Can Commercial Real Estate Compete with Government Bonds? Ukrainian Developer Reports Up to 12% Dollar Returns
As Ukraine navigates through wartime economic challenges, investors are increasingly scrutinizing their options for preserving and growing wealth in a volatile environment. Dmytro Kovalchuk, CEO of Alterra Group, one of Ukraine’s prominent real estate development companies, has sparked renewed debate about investment strategies by suggesting that commercial real estate can deliver returns of up to 12% in dollar terms — potentially outperforming the popular Ukrainian government bonds (OVGZ) that have long been considered a safe haven for domestic investors.
The comparison between commercial real estate and government securities represents a fundamental question facing Ukrainian investors today. OVGZ bonds, issued by the Ukrainian government, have traditionally offered attractive yields, particularly in hryvnia, as the state seeks to finance its operations during wartime. However, the real returns on these instruments, when adjusted for currency fluctuations and inflation, present a more complex picture. Kovalchuk’s assertion that properly managed commercial real estate portfolios can compete with or exceed these returns challenges conventional thinking about risk-adjusted investment strategies in Ukraine’s current economic landscape.
Launching large-scale commercial real estate projects in Ukraine requires substantial capital commitment and careful planning. According to Kovalchuk, developing properties with a total area of approximately 150,000 square meters demands significant financial resources, with costs running into tens of millions of dollars depending on location, construction specifications, and market conditions. The development process in Ukraine typically spans several years from land acquisition through design, permitting, construction, and eventual leasing or sale. Despite the inherent risks associated with such long-term commitments, especially during periods of geopolitical uncertainty, developers like Alterra continue to see opportunity in the Ukrainian market.
The commercial real estate sector in Ukraine has undergone significant transformation over the past decade. Before 2022, the market was experiencing steady growth, particularly in major urban centers like Kyiv, Lviv, and Dnipro. Modern office complexes, shopping centers, and logistics facilities were proliferating to meet growing demand from both domestic and international businesses. The full-scale invasion disrupted this trajectory dramatically, causing immediate market contraction, suspended projects, and capital flight. However, the past two years have seen a gradual stabilization in certain segments, with logistics and warehouse facilities showing particular resilience due to increased humanitarian and military supply chain activities.
Fuel prices have emerged as a critical factor affecting construction economics in Ukraine. Kovalchuk highlighted how fluctuations in energy costs directly impact project viability and timelines. Construction activities are heavily dependent on fuel — from operating heavy machinery and transporting materials to powering generators at sites where grid electricity may be unreliable. The volatility in global oil markets, combined with wartime disruptions to fuel supply chains within Ukraine, has created unpredictable cost structures for developers. Some companies have responded by incorporating fuel cost escalation clauses into contracts, while others have invested in alternative energy solutions for construction sites.
The broader context of Ukrainian real estate investment must also consider the country’s post-war reconstruction prospects. International financial institutions, including the World Bank and European Investment Bank, have estimated that Ukraine’s reconstruction needs exceed $400 billion. This anticipated influx of international capital and development activity suggests substantial long-term opportunities for commercial real estate investors who establish positions before the reconstruction boom begins in earnest. Early movers in strategic locations — near transportation hubs, in western regions perceived as safer, or in areas designated for priority rebuilding — may capture significant appreciation as conditions normalize.
Risk assessment remains paramount for any investor considering Ukrainian commercial real estate. While potential returns of 10-12% in dollar terms are attractive, they must be weighed against factors including ongoing military conflict, regulatory uncertainty, currency volatility, and liquidity constraints. Unlike government bonds, which can typically be sold relatively quickly on secondary markets, commercial real estate requires longer exit timelines and may involve substantial transaction costs. Nevertheless, for investors with appropriate risk tolerance and time horizons, the asset class offers portfolio diversification, inflation hedging properties, and exposure to Ukraine’s eventual recovery story that pure financial instruments cannot replicate.
The debate between real estate and government bonds ultimately reflects broader questions about Ukraine’s economic trajectory and investor confidence in its future. Kovalchuk’s willingness to publicly advocate for commercial real estate investment during such uncertain times signals that at least some market participants see opportunity amid crisis. As international attention increasingly focuses on Ukraine’s reconstruction needs and path toward European integration, the investment landscape will continue evolving. For now, both asset classes retain their advocates, with the optimal choice depending heavily on individual investor circumstances, risk appetite, and beliefs about Ukraine’s medium to long-term prospects.
