Stock & vacancy evolution in Kyiv
As of June 2020, the total stock of modern I&L in Kyiv totalled 1.76 million m2, including specialized premises with the possibility of creating special storage conditions. During H1 2020, no new industrial projects were delivered.
As the end of June 2020, three large projects were under active construction in Kyiv with a total of ca. 124,000 m2. According to their developers, they are due for completion in 2020-2021 and all of them are expected to enter the market with a low level of vacancy. Upon completion, the total stock will increase by 7.0%.
In the previous two years, leasing activity on the warehouse market demonstrated 150-180 thousand m2 in annual take-up. But there is a tend to decreasing leasing activity due to lack of available space on the market. In H1 2020, demand in Kyiv was driven mainly by grocery/supermarkets, e-commerce and logistics. The total volume of lease transactions in Kyiv as of Q1 2020 totaled ca. 29,000 m2.
Supply, demand & vacancy
Most of the transactions were pre-leases. This is one of the indicators of a shortage of warehouse space in the market. The Kyiv vacancy rate remained at 2.5% due to the lack of high-quality premises on the market and the level of pre-leasing on projects under active construction. The vacancy rate in most A Class I&L properties is at or close to 0%.
Rental rates & lease conditions
Given the high demand and supply shortages and changes in exchange rates of the national currency - rental rates continue to rise as of the end of H1 2020. Prime headline rents for high quality space in the Kyiv region is at EUR 4.5/m2/month.
Average lease lengths in Ukraine are 2-3 years without notarization, and more than 3 years with notarization. Developers offer rent-free periods (1-3 months), particular for key tenants.
Changes to the property and required repairs/renovations are possible upon agreement from both sides. In general, new premises are typically leased with a basic fit-out, second-hand premises are leased after agreed repairs/renovations.
The market is waiting for the revival of development activity. High demand significantly exceeds the growth of new supply. The growth of the retail & wholesale sector as well as the development of the e-commerce market is expected to further stimulate demand.
Landlords expect the market to decline in the third quarter. At the same time, landlords also expect that the recession in the market will not be as deep as in 2009, given the low market vacancy and low supply ratein previous years.