The vacancy rate of office space Kyiv in the first quarter of 2016 decreased by 0.9 percentage points (PP) compared to the previous quarter and amounted to 23,3%, relative to the vacancy rate of the first quarter of 2015, the decline was 3.8 percentage points, reported the press service of the consulting company Jones Lang LaSalle (JLL) in Ukraine on Wednesday.
“We expect a further decline in vacancy rates in 2016 because of the low volume announced for this year office projects in the conditions of gradual recovery of demand”, – the press service quoted analyst of the research Department at the company Mariana Soupcan.
The decrease in the level of vacant space, according to JLL, are due to stable demand for office space along with low number of new proposals.
“The volume of supply did not change significantly. In the first three months of 2016 was opened only one object – the third phase of BC “IRV” (7,1 thousand sq m, class “b”). Thus, by the end of the first quarter of the market volume of quality office real estate in Kiev amounted to 1.61 million square meters, or 555 sq. m on 1 thousand inhabitants,” according to JLL.
According to its forecasts, the volume of offices in 2016 will be about 35 thousand square meters, which is 15% lower than the previous year. In this case, all announced this year, the objects belong to the class “In”.
“We are seeing a reduction in the construction of business centers from 2014. All announced for 2016 projects are new phases of existing facilities, the majority of which was previously suspended, – said M. Kupchan. – In terms of the rise in demand, albeit slight, and a high level of occupancy of the previous phases, developers take the decision to resume construction. However, the volume of construction and expectations of the new facilities is still very low.”
According to research by JLL, in the first quarter, the largest amount of office space leased production companies (mainly pharmaceutical), as well as players of the IT-sphere (on 31% of the total volume of demand). High activity early in the year is also shown by international non-governmental organizations (18%).
According to JLL, the results of the first quarter the total volume of transactions amounted to 38.5 thousand sq. m, a 43% increase over the same period last year.
“The trend of the second half of last year to increase the number of crossings remains relevant today. Low rates, long rent free periods, the willingness of developers to make concessions, including to partially offset the costs of the office fit-out, create a favorable atmosphere for tenants, providing the opportunity to improve the commercial and qualitative conditions of the accommodation by moving,” noted the head of Department office space Jones lang LaSalle in Ukraine Alexander Globin.
The company also noted that in the first quarter 2016 the maximum rate of rent in the market of quality office centers in Kyiv decreased slightly and was $28 per sq m per month. (excluding VAT and operating expenses) versus $29 per sq m/month. at the end of 2015.
The company notes that the decline is primarily due to currency fluctuations (in the first quarter the rate of the national currency to the dollar has declined 8.5%) and pressure from tenants to landlords in terms of the formed “tenant’s market”.
“The earnings of most companies are formed in the national currency, and the weakening of the hryvnia increased their sensitivity to foreign exchange risks. Therefore, tenants are forced to optimize costs and primarily to reduce expenses denominated in foreign currency, including the rent. Given the current high amount of vacant space, developers are increasingly willing to make concessions to tenants,” added A. Globin.
As reported, by the end of 2015, the vacancy rate of office space in Kyiv fell by 3.7 percentage points compared with 2014 was 24.2%.