Rental activity in the warehouse real estate market of Ukraine in January-June 2024 increased by 13% compared to the same period last year and amounted to about 70 thousand square meters, according to a study by CBRE Ukraine.
“Despite the ongoing war and related challenges, the warehouse market continues to show signs of recovery and is the most stable segment of commercial real estate today. Although the volume of leasing activity is still restrained due to the current market conditions, several large tenants are exploring market opportunities for expansion, which may have a positive impact on leasing transactions in the coming quarters,” the company said in its report.
According to the company, the main trend in the first half of the year was the predominance of preliminary lease agreements in the structure of gross absorption, which are concluded before the commissioning of facilities. The reason for this was the low vacancy rate on the market – at 2%, as well as growing demand from the wholesale and retail trade segment and pharmaceutical companies, CBRE notes.
In the second half of 2024 and in 2025, about 170 thousand square meters of new supply is expected to enter the market, which will reduce the pressure of minimum vacancy, according to the company’s analysts. In addition, over the next two years, it is planned to restore 100 thousand square meters of warehouse space that was destroyed as a result of the aggressor’s missile attacks in 2022.
By the end of the first half of 2024, the prime rental rate for warehouses in Kyiv amounted to $4.9 per sq m per month (excluding VAT and OPEX payments), which is on average 20% lower than in other capitals of Central and Eastern Europe. At the same time, the cost of construction of warehouse real estate in our country is 20% higher than in our neighbors: $500-600/sq m versus $400-500/sq m. This is influenced by the economic and energy crisis, hostilities, labor shortages and supply chain disruptions, the study says.
At the same time, there is an increase in investment activity in the Ukrainian warehouse market. CBRE points out that among foreign investors interested in industrial real estate, construction companies that plan to participate in the restoration of Ukraine after the end of active hostilities stand out.
In addition, European companies are actively considering nearshoring (outsourcing to neighboring countries) in Central, Southern and Eastern Europe, including Ukraine. According to the CBRE European Logistics Occupier Survey 2024, 68% of respondents believe that outsourcing will have a significant impact on the development of logistics in Europe in the near future.
CBRE, headquartered in Los Angeles (USA), is the world’s largest commercial real estate advisory and investment company, with revenues of $30.8 billion in 2022. According to Fortune, it is one of the world’s 500 largest companies. CBRE Group Inc. shares are traded on the New York Stock Exchange. CBRE’s Ukrainian office was opened in January 2008 and is part of the company’s affiliate network.
Source: https://interfax.com.ua/
The Ukrainian real estate market is unbalanced, amid low demand and declining new supply, reported prices from developers are growing, while rental prices are falling, according to the National Bank of Ukraine (NBU) Financial Stability Report for December 2022.
It notes that demand for housing remains weak and unstable: the interest of few buyers depends on the intensity of the shelling of settlements and decreased again in the fourth quarter.
The existing demand is focused primarily on ready-made housing for residence, almost zero speculative for the purpose of further resale or lease.
The number of new buildings under construction is slowly increasing after an almost complete standstill in the first months of the war. In the country as a whole, work has resumed on more than two-thirds of sites, mostly in housing complexes in the final stages of construction. At other sites the resumption of work has occurred only on paper.
According to the State Statistics Committee of Ukraine, for the three quarters of 2022 completed construction of 2.8 million square meters. m multifamily housing. As noted in the report, this is half the record for the same period in 2021 and only a quarter less than the average of the previous five years.
Much worse is the situation with the start of new projects. In the first nine months of this year, developers received permits to build half as many multifamily units as the average for the same period of the previous four years. However, obtaining permission is not an indication of the start of construction – the actual start of construction work can be delayed for a long period.
The report also reminds us that, according to the “Russia Will Pay” project, more than 16,000 apartment buildings and almost 127,000 private homes have been destroyed or damaged since the start of the full-scale war until November.
The low activity of the primary real estate market, together with the significant amount of housing damaged by the shelling, will lead to a reduction in the supply of housing in the near future, and in the future to a possible shortage of housing. At the same time, the declared purchase prices are mainly increasing, while the rental prices remain almost twice as low as before the war.
The report states that the multidirectional price movements reflect an imbalance in the real estate market, relatively cheap rents will deter demand for the purchase of housing.
The price-to-rent ratio has risen substantially since March and is now at an all-time high. In terms of price, renting seems to be a better alternative than buying, and this situation will persist for a long time.
The war caused and continues to cause significant damage to the economy of Ukraine. Today, perhaps, the construction and real estate markets suffered the most from the hostilities. Thus, the report of the National Bank of Ukraine “On Financial Stability” dated June 17, 2022 indicates that since the beginning of the war, the market has practically stopped, both in terms of construction and the sale of housing. At the same time, according to the NBU, the situation has begun to level off in recent weeks, and above all in the regions that are least affected by the destruction from the war.
The most favorable situation is in the western regions of the country, while the National Bank notes that a number of significant problems remain there. First of all, this is a market imbalance, when the prices declared by sellers are not supported by demand and are supported artificially.
As for construction, here, according to the regulator, the situation is more optimistic. Developers have restored work on almost 50% of the facilities in the country. The most positive dynamics is observed in the western regions, in the center and in the Odessa region.
As for the office real estate market, according to the NBU, it suffered to a greater extent from the massive transition of staff to remote work.
The Open4business portal asked financial expert Igor Stakovichenko to comment on the current situation. In his opinion, the severity of the crisis in the real estate market directly depends primarily on the intensity of hostilities in various regions of the country, as well as on the well-being of the population.
“We see that the demand for housing in the same Kharkiv and Dnipro collapsed almost equally. At the same time, housing construction in Kharkiv is at a standstill, while in Dnipro it is being restored. This is due to the risk assessment by developers, since the Kharkiv region is now under devastating shelling by the aggressor,” the expert believes.
In his opinion, most of the prices in both the primary and secondary markets are dictated by the overestimated expectations of developers who continue to hope to find a buyer for their goods despite changes in the economy and a decrease in the income of part of the population.
“Builders think in the old way, and form the price based on the cost and those mark-ups that were fair in the pre-war period. Buyers have become much more cautious and assess the risks, in particular, the presence of bomb shelters, evacuation routes, and so on. As for the secondary market, here prices are often drawn from the ceiling, hoping more for luck, ”said Stakovichenko.
According to the expert, market recovery can be expected after the end of the war, when the demand for housing will increase and investors’ fears will decrease.
CONSTRUCTION, EXPERT, FINANCY, IGOR STAKOVICHENKO, MARKETS, REAL ESTATE MARKET, STAKOVICHENKO
