During 2013, general business dynamics in Ukraine remained suppressed with continuing negative economic dynamics in the country for at least five quarters in a row. At the end of 2013, Ukraine faced political uncertainty with increasing unrest following a decision by the government to seek closer political alignment with Russia at the expense of long-term structural reforms in the country and development of economic, social and institutional ties with the EU. Further escalation of public protests across Ukraine resulted from the authorities’ attempts to forcefully suppress peaceful pro-European meetings, which raised questions from the opposition over the respect of the law by the government.
2013 was marked by a comparatively high activity of office occupiers in Kyiv due to increase in space availability and downward correction of rents. In 2011-2013, new supply in the office property sector in Kyiv amounted to around 450,000 sq m (GLA) with additional 180,000 sq m (GLA) scheduled for delivery during 2014. Therefore, all other things being equal, DTZ expects that in the short term market-wide rents for offices in Kyiv may further decrease.
The highest development activity in the retail property market in Ukraine has been witnessed in Kyiv. During 2013, total retail stock in Ukraine’s capital city increased by around 13% compared to late 2012 and by 51% since 2008. Around 900,000 sq m (GLA) of new ‘modern’ retail space is in active stage of planning or under construction in Kyiv. If these properties were commissioned in accordance with the announced plans, by 2017 current retail stock in the city will increase by over 40%, leading to strengthening of competition among landlords and reinforcement of ‘tenant’s market’.
In 2013, generally low development activity in the warehouse and logistics property market in the Greater Kyiv area combined with relatively robust demand resulted in market-wide vacancy dropping to 3% at the year-end compared to 6.8% in late 2012 and 15.7% in 2011.
DTZ estimates total direct investment volume in Ukraine in 2013 at only around USD 48 million in contrast to USD 409 million in 2012. Prime property yields in Kyiv remain at high levels compared to other European capitals, reflecting country risk.
Source : DTZ (Groupe UGL)