purpose of the land plot, obtaining town planning conditions and restrictions, obtaining a construction permit and putting the object into operation, there are always many “surprises” waiting for us here. And it is the local investor who has a significant advantage over the international one, since he is already adapted to these market conditions and features and can predict and avoid them in advance.

LDaily: Do you see an increase in demand for economic real estate? What forecast do you give in this direction? What solutions does your company offer?

D. Omelchuk: I think that these projects will be in demand in the long term. Undoubtedly, interest on the part of investors is growing, but, unfortunately, interest remains in many projects. One

among the factors of growth of demand and interest, no matter how banal, there is finance. If the developer aims to attract financing from the EBRD, IFC, etc., he must meet the criteria of sustainable development and energy efficiency. Therefore, the easiest and most understandable way to do this is the “green” certification of buildings according to one of the international standards. LEED, BREAM and EDGE remain popular in Ukraine. Each of them has advantages for certain objects and goals of the developer.

Therefore, the development of eco-projects and projects with “green” certification is clearly a trend that, albeit slowly, is firmly entrenched in the Ukrainian market. For some companies, it is also an indicator of prestige and care for the consumer (client).

Certification according to LEED, BREAM, DGNB and EDGE standards is one of the services provided by DELTA Ukraine. It was our company that carried out the first certification in Ukraine according to the DGNB system in 2014 (BILLA supermarket in Kyiv) and the first LEED certification. Therefore, we can note a stable trend towards harmonious growth of this market in Ukraine.

LDaily: How did the coronavirus affect the Ukrainian real estate market? How is the company coping with the current crisis?

D. Omelchuk: It is worth noting that there is not a single industry left that would not suffer to one degree or another from the coronavirus quarantine in Ukraine. Currently, it is still too early to talk about the consequences it led to both in the capital and in the regions, because they will depend on the further development of the situation in the country. The construction sector is one of those that has not frozen and continues to function, although it certainly faces its difficulties and challenges. We see that some projects are frozen, while others, on the contrary, have gone into active construction and implementation. I’ll be honest: at the beginning of spring, we expected that 90% of our projects could be frozen. Fortunately, this did not happen.

On the contrary, the number of projects that we are currently working on is greater than in 2019. This is because it is not new for us to work, maintain communication and hold meetings online, since the customer or project manager can be in any part of the world. So we keep our finger on the pulse of events and are ready to quickly respond to changes. Perhaps we adapted to the changes in time and somewhat changed the vector of development. Currently, we are focused on cooperation with local investors and developers, because we have something to offer them. Starting with experience in consulting and project development, Western expertise and support, and ending with modern digital tools for project management.

LDaily: What projects is currently being implemented by DELTA? What are the main requirements put forward by customers?

D. Omelchuk: We are currently focused on warehouse real estate. About five projects with a total area of ​​about 100,000 m2 are currently being implemented. We are just starting to work on a few more. The experience gained gives us the opportunity to make such projects as attractive as possible for the market and to be effective for the investor.

Another vector of development is cooperation with international organizations in Ukraine. Currently, we provide various services to organizations such as the World Bank, UNICEF, UNOPS, GIZ, and others.

The main requirements of the customer are a complete understanding of his goals and plans, readiness to work at his pace (and often this is a format of 24/7 availability), deep expertise and a professional approach. That is, it is important for the customer to have a partner who would treat his project as his own.

For us, the main key to success is communication and culture. Correctly constructed communication in the project is already a significant part of its success. The main rule of the company when interacting with customers is the tactic of win-win, win-win relations. We win only when the customer wins.

LDaily: Everyone knows the risks of doing business in Ukraine. Which of them can you highlight? How do you minimize these risks? Is it easy for a foreign company to work in Ukraine?

D. Omelchuk: In my opinion, every company doing business in Ukraine faces a number of risks, and we all know them well. The main difference is preparation and reaction to them. Nowadays, it is better to talk not about risk minimization, but about quick and timely reaction to events. It is this, when properly assessed, that helps turn risk into a controlled movement into the unknown. One of the main successes we have achieved is the formation of the right team and company culture principles, which are embedded in DELTA’s DNA. It is culture and communication that make it possible to avoid most risks or react to them correctly and in time.

In general, DELTA Ukraine operates under the same conditions as other market players, and it does not matter if it is a local or foreign company. Yes, we have significant experience in project implementation in various European countries and expert support from colleagues from other offices of the DELTA group. At the same time, we do not have any concessions: we compete on the same level with Ukrainian companies.

LDaily: What is the difference between starting a business in Ukraine and Austria?

D. Omelchuk: This is probably the question we are asked most often. If we approach globally, then of course there are differences, but they are not as drastic as we sometimes think. I think so

the first difference is the conduct of business, which in Austria is more amenable to long-term planning and is more predictable. That is, in Austria, we rarely radically adjust our plans, direction of development, financial indicators, etc. The second difference is that in Austria, and even in the Czech Republic and Slovakia, we do not have to explain to the customer for a long time that proper consulting and professional project management will cost less and be much more effective than building our own structure.

LDaily: Please share the company’s plans in the short term.

D. Omelchuk: Probably, the main plan is to prepare for a new challenge. The crisis has not gone anywhere, although in the summer we felt a certain relaxation, but now we should prepare for new challenges. And now the most important task is to support the team spirit, values ​​and quality standards of DELTA, regardless of whether the services are provided to the customer from the office or from the home office. And believe me, it’s not that easy.

We passed the spring crisis thanks to a stable foundation of values ​​and culture, so now we are only strengthening it and preparing for new challenges. Currently, our main plan is to work with project teams and help customers with them. In addition, active work is carried out on the development of the company in the field of digitization. We have our own cloud-based construction project management platform, Datenpool, and are constantly adding new useful features to it. Today, most of our concepts are presented to customers already in virtual reality glasses, so you can feel and see absolutely all the details of the future construction. Our own project department is maximally focused on BIM technologies, and people on construction sites are beginning to test and implement augmented reality (XR) technologies. Now we have a good chance for the development of these technologies in Ukraine.

Another significant step was the development of our subsidiary company in Ukraine, which deals with general contracting — ALPHA Construction. Nowadays, we can not only implement plans for design or project and construction management, but also directly carry out construction work, and it does not matter according to which scheme, EPC or EPCM. We offer a completely new model of interaction with the customer on the market of general contracting services, which is based on the principles of complete transparency. Transparency in everything — in pricing and costing, in the structure, the cost of managing a general contracting project, in the amount of profit, and so on. For Europe, the Open Book scheme is already a development classic, while in Ukraine we are just beginning to prove its effectiveness and economic benefits.

LDaily: How was 2020 for your company? What results have you achieved this year?

D. Omelchuk: Paradoxically, this year was quite successful for us. Even during the crisis, we significantly expanded the portfolio of objects and completely turned the vector of development from cooperation with international investors to cooperation with local clients. Now we perfectly understand what the Ukrainian customer needs and what value we can bring to him in the project. Our main merit is that we not only kept our team in a difficult period, but also developed and continue to develop it. We have never reduced the expenses for financing the salary fund, we actively work on the development of our team and pay maximum attention to increasing professional competence and personal training.

Regarding the financial results, I will say sincerely: we did not achieve the predicted indicators, and most likely, we will not achieve them. Fortunately, however, this is not the primary goal for the company and shareholders. For us, the main value is people and our customers. Therefore, I can say with confidence that 2020, despite the crisis, turned out to be not easy, but interesting, rich and successful for DELTA Ukraine.