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Business returns to offices: results of the 1st half of 2021

The first half of the year was marked by the gradual return of employees to work from office mode. In the world and in Ukraine, in the work from home mode, many companies note a decrease in the efficiency of employees, reduce the time of remote work and gradually return to offices.

Vacancy

  • In general, the indicator is at a fairly stable level, unlike other periods of financial crises.
  • During the first half of 2021, due to increased demand and despite the volume of new supply of office space, the overall vacancy rate in office buildings of Grades A and B decreased from 11.5% to 11.1%.
  • The vacancy rate in Grade A office buildings declined from 10.8% at the beginning of the year to 10.6%. Grade B vacancy decreased from 11.6% to 11.3%, respectively.

1h office market overview_eng

Rental rates

  • According to the results of the first half of 2021, there has been a moderate increase in office space rental rates.
  • The prime headline rent remains at $26/sq m/month, as in 2020. In Grade A, there was an increase in the lower limit: from $18/sq m/month to $19/sq m/month in the first half of 2021.
  • In Grade B, the rental rate range changed from $11-19/sq m/month in 2020 to $12-20/sq m/month in the first half of 2021.

Demand

  • Globally, despite COVID-19, companies are not going to abandon working in offices. However, in more mature markets, companies are gradually returning employees to offices, considering the vaccination rate. An example is such international companies as Google, Apple, Amazon, Facebook, which notice the need for physical presence in offices for effective teamwork, especially when it comes to developing new projects/startups.
  • Ukrainian representative offices of international companies are also steadily returning employees to their offices in accordance with the global policy of their headquarters companies.
  • The total take-up of office space (gross take-up) in the first half of 2021 was about 60,000 sq m, which is 66% higher than the same indicator in the first half of 2020 (40,000 sq m).
  • The IT sector represents the largest share in the demand structure during the first half of the 2021 - 64% (~40,000 sq m). FMCG companies accounted for about 10% (~5,000 sq m) of total demand.

Supply

  • Five office buildings with a total size of more than 71,000 sq m were opened in the first half of 2021: LUWR BC (GLA 27,000 sq m) near Lukyanivska metro station, office building near Taras Shevchenko metro station (GLA 21,200 sq m), two office buildings on Zoologichna street (GLA 11,820 sq m; 6,000 sq m) and office premises as part of the River Mall shopping center – River Mall BC (GLA 5,000 sq m).
  • As a result, as of the end of the first half of 2021, the cumulative supply of professional office space in Kyiv reached more than 2,218,000 sq m. The total area of commissioned facilities is about 34.8% of the total volume of premises declared by developers for 2021.
  • According to developers, 8 office buildings with a total area of ~130,000 sq m are planned to be commissioned in the second half of 2021.
  • It is important to underline that the only office building in Grade A that will be introduced this year is the Magnett BC (GLA 44,000 sq m, 1st stage). The Magnett BC will be the largest Grade A office center opened in the last 8 years (since the Gulliver BC with a GLA of 70,000 sq m was commissioned in 2013).