In the first half of 2024, the trends that emerged last year were consolidated and intensified in Ukraine’s office and industrial real estate market. The situation has stabilized and the market is gradually returning to pre-war numbers. Iryna Nastych summarised the situation in an article prepared by the Ukrainian Real Estate Club for Property Forum.
Offices: stabilization of the market
The first half of 2024 was marked by at least four lease transactions for offices ranging from 3000 to 5000 square meters. These deals were concluded mainly in buildings in the central business district of Kyiv. This fact demonstrates a clear trend: in times of crisis, unique opportunities arise, and some companies are taking advantage of them. Moving from a building of questionable class and comfort to a premium location with professional service, thanks to efficient space planning alone, allows you to fit into a much smaller office space while maintaining the same number of workstations, the experts claim, this, in turn, allows you to improve your office space without increasing your rent. There are always a minority of companies that get ahead thanks to non-standard solutions, but it is thanks to such or similar solutions that we can see which of the office real estate market players have a chance to grow their businesses shortly.
The vacancy rate is decreasing because practically no new facilities are entering the market, while many companies are not only moving to other locations but also expanding in new or current locations. Especially international organizations and charitable foundations that are involved in helping Ukraine, explain experts.
Main forecasts for the second half of this year:
● Maintaining the key market indicators at the level of the first half of the year, with minor fluctuations in vacancy and rental rates.
● Continuation of the trend of companies moving from less comfortable buildings to more modern and prestigious offices. This process will be intensified by the desire of companies to optimize costs and improve conditions for employees.
● Increase in the number of long-term lease agreements compared to 2023.
● Decrease in vacancy rates in Class A and B buildings with completed finishes.
● There is a demand for new office buildings, as well as for facilities that were commissioned in 2020-2022 and have not been filled by at least 30%. Accordingly, there are higher chances of further occupancy of new office buildings.
● Stabilization of rental rates. Prime effective rents were stable at $20 per sqm/month (triple net) as of the end of June 2024.
The recovery of demand for office space hinges on stabilizing the security situation and further economic recovery. We expect occupier demand to remain in ‘slow recovery’ mode strengthening in H2 2024.
Industrial market: new record for new developments
The development trend that started in 2022-2023 continued in 2024. Almost all areas and market players that are somehow related to industrial parks have shown great activity in terms of development and qualitative changes this year.
It is worth noting the record number of industrial parks created and registered. The year 2024 was a record year for the number of registered industrial parks in the history of industrial park development since 2014. As of July 2024, 16 industrial parks have already been registered. Before that, the largest number of registered industrial parks was in 2017 and 2023 - 13 industrial parks each. Thus, as for the H1 of 2024, 84 parks are included in the Register of Industrial Parks.
In the coming years, this list may include up to 25 operating industrial parks that are currently under active construction. Therefore, it is safe to say that in the 10th year of industrial park development, quantity has finally begun to turn into quality. The situation with the provision of roads, networks and infrastructure to industrial parks has also improved significantly.
