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What does the commercial real estate market expect in 2020?

Commercial real estate in 2020 – the main trends: the boom in coworking construction, a decrease in vacancy rates and an increase in rental rates

Kyiv commercial real estate market managed to overcome the crisis and return to the indicators of 2013. This turn is associated with an increase in consumer sentiments and economic growth.

For example, last September, the consumer sentiment index, according to GFK Ukraine, surpassed the 2010 record and amounted to 97.5 points, which is 1.9 points higher than in August. Sales in many stores grew by 10-15% last year, retailers expect the same growth this year.

Kyiv took second place after Guadeloupe (Caribbean) in the ranking of the 50 most interesting places for tourists to visit in 2020, according to the tourist portal Big 7 Travel. Hoteliers expect more travelers.

Here are five major trends on Kyiv commercial real estate market in 2020.

  1. Offices and shopping centers are growing in price

Renting a space in a popular metropolitan office or shopping center will not be an easy process this year. “Many business centers do not have free space; some have a waiting list. The office real estate market has returned to pre-crisis 2013 indicators”, Ihor Chernenko says, the founder of Investment Development Property (IDP). He adds that, as in previous years, most of the rental transactions are carried by IT companies that are willing to rent premises in the best business centers of the city. The average vacancy rate in Kyiv office centers at the beginning of 2020 was 6.2% and this year it will only decline. In 2015 17.5% and in 2016 14.4% of the total area of ​​Kyiv offices were empty, according to Colliers International (Ukraine) research.

  1. Rent is getting more expensive

This year, rental rates may increase by 7-10%. Now tenants of class A premises in Kyiv pay an average of $ 20-30, class B – $ 14-19, class C – $ 9-13 for sq. m. per month. In shopping centers, rental rates are $ 45-50 for sq. m. per month. Most tenants pay a percentage of the turnover as a rate. The higher sales, the higher income from the shopping center. 

  1. Developers engaged in construction

Investors are ready to invest in the commercial real estate market. For example, only Vagif Aliyev announced his intention to open a shopping center in each district of the city. This year, he plans to commission Ocean Mall shopping center in the neighborhood of Ocean Plaza shopping center, the total area of ​​which will be about 300 thousand square meters. The development company Stolitsa Group intends to open a shopping center and Retroville business center with a total area of ​​120 thousand square meters. This year the most famous Kyiv unfinished construction may start its operating – Respublika shopping center with a total area of ​​about 300 thousand square meters, which is associated with Vitaliy Khomutynnyk and Pavlo Fuks. “In Kyiv and Ukraine, indeed, it is now planned to open several facilities. In my opinion, this will affect the redistribution of flows among already operating and new complexes and, possibly, the rotation of tenants in operating facilities. Attendance at the mall remains now at the level of capabilities of each facility”, Iryna Krupa says, General Director of the Multifunctional Complex Gulliver.

In the next few years, up to 10 new business centers will be opened in Kyiv, but rental rates will continue to grow, as Ihor Chernenko predicts. “Demand for offices in coming years will exceed supply, the expert said.

  1. Segment for “hipsters”

Investors are interested in the coworking market. According to Colliers International (Ukraine), its total area in Kyiv is 62 thousand square meters, which is 3.2% of the total supply of high-quality office real estate.

About 62% of the market is controlled by four companies – IWG plc (Regus, Spaces), Platforma, Creative States, Creative Quarter. Investors are ready to invest in the opening of new coworking space. In the next six months, the supply will grow by 27%, according to Colliers International (Ukraine) forecast. It is planned to open four large facilities, including Platforma Fortuna (4.5 thousand square meters), Creative States of Arsenal (4.13 thousand square meters), Creative Quarter in Gulliver in Tower B (2.8 thousand square meters) , Kooperativ (4 thousand square meters).

  1. E-commerce: offline investment will grow

In 2020, according to the forecasts of Evo group, the Ukrainian e-commerce market will grow by 15%, that is up to UAH 87.2 billion. Typically, customers order goods online and want to pick them up at the store. Approximately every second customer of shops uses this service, while in Poland this rate is about 70%. Therefore, large retailers will invest in the development of their own online store chains.

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