Office H1 2021

Kyiv Office Property Market in H1 2021

Since May 2020 the nationwide lockdown in Ukraine was substituted by the so-called 'adaptive quarantine', meaning that the most restrictive measures have been lifted, except for the regions with high infection rates. After the record high statistics in April 2021 with over 20,000 new COVID-19 cases a day, during the remainder of H1 2021 the situation significantly improved. Despite the increasing pace of the national vaccination campaign that commenced in February 2021, Ukraine still has the lowest vaccination coverage in Europe.

The business expectations and consumer confidence improved during H1 2021, despite the growing concerns over the probable upsurge in new COVID-19 cases from September 2021. Nevertheless, economic recovery is expected in 2021 with the annual GDP growth of 4.1% projected by the Ministry of Economy of Ukraine. The EBRD more conservatively projects the economic growth of around 3.5% in both 2021 and 2022.

 

Demand

According to a new report from Cushman & Wakefield in H1 2021, occupier demand improved with take-up estimated at around 85,200 sq m, which is similar to the figure of H1 2019, but three times higher than the figure of H1 2020. Notably, about 45% of all take-up was formed by pre-leases in H1 2021. Net absorption, which was negative in 2020, in H1 2021 reached almost 53,000 sq m, indicating positive market dynamics.

Key office lease transactions, H1 2021

Property

Submarket*

Tenant

Area, sq. m

Type

BC at 52 Dehtyarivska Str.

NC-WB

A.G.R. Group

2,950

relocation

BC Richport

Podil

confidential

1,900

relocation

BC at 19 Druzhby Narodiv Bould.

Pechersk

confidential

1,900

renewal

* CBD – Central Business District; C – Central outside CBD NC-WB – non-central on the western bank of Dnipro River; NC-EB - non-central on the eastern bank of Dnipro River.

GLA – Gross Leasable Area.

 

Source: Cushman & Wakefield

 

New Supply

According to Cushman & Wakefield in H1 2021, new office supply in Kyiv amounted to around 90,000 sq m GLA, which is similar to the annual figure for 2020. Approximately 80% of the figure was delivered in Q1 2021, being comprised of a number of office buildings, delivery of which was postponed during several years. As of July 2021, the estimated 170,000 sq m GLA of new office space was under construction in Kyiv and scheduled for completion by the year-end.

New Supply

Source: Cushman & Wakefield

 

Vacancy

Due to the impact of COVID-19, economic slowdown and significant new office supply, at the end of 2020 primary vacancy reached 11.7%.

During Q1 2021 vacancy further increased to 13.8%, having slightly softened to 13.2% in Q2 2021.

Major office projects delivered in H1 2021

Property

Submarket*

Area, sq. m

Owner / Developer

BC LUWR

NC-WB

22,000

local developer

BC Platforma

C

17,200

City Capital Group

BC Wave Tower

NC-WB

12,070

local developer

BC GarmArt

NC-WB

11,800

local developer

* CBD – Central Business District; C – Central outside CBD NC-WB – non-central on the western bank of Dnipro River; NC-EB - non-central on the eastern bank of Dnipro River.

GLA – Gross Leasable Area.

 

Source: Cushman & Wakefield

Rents

According to Cushman & Wakefield since March 2020, the downward correction in occupational costs was witnessed across all office property classes in Kyiv, but still various properties were demonstrating differing rental performance. In Q1 2021, prime rents in the sector slightly increased, reaching USD 27 per sq m per month (net of VAT, service charge and utility payments), and remained stable during Q2 2021.

Rents

Source: Cushman & Wakefield

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