Snapshot: Kyiv warehousing property market, Q1 2020
Supply and demand
Following the trend of the previous several years, overall development activity in the warehousing and logistics property sector in the Greater Kyiv area remained low with no new deliveries in Q1 2020. As of early April 2020, Cushman & Wakefield projects that two warehousing and logistics properties of cumulative area around 60,000 sq m are scheduled for commissioning during the following three quarters of the year.
Take-up in the warehousing and logistics property sector in the Greater Kyiv area reached around 28,800 sq m in Q1 2020, which exceeded by around 15% the figure for Q1 2019 and doubled compared to Q1 2017, but it was by 35% less than take-up in Q1 2018. Significantly, pre-leases formed around 85% of all lease transactions signed in Q1 2020.
Cushman & Wakefield estimates that net absorption in the sector was negative and amounted to around (-40,800) sq m, being attributable to a change in leasing strategy of the landlords of several properties and partial vacation of a previously owner-occupied warehousing facility prior to the spread COVID-19. Though in March 2020 several lease transactions were postponed till after the quarantine, occupier dynamics in the Greater Kyiv area remained generally stable during the most of Q1 2020.
Rents and vacancy
Primary vacancy in the logistics and warehousing property sector in the Greater Kyiv area increased to 2.9% from 0,8% at the end of 2019, which is close to the level of vacancy during 2018. It is important to highlight, however, that both warehouses scheduled for delivery in 2020 are already from 40% to 100% pre-leased.
After several years of continuous rental growth during 2017-2019, in Q1 2020 rents for quality warehousing space were generally stable. In JanuaryMarch 2020, base monthly rents were 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. In view of the increasing risks related to economic slowdown amid the spread of COVID-19, since the second half of March 2020 many occupiers in the sector initiated negotiations with the landlords with the intention to decrease their occupational costs.