The pandemic has become a catalyst for the development of a new real estate cycle. New modern formats and additional services are being created. The office remains an important driving force for the development and interaction of teams, as well as for the development of corporate culture and business in general. The activity of tenants showed an increase in Q4 2020, in relation to Q2-3. 2020 Odanko it is still at a rather low level in relation to the end of 2019, the beginning of 2020.
The market volume at the end of the 4th quarter of 2020 amounted to 2.573 million square meters (GLA) in 332 * classified business centers of class A, B + and B
Market volume growth in 2020 was 5.96%.
In 2020, 144,794 thousand square meters were commissioned.
Of these, objects:
-class A: 71.9 thousand sq. m;
-class B +: 97.9 thousand sq. m;
-class B: 52.5 thousand square meters.
In total, 203.6 thousand square meters were planned for commissioning in 2020, some of them postponed the commissioning date to 2021.
Some objects may consist of several separate buildings / buildings and are put into operation in different phrases, but are presented on the market under a single name within a single project.
Of the 203.6 thousand square meters of class A, B + and B offices planned for commissioning in 2020, 144.8 thousand square meters were commissioned. In the 4th quarter of 2020, 5,369 sq. M of new premises were commissioned (building B11, Unit city, Dorogozhitskaya st. 3) out of the planned 62.8 thousand sq. m .. In 2021, it is planned to put into operation 223.3 thousand square meters of class A, B + and B offices (GLA)
The growth in the vacancy rate will continue in 2021 due to the partial mode of remote work and the restrained activity in the market. The consensus forecasts a global economic recovery in the second half of 2021.
Subject to a gradual recovery in market activity, the transition from telecommuting and an increase in the number of employees in the office, the growth of vacancies may slow down by the end of 2021.
According to our estimates, the total vacancy rate will be no more than 15% -16%, which exceeds the current figure by 2.5-3.5 percentage points. This value is not critical to the functioning of the market.
In 2021, the tendency of increasing vacancy and decreasing rental rates continues, however, in quality office buildings with a good location, they will be insignificant. A more substantial correction of rental rates, as well as the enthusiasm for vacancy, will be observed in obsolete properties.
Blocks up to 500 sq.m. are in the greatest demand in the office real estate market in Kiev.
In 2020, several large transactions for the lease and sale of offices were closed, the area of which ranged from 3,000 square meters (in a facility that had not yet been commissioned).
The activity of IT companies by the end of 2020, compared to the same period in 2019, was low.
Over the past two years, the modernity, manufacturability and developed infrastructure of the business center have become a priority for the central location.
However, only those properties are successful with potential tenants where, despite the non-central location, one can get the same service and level of infrastructure as in the central business district. There are very few such objects today. They have a high occupancy rate and a stable pricing policy.
The center will continue to attract renters with a wide range of infrastructure facilities. The facilities are located in the central part of the city of A and B + classes, the least affected by the crisis situation associated with the pandemic.
Today's circumstances call for flexibility in terms of the terms of the lease. Some of the companies that previously planned to rent office space are now considering coworking spaces.
Due to the uncertain situation in connection with the pandemic, they are not ready to enter into long-term contracts and invest in repairs.
The level of weighted average rental rates for office premises in Kiev in 4 sq. 2020 showed negative dynamics for all classes:
class A: -4.7%;
class B +: - 14.2%;
class B: -14.4%;
relative to the 4th quarter of 2019.
At the end of 2020, the base rental rates for high-quality class A office premises with renovation remained at the level of $ 27- $ 35 per sq.m. per month (excluding VAT, service and communication charges).
The minimum rental rates in class A are offered for offices with low liquidity (no possibility of creating flexible spaces, low level of natural light).
In class B, the maximum rates are offered for offices with high-quality renovation, in the city center, or near the metro in areas close to the center.
Real weighted average, base rental rate - the proposed base rate for specific potential tenants (excluding VAT, service and utility payments)
The range of declared base rental rates (VAT, service and utility payments)
The rental rate in exceptional cases reaches $ 40 per sq.m: unique offices with expensive renovations and premium furniture.
The National Bank predicts the growth of the Ukrainian economy in 2021 and 2022-2023 years at about 4%. According to this forecast, in 2021 the economy will almost make up for losses from the coronavirus crisis and will show an increase of 4.2% of GDP. We do not expect a significant improvement in the economic situation in 2021.
However, based on the available data and trends in the office real estate market, we believe that the entry into the market of new innovative office formats has good prospects. Today, we are seeing a shortage of modern, high-tech facilities with a high level of service.
As we can see from our clients, they are interested in innovative buildings with panoramic glazing, good location, provision of a park with places, good service.
We do not believe that the office market will decline due to the coronavirus crisis. Most companies are reporting a decline in productivity, which in any case suffers from remote work.
Research shows that a significant percentage of office workers did not feel connected with the corporate culture of the company while working remotely, they saw limitations for professional growth, exchange of experience with colleagues, for the development of corporate culture and, along with this, the complexity of organizing a workspace at home.
According to the research https://a-development.com.ua/