MARKETBEAT, Kyiv, Ukraine, Office Q1 2020

Office real estate market in Kyiv in Q1 2020

The new Cushman & Wakefield report shows the dynamics of the office real estate market in Kyiv in Q1 2020 and investigates, whether key market indicators in Q1 2020 changed due to the pandemic spread.

 

Demand

In Q1 2020, occupier demand was very low with take-up estimated at approximately 7,900 sq m, being around 80% less than the figures in the respective quarter in 2019 and 2018, while net absorption reached only around 3,000 sq m. During first quarter of the year transactional dynamics on the office property market in Kyiv is traditionally lower compared to other three quarters, but in 2020 amid the spread of COVID-19 many deals planned for March were temporarily put on hold and postponed till after the quarantine.

 

Key Office Lease Transactions, Q1 2020

Property

Submarket*

Tenant

Area, sq m

Type

confidential

NC-WB

confidential

1,700

pre-lease

BC at 15 Leiptsigska Str.

 

Pechersk

confidential

735

relocation

BC Senator

 

Pechersk

confidential

540

additional location

BC Zitadelle

 

Pechersk

 Goethe-Institut

500

expansion

*NC-BW – non-central area on the western bank of Dnipro River

Source: Cushman & Wakefield

 

New Supply

In Q1 2020, new supply on the office property market in Kyiv amounted to around 7,500 sq m GLA, which is only 15% of the figure for Q1 2019 and around 50% of the figure of Q1 2018. The office building ‘Nyvky City’ developed via reconstruction was the only property delivered in Q1 2020.

 

MARKETBEAT, Kyiv, Ukraine, Office Q1 2020

Source: Cushman & Wakefield

 

As of early April 2020 over 200,000 sq m GLA of new office space was scheduled for completion by the year-end, however the evolving economic slowdown, in Ukraine and globally, is likely to result in a downward correction of the actual new supply in the sector during the following 9 months. BC Hillfort Business Mansion

 

Key Office Projects Scheduled for Completion in Q2-Q4 2020

Property

Submarket*

Area, sq m

Owner / Developer

BC Lukyanivskyi

NC-WB

22,000

local developer

BC Sigma

NC-WB

18,764

MERX

BC Avenue 53

NC-WB

18,300

local developer

BC at 4 Korolenkivska Str. (phase 1)

CBD

18,000

TRK

BC M8

Pechersk

13,000

local developer

BC Hillfort Business Mansion

CBD

8,550

NEST

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

Source: Cushman & Wakefield

 

Vacancy

Despite the quarantine measures and economic slowdown, primary vacancy reached 6.7% in March 2020, which is only a minor increase from 6.5% at the end of 2019. Primary vacancy is presently forecast to increase until the year-end, due to a quite sizeable pipeline supply in the sector combined with a potential correction of expansion and/or relocation plans of a number of office occupiers in Kyiv.

 

Rents

In Q1 2020, prime office rent remained at USD 30 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, some downward correction in occupational costs across all office property classes is now likely during the coming months, but various properties on the market will demonstrate different rental performance depending on their quality, occupancy and management.  

 

Marketbeat

Source: Cushman & Wakefield

"The current slowdown in the office real estate market in Kyiv is primarily due to the deterioration of the overall economic situation and business dynamics in Ukraine and the world because of a global pandemic coronavirus infection and radical quarantine measures," explains Marta Kostiuk, Head of Research and Development Consultancy at Cushman & Wakefield in Ukraine. - Although the uncertainty about the duration of current quarantine activities in Ukraine and the world, as well as their impact on economic and business dynamics, poses significant risks, the office real estate market in Kyiv is small in volume and has further potential for development in terms of available formats and objects quality. The vacancy in the segment is low, and most tenants who plan to move to other office properties or extensions do not abandon their plans. These factors, combined with Ukraine's recent progress in the negotiations with the IMF, allow us to look positively at the future of the office real estate market in Kyiv, despite the obvious complexity of the current situation in Ukraine and the world. "

 

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