Offices in survival mode: tenants move from old to first-class business centersSupply on the market is growing, and demand is decreasing, which affects rental rates of all classes of business premises. Despite the war, active development continues in the office real estate market. However, this is not an upward movement, but on the spot. Today, companies can rent better premises for the same money. The fall in rental rates and the presence of vacant high-quality space has caused a remarkable revival and frequent relocations of tenants, UTG analysts explained in Delo.ua a commentary. Companies that previously could only afford to rent Class B space have now focused on Class A properties, in particular new office buildings that entered the market in 2020-2022 and offer very good rental offers. The office real estate market began to sag significantly in demand since 2020 with the onset of the pandemic and the introduction of the trend for remote and hybrid work. The factor of war and risks hit the market even harder. After all, the safety of employees came first. Offices for next to nothing. Supply is growing, demand is decreasing In the first half of 2024, the supply increased slightly due to the introduction of new facilities. However, demand is not growing. Companies continue to practice remote and hybrid work formats, refusing to rent large offices. Another reason is the lack of potential new large office tenants due to the war in the country. Two office facilities opened in Kyiv in the first half of 2024, but the war significantly slowed down the growth of new space. At the beginning of the year, according to UTG, it was planned that approximately 51,000 sq.m of office space would appear on the market by the end of 2024 within four projects. So far, two Class B facilities have been opened. This is a rather modest addition compared to the growth rate in 2022: In 2022, 7 objects appeared on the market in Kyiv: “Magnett”, “Aria”, “TAS Podol”, “Hlybochytsky”, ave. Bazhana, 151, “Lake Plaza”, “Pixel Hub” with a total leasable area of 81,200 sq.m; in 2023, 6 objects were opened: “HIGHWAY 22”, “Pro100 Garden”, “Korolev HUB”, “Twelve”, “GRADIENT”, st. V. Lobanovsky, 96 with a total leasable area of 48,000 sq.m; in 2024, Nyvky City and BC have now opened at the intersection of the street. Filatova and st. Saper Field with total leasable area = 13,600 sq.m. At the same time, many office premises were damaged by rocket attacks. They are actively recovering, but according to former tenants, they do not plan to return to these offices quickly. There are practically no prerequisites for an increase in demand for office real estate, says Konstantin Oliynyk, head of the strategic consulting department at UTG. According to him, the relocation and further legalization of Ukrainian IT personnel abroad continues, and it is IT companies that have provided the greatest demand for office real estate in recent years. “Ukrainian companies register and open offices in Poland, Romania, Colombia, Spain, Portugal, India, Bulgaria, Turkey, Argentina, Great Britain, Czech Republic, Croatia, Serbia, Montenegro, Georgia, Uzbekistan, Mexico, Uruguay, Peru, Brazil,” Oliynyk said. In addition, there is a general slowdown in the global economy (rising costs, lower profit growth, reassessment of development strategy), which hinders hiring and even provokes optimization of the number of employees: 229 companies in the world, including the largest IT giants (Microsoft, Apple, Google, Meta, Amazon, Snapchat, Twitter) have been cutting a significant part of employees for the third year in a row. And this affects the emergence of new currency contracts in our country.
Supply on the market is growing, and demand is decreasing, which affects rental rates of all classes of business premises. Despite the war, active development continues in the office real estate market. However, this is not an upward movement, but on the spot. Today, companies can rent better premises for the same money. The fall in rental rates and the presence of vacant high-quality space has caused a remarkable revival and frequent relocations of tenants, UTG analysts explained in Delo.ua a commentary.
Companies that previously could only afford to rent Class B space have now focused on Class A properties, in particular new office buildings that entered the market in 2020-2022 and offer very good rental offers.
The office real estate market began to sag significantly in demand since 2020 with the onset of the pandemic and the introduction of the trend for remote and hybrid work. The factor of war and risks hit the market even harder. After all, the safety of employees came first.
Offices for next to nothing. Supply is growing, demand is decreasing
In the first half of 2024, the supply increased slightly due to the introduction of new facilities.
However, demand is not growing. Companies continue to practice remote and hybrid work formats, refusing to rent large offices. Another reason is the lack of potential new large office tenants due to the war in the country.
Two office facilities opened in Kyiv in the first half of 2024, but the war significantly slowed down the growth of new space. At the beginning of the year, according to UTG, it was planned that approximately 51,000 sq.m of office space would appear on the market by the end of 2024 within four projects. So far, two Class B facilities have been opened. This is a rather modest addition compared to the growth rate in 2022:
In 2022, 7 objects appeared on the market in Kyiv: “Magnett”, “Aria”, “TAS Podol”, “Hlybochytsky”, ave. Bazhana, 151, “Lake Plaza”, “Pixel Hub” with a total leasable area of 81,200 sq.m;
in 2023, 6 objects were opened: “HIGHWAY 22”, “Pro100 Garden”, “Korolev HUB”, “Twelve”, “GRADIENT”, st. V. Lobanovsky, 96 with a total leasable area of 48,000 sq.m;
in 2024, Nyvky City and BC have now opened at the intersection of the street. Filatova and st. Saper Field with total leasable area = 13,600 sq.m.
At the same time, many office premises were damaged by rocket attacks.
They are actively recovering, but according to former tenants, they do not plan to return to these offices quickly. There are practically no prerequisites for an increase in demand for office real estate, says Konstantin Oliynyk, head of the strategic consulting department at UTG. According to him, the relocation and further legalization of Ukrainian IT personnel abroad continues, and it is IT companies that have provided the greatest demand for office real estate in recent years.
“Ukrainian companies register and open offices in Poland, Romania, Colombia, Spain, Portugal, India, Bulgaria, Turkey, Argentina, Great Britain, Czech Republic, Croatia, Serbia, Montenegro, Georgia, Uzbekistan, Mexico, Uruguay, Peru, Brazil,” Oliynyk said.
In addition, there is a general slowdown in the global economy (rising costs, lower profit growth, reassessment of development strategy), which hinders hiring and even provokes optimization of the number of employees: 229 companies in the world, including the largest IT giants (Microsoft, Apple, Google, Meta, Amazon, Snapchat, Twitter) have been cutting a significant part of employees for the third year in a row. And this affects the emergence of new currency contracts in our country.