The inner-city shopping and office centre Mandarin Plaza in Kiev: vacancies, particularly in modern properties in Kiev, are practically nonexistent, resulting in property owners being able to define the prices.

The status quo in the real estate markets

Development activities in the Ukraine are high. In the first half of 2007, according to Colliers International, roughly 115,000 square metres of office space was built in Kiev – that is 50 percent more than during the first half of the previous year. By the end of the year an additional 125,000 square metres of modern office space will join the market, which makes an estimated total of 850,000 square metres in the Ukrainian capital.

Office rents rose in the first half of 2007 for all office properties by an average of 18 percent. Currently, rents for class A spaces are at 52 US-Dollars per square metre and month. Class B and class C owners are demanding 41 and 30 US-Dollars per square metre, respectively. These prices are obviously being paid, since the vacancy rates are very low. In the middle of 2007, the vacancy rate was at two percent. Therefore, the office property market is clearly a renter’s market. Investments in office real estate are appropriately attractive, even if returns over the past years have gradually declined and are meanwhile “only” nine percent.

The market for retail space is also booming. However, even though completion volume has doubled in Kiev since 2006, the imbalance of supply and demand will not improve, as Halyna Maliborska, Director of Retail Property Department at Colliers International (Ukraine) explains. “Most spaces have joined the market this year and are already occupied by anchor tenants. Smaller retailers hardly have a chance to expand”, she says.

The outer regions of the Ukraine look better, where development activities are also very high. Prices are meanwhile beginning to stabilise there. Kiev, however, remains a renter’s market, even with retail space. Rents here are between 120 and 300 US-Dollars per square metre and month for units up to 300 square metres in popular locations. They are between 50 and 70 USDollars per square metre and month in the less popular shopping centres.

The situation with warehouse and logistics space is summarised by Alexander Nosachenko, Managing Director of Colliers International: “Rents are stable and have hardly changed in the first six months, at eight to ten US-Dollars per square metre and month. However, we have noticed a slight increase in rents with inner-city warehouse properties, to 16 US-Dollars per square metre and month”, he says. This segment also has extremely low vacancy rates. However, Alexander Nosachenko also notes that investment activities in this area are increasing, and the first international investors specialised in warehouse and logistics property have discovered the Ukrainian market.