Rental rates: non-essential changes
Related article: Assess the reliability of the builderLow development activity coupled with relatively high demand of tenants led to a slight increase in rental rates and actual costs associated with the rental of office space in Kiev.
As of the last quarter of 2017, rental rates for the best office space in Kiev were in the range of 18-26 dollars per square meter. m per month. At the same time, the achievable rental rates for class B and C office premises were at the level of $ 8-17 per sq. M. m per month and 4-12 dollars per square meter. m per month, respectively.
Due to improved demand dynamics combined with a record low supply of new office space, the primary vacancy in the office real estate market in Kiev, according to experts, fell from 21.3% in the first quarter of 2016 to 12% at the end of 2017, which is the lowest since 2011.
Who formed the demand?
According to JLL analysts, about 50% of demand was generated by the dynamically developing IT sector, and there was also an increase in demand from companies in the manufacturing and business services sectors.
"Lease agreements related to relocation of companies to other office premises accounted for approximately 52% of all transactions in the office real estate segment in Kiev, another 30% have formed agreements to revise the terms of lease or renewal of lease agreements. It is important to note that the remaining 18% is the share of prisoners during the period of preliminary lease agreements, which, in principle, were absent in the market of Kiev from 2009 to 2017, "says Marta Kostyuk, head of the department of analytics and consulting for development of Cushman & Wakefield in Ukraine.
Trends of the year
Experts agree that the office market in Kiev is now at an early stage of recovery. There is a steady demand, the volume of absorption is comparable with the pre-crisis indicators of 2011-2013, as a result, the vacancy rate decreased throughout the year. At the same time, tangible growth in rental rates has not yet begun, and development activity is still at a low level.
Forecast for 2018
Experts Cushman & Wakefield expect that over the next 6 months rental rates for the best office space in Kiev will increase. At the same time, most likely, in other classes of office premises, the average achievable rental rates will remain at the current level, but lessors are less likely to agree to lease benefits (for example, compensation for repair and rental holidays).
"During the first half of 2018, we expect a further decrease in the level of the primary vacancy in the office market in Kiev to about 10%, which is due to the small volume of the new offer announced for commissioning in the short term," says Levon Papoyan, head of the department office real estate, Cushman & Wakefield in Ukraine.
Loading has grown, tariffs - no
The popularity of Kiev hotels is growing. This has been fixed by operators over the past few years. So, according to the results of 2017, the download of high-quality hotels in Kiev exceeded 47% against 39% in the same period of 2016 and 33% - in 2015.
"This indicator is gradually approaching the standard for Kiev average level - 50-55% per year. The significantly increased number of international events in the city is once again beginning to attract the guests' interest in Kiev, filling the city hotels with tourist and corporate groups, "says Tatiana Weller, head of the hotel business department at JLL.
The average tariff for the year has slightly decreased - to $ 148 compared to $ 151 a year earlier. In turn, the numbers of rooms, due to increased demand, also increased - on average, from $ 60 to $ 70.
"In 2017, in Kiev for the first time in three years, new branded hotels were opened. This suggests that investors are confident that the turning point of the crisis in the country is over, and that the market is beginning to stabilize, "says Ms. Weller.
At the end of the year, the branded market of the Ukrainian capital increased by 668 numbers. So, the first in the country Park Inn - Park Inn by Radisson Kyiv Troyitskaya (196 rooms), the first Mercure - Mercure Kiev Congress for 160 rooms, the first Aloft (312 rooms), and also the rebranding of the former hotel "Kosmopolit" was held.
Forecast for 2018
According to experts, this year there are no significant changes in the segment of hotel real estate in the capital. At the same time, the offer will increase by 280 numbers. But all of them will be concentrated in one hotel - Ibis Kiev Central Station (280 rooms).
This segment of commercial real estate is experiencing stagnation, which has lasted for several years, nevertheless, some changes that allow us to look at the market with optimism have occurred here.
Supply, demand and vacancy
For several years in a row, the level of supply of quality warehouse space in and around Kiev was declining, as new areas and facilities did not enter the market. Part of this trend continued in 2017, at the end of which the vacancy rate fell to 5%. But the distinctive feature is that last year the market, although insignificant, was replenished with new objects. Thus, the total increase in new areas for the year amounted to less than 10 thousand square meters. meters. And the total volume of storage facilities at the end of 2017 is about 1 million 300 thousand square meters. m.
At the same time, tenants became more active (thanks to which the vacancy decreases, although the number of areas is expanding). "Major roles" behind it are "booked" by large logistics operators and retailers, which in 2017 "closed" almost 90% of all transactions for leasing storage facilities in Kiev and around.
Due to stable demand and low input volume, the vacancy rate gradually decreased throughout the year, reaching 5% at the beginning of 2018.
Despite the improvement in macroeconomic indicators and the growth of rental activity of operators with a modest level of the new offer, in 2017 rental rates, on average, remained at the same level of $ 3.5 per sq m per month for Class A premises and 2.7 USD per sq. m. m / month - in class B. However, the range of rental rates has become less, due to the growth of their lower boundaries - for class A by 7%, for class B - by more than 20%. The highest rates for the best premises now amount to $ 4.5 per square meter. m / month.
"However, due to the low volume of input, we expect an increase in rates in 2018," said Darina Kulaga, an analyst at JLL in Ukraine.
Trends in 2017 and the outlook for the next
Last year, among the operators, warehouses on the left bank - in Chernigov and Kharkov directions - were in great demand. On the right bank, the most popular is the Zhytomyr direction.
If in 2016, market activity and gross absorption formed, primarily, the moving of companies, then, according to the company CBRE-Ukraine, in the past there were often transactions to expand the area. More than 80% of the lease contracts concerned conditionally small premises - an area of up to 5 thousand square meters. m.
The trend that was clearly manifested in 2017 and, most likely, will develop in the next is that large operators (the same retailers and logistics companies) began to give preference to buying or building their own facilities before the lease. Because of this, it is possible that the total number of warehouse premises (even despite the entry of new facilities on the market) will decrease, as some of them may become the property of companies that will use them for their own needs, rather than renting out.
Thus, experts agree that despite the fact that in 2018 new areas will be put on the market (according to the announced plans, the increase may amount to 100 thousand square meters), the vacancy rate due to this will not grow, and so called unsatisfied demand will remain at the current level.
Earlier it was reported how the economy of common use is changing the market of office real estate.