New supply on the office real estate market in Kyiv in 2019 was around 100,000 square meters and record-hitting 255,000 square meters of areas are announced to go live in 2020
“Over the past four years, the Business Expectations Index in construction has grown significantly (137.9 points) and has broken an eight-year record. Thus, the new supply almost doubled compared to 2018 and amounted to about 100,000 square meters, and the total supply of office space in Kyiv amounted to 1.8 million square meters,” CBRE Ukraine (Kyiv), the consulting company, said in a press release.
According to developers’ announcements, in 2020 a record number of areas should enter the market – about 255,000 square meters. Moreover, in 2021 an additional 250,000 square meters is expected to go live and in 2022 some 250,000-300,000 square meters.
“The shortage of quality space in Kyiv resumed the activities of developers, as evidenced by an increase in the volume of new supply by 70% year-over-year in 2019. Despite such a sharp increase in the volume of new space, it is expected that the bulk of it will be absorbed by IT and the flexible office segment, due to pent-up demand for large quality areas,” CBRE Ukraine said.
Thus, the average vacancy rate is likely to remain at the same level or show a slight increase in the best areas on the market.
“If in the next two to three years, demand will correspond to the supply, then significant fluctuations in rental rates are not expected,” CBRE Ukraine said.
The low standard of quality in the commercial real estate market in Ukraine and a lack of systemic changes are the result of withdrawal of foreign investors, Serhiy Serhiyenko, the managing partner of CBRE Ukraine, has said at the meeting “Global Review of Ukraine’s Economy” in Kyiv.
“In order for this to change, the state needs to be ready to help interact with potential investors. Because the barriers to entering the market are huge. Today there are practically no international investors. They were, they tried, and they practically all left. Now we need a thorough approach from the city and the state to plan competitive business infrastructure,” he added.
The managing partner of CBRE Ukraine said that a lack of international players is the reason for stagnation – almost everyone creates the same product with minimal innovations, while there is no systematic change in the approach to real estate, although there is demand for quality products in the country.
“Today, I would say, the commercial real estate market is in a state of stagnation and underdevelopment. We do not have system investors, we do not have a systematic approach to real estate, we have a very low quality standard, despite the fact that there is demand,” the expert said.
According to him, over the past 4.5 years, more than 500,000 square meters of offices have been leased in the Kyiv market, of which 200,000 were rented by IT companies.
He noted that the demand from IT specialists is huge, but it cannot be satisfied, as many companies need large-scale areas of 20,000-30,000 square meters, which can only be provided by systemic international players.
On Wednesday, July 10, at 10.30, the press center of the Interfax-Ukraine news agency will host a press conference by UTG entitled “Half-Year Results in Real Estate Market of Ukraine 2019: Main Trends and Challenges.” Participants: UTG Director Yevhenia Loktionova, head of the strategic consulting department at UTG Kostiantyn Oliynyk, deputy head of the strategic consulting department at UTG Oksana Havrylevych (8/5a Reitarska Street). Accreditation of journalists by phone: +38 067 216 4343, +38 044 537 2364, or by e-mail: firstname.lastname@example.org.
The share of vacant space on the office real estate market in Kyiv in the first quarter of 2019 fell by 0.4 percentage points (p.p.), reaching 7.2%, the press service of Jones Lang LaSalle (JLL) in Ukraine has reported. “We expect a further decline in vacancy, although not significant. On the one hand, the low commissioning volume that has been observed on the market since 2015 and steady demand contribute to the absorption of space in existing buildings, on the other hand, rising rental rates restrain the activity of tenants,” Head of office Group at JLL, Alexandra Globina said.
The highest rental rates in class A facilities in the first quarter of 2019 increased 6%, to $32 per sq. m. a month, which corresponds to the value of five years ago, according to JLL. At the same time, rental rates in class B facilities also increased to $25 per sq. m. a month.
According to JLL, a decrease in vacancy and an increase in rental rates have led to a gradual increase in developer activity.
The total volume of transactions in the office real estate market in Kyiv in the first quarter of 2019 amounted to 22,500 square meters, with about half of the transactions accounted for IT-companies, JLL experts said.