Kyiv office property market, Q3 2020
Supply and demand
In Q3 2020, new supply on the office property market in Kyiv amounted to around 43,200 sq. m GLA, bringing cumulative new supply for 9 months to around 78,800 sq. m, which is 30% and 50% more than in Q1-Q3 2019 and Q1-Q3 2018 respectively. New deliveries in Q3 2020 include the business centres Hillfort Business Mansion and Avenue 53, along with Forum Infinity and Forum Park Tower developed via reconstruction. The business centre Sigma was also completed and opened in Q3 2020, but the property was commissioned by its previous owner back in 2014, therefore it is not included into the new supply figure for Q3 2020. The next phase of UNIT.City Innovation Park will be completed in Q4 2020.
In Q3 2020, occupier demand was similar to Q2 with take-up estimated at approximately 32,500 sq. m, while cumulative take-up in January- September 2020 was around 70-75% less than during the first 9 months of 2019 and 2018. Out of 5 properties delivered in Q3 2020, two business centers achieved 90% and 100% occupancy. Net absorption was estimated at 3,500 sq. m in Q3 2020.
Rents and vacancy
Due to ongoing impact of COVID-19, economic slowdown and significant new supply, at the end of Q3 2020 primary vacancy reached 10.4% increasing from 9% in Q2 2020 and 6.5% at the end of 2019. Nevertheless, primary vacancy is expected to decrease by the end of 2020.
During Q3 2020 prime office rents remained at USD 27 per sq. m per month (net of VAT, service charge and utility payments). In view of the sharp deterioration of economic situation both in Ukraine and globally since Q1 2020, some downward correction in occupational costs across all office property classes is still likely during the coming months, but various properties on the market will demonstrate differing rental performance depending on their quality, occupancy and management.