Kyiv warehousing property market, Q2 2020
Supply and demand
In Q2 2020, there were no new deliveries on the warehousing and logistics property market in the Greater Kyiv area. Nevertheless, in view of stable low vacancy having decreased to record low levels towards the end of 2019, development activity in the sector picked up. As of August 2020, Cushman & Wakefield projects that around 125,000 sq. m of new warehousing space may be commissioned in H2 2020 with additional 50,000 sq. m in pipeline for 2021.
Take-up in the warehousing and logistics property sector in the Greater Kyiv area reached around 51,000 sq. m in Q2 2020, which was around 25% less the figure for Q2 2019, but almost doubled compared to Q1 2020. Pre-leases formed around 30% and 85% of all lease transactions signed in Q2 and Q1 2020 respectively. Take-up for H1 2020 amounted to around 79,800 sq. m, which is only 15% less compared to the figure in H1 2019.
Cushman & Wakefield estimates that net absorption in the sector amounted to around 8,150 sq. m in Q2 2020. Though in March 2020 several lease transactions were postponed till after the quarantine, and in Q1 2020 net absorption was negative, occupier dynamics in the Greater Kyiv area remained generally stable during the most of H1 2020.
Rents and vacancy
Primary vacancy in the logistics and warehousing property sector in the Greater Kyiv area reached 2.6% at the end of Q2 2020, having decreased from 2.9% in Q1 2020. Furthermore, warehouses scheduled for delivery in H2 2020 are already partially or fully pre-leased.
After continuous rental growth in 2017-2019, in H1 2020 base monthly rents for quality warehousing space were generally stable in the US dollar equivalent, being in the range of 4.0-5.8 per sq. m for prime warehousing space, and at around USD 3.2-3.8 per sq. m for the highest quality B class properties. At the same time, in a number of properties with UAH denominated leases base rents decreased in the US dollar equivalent due to the hryvnya depreciation by more than 12.5% since the year start. Though rare temporary discounts were provided to some occupiers in the sector in April-May 2020 because of COVID-19, starting from June lease terms in most cases were brought back to pre-quarantine arrangements.