2. SUPPLY
In 2014, over 158,000 sq.m are scheduled to
delivery. In case all the announced projects
will be completed in time, the total market
supply will amount to 1,814,000 sq.m and will
result 9% increase of the total office stock in
Kiev. In 2Q 2014, over 84,000 sq.m. of new
office space have been delivered on the
market. The most outstanding among them
are BC ‘Domino’ and BC ‘IQ Business
Center’.
DEMAND
The volume of office space leased in the
Ukrainian capital in the second quarter
reached about 18,000 sq m (GLA). It is by
28% less in comparison with the same period
in 2013. But, nevertheless, this figure is
higher than in 1Q 2014 by 40%.
Tenants in Kiev and other big cities reduce
their leased areas.
VACANCY AND RENTS
the overall vacancy rates in Kiev at the end of
2Q 2014 increased by 2% and reached 22%,
driven by exceeding of new supply over take-up
level.
Traditionally, vacancy in Class A offices is
higher than in Class B: in 2Q 2014 Class A
vacancy rates were at the level of 31%, and
nearly 20% in the Class B.
Asking rents in business centers delivered to
the market earlier before Y2012 (‘old’ group,
represented by Parus, Leonardo 1 phase) are
higher and can be treated as market prime
rents, which are USD 34-36/ m2 / month
triple net. ‘New group’ (built after 2012)
provides more aggressive policy: their prime
rents started from USD 24 / m2 / month to
USD 35 / m2 / month.
OUTLOOK
In 2014, a significant volume of new supply
conjoined with the further destabilization of
economic and political situation in Ukraine,
has negatively affected office market
balance. Tenants turn to reduce spaces for
business, rental rates are under the pressure
of insufficient demand as well as grown up
competition. Developers look cold suspicion
on new business project and prefer to work
with already existing developments.
OFFICE
Q2 2014
90.0
80.0
70.0
60.0
50.0
40.0
30.0
20.0
10.0
0.0
1800.0
1750.0
1700.0
1650.0
1600.0
1550.0
1500.0
1450.0
1400.0
DYNAMICS OF OFFICE SPACE SUPPLY, THS SQM
Total New Take up
Q1 2013 Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2 2014
35.00%
30.00%
25.00%
20.00%
15.00%
10.00%
5.00%
0.00%
VACANCY, %
Total Class A Class B
Q1 2013 Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2 2014
3. SUPPLY
In Q2 2014 there was only one new hotel in
Kiev - Park Inn by Radisson with 199 rooms
in 3 stars category.
Thereby, there are approximately 10,300
rooms of different categories on Kiev hotel
market, and the biggest share in structure is
represented by 3 stars hotels.
According to experts, hospitality market in the
capital of Ukraine is oversaturated, so,
developers’ attention should be concentrated
on regional markets. The most preferable
among them are Odessa, Donetsk, Lviv,
Kharkiv markets.
DEMAND
Political tensions in the country caused a
reduction of tourist flows and demand for
hotel rooms as well. The average projected
fall is 20%.
OCCUPANCY AND RENTS
Business trips to Ukrainian capital step by
step return to the normal level, nevertheless,
the amount of business guest from Russia
remain stable low. So, in the Q3-4 2014
market expects renewal of occupancy levels
at 35-45%, consider that dynamics of the last
group of visitors’ inflow in the future is
uncertain.
OUTLOOK
According to the developers’
announcements, the total supply of hotel
rooms in Kyiv in 2014 may increase by 5% in
2014 and more than 15% during the next
years.
International and local developers maintain
their interest in regional markets, in mid-range
and economy segment. There are only
few projects in the capital and their amount is
not expected to increase. The future
development of the Kiev hotel market may
hang upon only reconstruction of the existing
facilities.
HOSPITALITY
Q2 2014
4,610 4,610
4,809
5,000
4,500
4,000
3,500
3,000
2,500
2,000
1,500
1,000
500
0
End 0f 2013 1Q 2014 Q2 2014
5*
4*
3*
2*
1*
SUPPLY OF ROOMS, %
STARS UAH EUR
Q1 2014 Q2 2014 Q1 2014 Q2 2014
3 1,150 955 77 61
4 1,990 1800 133 114
5 5,500 3245 365 205
4. SUPPLY
Kiev primary residential real estate market
supply starts to increase in April up to the end
of Q2 2014. Secondary market supply
dynamics wasn’t one valued: despite rather
big growth in Q1 2014, it has dropped
significantly in May, with further improving in
June. Rental market supply has decreased
slightly after significant apartment’s vacancy
in Q1 2014. Step by step live in Kiev become
suffer and after president elections business
continue to develop, so, a part of vacant
spaces was took up.
DEMAND
Demand for residential premises in Q2 2014
has shown a remarkable increase after
outstanding fall in Q1 2014. Such growth has
been driven by demand that comes from
Donbas movers, as well as by rather flexible
pricing policy of sellers, particularly on the
primary market.
The rental market was traditionally more
active than sales market. Demand has
grown, approximately by 50% in comparison
with Q1 2014 and by 8-9% in comparison
with the same period last year.
PRICES AND RENTS
During 2013 prices for apartments on primary
market had mostly negative dynamics. A
slight decrease was observed on secondary
market as well. In Q2 2014 supply dominates
demand, so a competition to win a client
powers up.
In Q2 2014 prices on rental market has
decreased by 7-8% averagely. More
significant reduction was observed in
economy and middle-range segment of
apartments.
OUTLOOK
Given to the difficult economic situation, there
is a pent-up demand on the sales residential
real estate market that may come into force
in Q3-4 2014. It can leverage market balance
and rise up market prices.
RESIDENTIAL
Q2 2014
15.00%
10.00%
5.00%
0.00%
-5.00%
-10.00%
DYNAMICS OF APARTMENTS SUPPLY, %
Primary market Secondary market
January February March April May June
2500
2000
1500
1000
500
0
DYNAMICS OF SALES PRICES, USD/SQ M
Primary market Secondary market
January 2014 April 2014 July 2014
DYNAMICS OF DEMAND ON THE SALES MARKET, %
-21.78%
-37.79%
23.11%
38.84%
18.03%
50.00%
40.00%
30.00%
20.00%
10.00%
0.00%
-10.00%
-20.00%
-30.00%
-40.00%
-50.00%
February March April May June
5. SUPPLY
In the second quarter of 2014 TC
Atmosphere has appeared on the market
(leasable area of 30.2 thousand square
meters). The new hypermarket Leroy Merlin
and TC Appetite also were delivered, but,
their cumulative area is not significant.
It is scheduled to delivery only 74.7 thousand
square meters, which is by 50% less than in
2013.
DEMAND
Number of retail operators have cancelled
their entrance to Ukrainian market. H&M is
among them.
On the other hand, considerable expansion
prepare Polish operator LLP (Reserved,
Mohito, Cropp Town, Sinsay) – its shop will
appear in ‘Respublika’, ‘Prospect’, ‘Karavan’
(Dnipropetrovsk) and in Lviv.
VACANCY AND RENTS
The share of vacant spaces in Kiev by the
end of Q1 amounted at 5.6%. During Q2
2014 it has risen by almost 40% to 7.8%.
To keep the quality retailers, many landlords
were forced to revise the lease terms with
each tenant individually.
Driven by such changes, prime rents in
shopping centers become a subject of
differentiation: from 70 to 100 USD per
sq.m/month.
OUTLOOK
In the first half of 2014 about 55% of
expected new supply was already delivered
to the market. The other part of new supply is
represented by TC Prospect (40.5 thousand
square meters) and scheduled to delivery in
the second half of the year. It results a 50%
decrease in new market supply in
comparison with 2013.
Base asking rental rates for high-quality retail
real estate in short-term period will remain
stable, with some downward correction by 3-
5%.
Due to political uncertainty, a lot of retailers
postpone expansion and market entrance, so
take-up will not be huge in 2014.
RETAIL
Q2 2014
1000.0
900.0
800.0
700.0
600.0
500.0
400.0
300.0
200.0
100.0
0.0
DYNAMICS OF RETAIL SPACE SUPPLY
Q1 2013 Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2 2014
9.00%
8.00%
7.00%
6.00%
5.00%
4.00%
3.00%
2.00%
1.00%
0.00%
VACANCY, %
Q1 2013 Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2 2014
6. SUPPLY
In the Q2 2014 developers’ activity brought
120.6 th. sq. m of new supply
An additional 28,000 sq.m of modern
warehouse space is expected to be delivered
to the market in Q4 2014
Still active in terms of logistics infrastructure
development remain the Kiev region,
Dnepropetrovsk and Odessa region.
DEMAND
The largest share in the overall demand
structure in Q2 2014 was represented by
pharmaceutical, food, logistics and
transportation sectors. The overall take up is
approximately 31,000 sq.m. The whole
demand was concentrated in Kiev region.
Rather high and unsatisfied demand is for
ADR and special temperature conditions
warehouses with small area.
VACANCY AND RENTS
The vacancy levels in Kiev region were rather
low and stable – approximately 3-3.5% during
Q1-2 2014. For some object there is a slight
vacancy growth – by 0.2-0.3%, the first rates
rise since 2009.
Kiev warehouses rents were also rather
stable. The average rents for Western Bank
were at 6-6.5 USD/sq.m./month, for Eastern
Bank – 4.5-5.5 USD/sq.m./month.
OUTLOOK
148.6 th. sq. m of warehousing premises are
scheduled to delivery in 2014. Nevertheless,
only 65% of this amount will be presented for
open market. Thus, demand for warehouses
space is higher than new supply delivery in
market balance. Such situation provides
stability in market rents, despite punctual
rents reduction. Vacancy rates remain low,
there is now expectation for substantial
growth in the nearest future.
WAREHOUSES
Q2 2014
DYNAMICS OF WAREHOUSES SPACE SUPPLY
1328.93
1405.68
1529.68 1529.68 1529.68
1650.28
1800.0
1600.0
1400.0
1200.0
1000.0
800.0
600.0
400.0
200.0
0.0
Q1 2013 Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2 2014
300000
250000
200000
150000
100000
50000
0
TAKE UP VOLUMS, SQ. M.
2012 2013 2014