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Developers continue building new offices in Kyiv to meet the needs of IT companies

Rental rates have stabilized. Photo: luwr.com.ua

Rental rates have stabilized. Photo: luwr.com.ua

In recent years, the IT sector has become an engine for the development of the office market in Ukraine, especially after the 2014 crisis. By adapting the market to the flexible needs of this segment, the premises managed to survive in a difficult pandemic time. But now the market is expecting new changes in the needs of the market.

As Kostiantyn Oliynyk, the head of the UTG Consulting Department, notes, earlier the main needs of class A and B office real estate in the capital’s business districts fell on the representative offices of the international companies. But after their number declined, the market began to sink. The rapid development of companies dealing with new technologies, the development of the Internet, and start-ups saved the situation.

"Ukraine ranks fourth in the world in terms of the number of certified programmers. It was during the difficult 2014-15 years that this segment began to actively develop on the territory of the country. The increase of the personnel gave 15-20% per year. The industry grew very quickly to 4,000 companies: 60% of them are outsourcing, 36% are startups, 4% are research&development centers with their own practices and their own personnel," the expert explains.

Due to the involvement of young people in this segment and the rise in salaries, IT companies began to grow and gradually filled all the gaps in the market in class B office premises, and subsequently in offices of the higher class A class as well. This provoked development activity: developers began to build new projects of "flexible" offices exclusively for the needs of the IT segment.

At the same time, most of the companies in the industry, according to Oliynyk, are now actively leaving the capital—they are moving to Dnipro, Zaporizhzhia, Kharkiv, and Odesa, where it is easier to find personnel for more flexible salaries and more moderate office rental rates.

"The number of proposals that are being built in Kyiv and are focused on IT may be unclaimed when large companies move their offices to other cities," the expert emphasized.

At the same time, according to him, if Ukraine intensifies its efforts to join the European Union, international companies in need of the classic "B" and "A" offices in the city center may return to us.

Rent: Prices are stable

Office rental rates are gradually stabilizing. In October 2021 rent for 1 sq. m per month in class A costs $26.4 (an increase compared to January 2021 by +3.1%), in class B—$17.9 (or +3.9%), class C—$11.8 (or +9.2%) excluding VAT.

Market reset

Today, according to UTG, the total leased area of office buildings in Kyiv is1,825,150 m2, which corresponds to 611.9 m2 per 1,000 residents.

There are more than 150 office centers in the capital:

  • class A—19 buildings,
  • class B—111,
  • class C— 20,
  • not classified—about 40 administrative facilities.

In the supply structure in terms of space, class A occupies 25.5% (481,088 m2), B—64.8% (or 1,222,636 m2).

About 46.6% (or 878,450 m2) of office premises were commissioned by 2010 and today are out-of-date and technically obsolete. At the end of 2020, the offer was replenished with 10 business centers, with a total GLA of 119,300 m2. Class B buildings account for the lion's share—this is approximately 2 million square meters of office space.

In 2020, the offer was replenished with 10 business centers with a total area of 119,300 m2. During 2021-2022, the office real estate market in Kyiv is expecting a replenishment in the form of another 29 business centers. In particular, this year the first part of Smart Hub Obolon was opened, and a-the flexible Regus office in the business center Louvre in Lukyanivka District and the ITT-Plaza complex in the city center are announced to open in December.

In addition, outdated shopping centers, hotel complexes, enterprises, and factories have undergone transformations into office centers in Kyiv in recent years—the hotel Kooperator, Slavutych, the cinema Zorianyi, the SECs Silver Breeze and inSilver, M. Voronin factory, the factories Arsenal and ElektroPryladPostach and others.

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