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REAL ESTATE MARKETS REVIEW 
Q2 2014
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
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
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
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
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

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Real estate market review Q2 2014

  • 1. REAL ESTATE MARKETS REVIEW Q2 2014
  • 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